Amended and Restated Plan of Operation

Maine Insurance Guaranty Association

Article 1. Plan of Operation.

This Plan of Operation (the "Plan") of the Maine insurance Guaranty Association (the "Association") shall become effective upon written approval of the Superintendent of Insurance (the "Superintendent") after acceptance by member insurers transacting at least 60 percent of the total net direct premiums written for the kinds of insurance covered by the Maine Insurance Guaranty Association Act (the "Act"), Chapter 24-A Section 4433 of the Maine Insurance Laws. All section references herein shall be to sections of the Act.

Article 2. Board of Directors.

A. There shall be a Board of Directors (the "Board") in accordance with the provisions of Section 4437 of the Act.

1. The Board shall consist of seven member insurers who continue to write new business in the State.  However, not less than three of the member insurers must be member insurers that are domiciled in the State.  The members of the board shall be selected by the member insurers based on a weighted vote using premium volume as a determining factor in the number of votes allowed each member. Each member shall have at least one vote in electing a Director.

Notwithstanding the foregoing, in order to ensure compliance with the requirement in Section 4437 of the Act that not less than three members be Maine domiciled companies, if use of a weighted vote using premium volume as a determining factor in any election would result in a Board without three member insurers domiciled in the State, then the domiciled member insurer or insurers with the highest vote totals among domiciled member insurers shall be deemed elected to the Board so that the Board shall have a minimum of three member insurers domiciled in the State, and in such event the remaining positions (if any) being filled in such election shall be filled by member insurers not domiciled in Maine based on a weighted vote using premium volume as a determining factor.

2. The initial Board of Directors shall be appointed by the Superintendent and shall serve until the 1973 annual meeting of the Board. By mail vote, on a cumulative weighted basis, the ballots for which shall be mailed to members at least thirty days prior to the 1973 annual meeting of the Board, the members shall elect three directors for a three-year term, two for a two-year term, and two for a one-year term by similar mail vote prior to each annual meeting of the Board. Thereafter, the members shall elect Directors for a three-year term to succeed the Directors whose terms will have expired at such annual meeting.  In case of a vacancy on the Board for any reason, said vacancy must be filled for the remaining period of the term by a majority vote of the remaining board members, subject to the approval of the Superintendent.  In filling a vacancy on the Board, the Board shall ensure that the requirements of 24-A M.R.S.A. s. 4437, which mandates that at least three members be Maine domiciled insurers and that all members continue to write new business in the State, will be satisfied.

3. Upon the election of the Board, the Association shall notify the Superintendent and request his or her written approval of the Board.

4. The Board shall elect a Chairman and such other officers as may seem desirable from among its members, each to serve for a period of one year.

B. A majority of the Board shall constitute a quorum for the transaction of business and the acts of a majority of the Board present at a meeting at which a quorum is present shall be the acts of the Board: except that an affirmative vote of five Board members shall be required to:

1. Approve a contract with a servicing facility,

2. Levy an assessment or provide for a refund, or

3. Borrow money.

C. The Board shall hold an annual meeting at the office of the Superintendent in May, unless the Board upon proper notice shall designate some other date or place. At each annual meeting the Board shall:

1. Review the Plan and submit any amendments it may deem appropriate to the membership. Such amendments shall be adopted upon approval of the Superintendent unless disapproved within 30 days by member insurers transacting at least 40 percent of the total net direct premiums written for the kinds of insurance specified under Section 4433 of the Act.

2. Review each outstanding contract with servicing facilities and make any necessary corrections, improvements or additions.

3. Review operating expenses and covered claims costs and determine if an assessment, or a refund of a prior assessment would be appropriate and, if so, the amount thereof. The Board shall levy any such assessment or make any such refund in accordance with Section 4438.1.0 and 4438.2.F of the Act. The Board may waive the collection from or refund to a member insurer when the amount thereof is less than $10.00.

4. Review, consider and act on any other matters it may deem appropriate.

D. The Board shall hold a meeting promptly after receiving notice from the Superintendent of the insolvency of any member insurer. At such meeting or at any subsequent meeting, the Board shall consider and decide:

1. What method or methods, as permitted under Section 4438.l.F of the Act shall be adopted to apply and discharge covered claims of the insolvent insurer for each of the three categories of kinds of insurance as identified in Section 4438.1.0 of the Act but in no event shall an insolvent insurer be appointed as a servicing facility. If the Board decides to contract with a servicing facility, the Board shall seek to secure the receiver's, liquidator's, or statutory successor's participation in such contract to assist the Association in the performance of its legally imposed duties. The Association shall pursue all recoveries permitted to the insolvent insurer.

2. What immediate action, if any, should be taken to assure the proper retention of the records of the insolvent insurer necessary to the prompt and economical handling by the Association of covered claims. In this effort, the Board, or a designated servicing facility, shall work with the receiver, liquidator or statutory successor and seek the approval of such person to have the Board or a designated servicing facility, take direct physical control of that portion of the insolvent insurer's records deemed by the Board to be necessary for the discharge of its duties imposed by law.

3. What persons should be hired by the Association to implement and carry out the directives of the Board made pursuant to its statutorily imposed duties.

4. To what extent and in what manner the Board shall review and contest settlements and releases or judgments, orders, decisions, verdicts and findings to which the insolvent insurer or its insureds were parties in accordance with Sections 4438.l. D and 4449 of the Act.

5. What assessment, if any, should be levied upon member insurers. If such assessment is determined to be necessary, the Board shall levy such assessment in accordance with Section 4438.1.0 of the Act. The Board may waive the collection from a member insurer when the amount thereof is less than $10.00.

6. Any other matters it may deem appropriate.

E.  The Board may schedule such other regular meetings as it may deem appropriate. Special meetings of the Board may be called by the Chairman, and shall be called at the request of any two Board members. Not less than 5 days written notice shall be given to each Board member of the time, place and purpose or purposes of any special meeting. Any Board member not present may consent in writing to any specific action taken by the Board. Any action approved by the required number of Board members at such special meeting, including those consenting in writing, shall be as valid a Board action as though authorized at a regular meeting of the Board. At such meeting the Board may consider and decide any matter it may deem appropriate.

F.  Members of the Board may participate in a meeting of the Board through the use of a conference telephone or similar communications equipment, by means of which all persons participating in the meeting are able to hear each other, and the participation by such means shall constitute presence in person at such meeting.

G.  Members of the Board shall serve without compensation, but they may be reimbursed for necessary travel expenses incurred in attendance at Board meetings.

Article 3. Operations.

A. The official address of the Association shall be the address of the Chairman of the Board unless otherwise designated by the Board.

B. The Board may employ such persons, firms or corporations to perform such administrative functions as are necessary for the Board's performance of the duties imposed on the Association. The Board may use the mailing address of such person, firm or corporation as the official office address of the Association. Such persons, firms or corporations shall keep such records of their activities as may be required by the Board.

C. The Board may open one or more bank accounts for use in Association business. Reasonable delegation of deposit and withdrawal authority to such accounts for Association business may be made consistent with prudent fiscal policy. The Board may borrow money from any person or organization including a member insurer, or from an appointed servicing facility, as the Board may deem appropriate.

D. The Board may levy an initial assessment per member and such subsequent assessments as may from time to time become necessary to cover the reasonable costs of administration of the association.

E. The Board may contract with one or more persons, firms or corporations to act as servicing facilities should the Board receive notice from the Superintendent of any insolvency of a member insurer. Such contract terms may include:

1. Terms of payment to the servicing facility.

2. Extent of authority delegated to the servicing facility.

3. Procedures for giving the receiver, liquidator or statutory successor timely notice, sufficient to protect the Association's right of subrogation against such person, of each and every covered claim not otherwise reported to such person.

4. Procedures contemplated for the handling of covered claims as defined in the Act. These procedures shall include the right to request from or offer to any person arbitration of such person's covered claim.

5. Procedures for the printing or preparation of forms necessary for the proper handling of covered claims.

6. Requirement of a bond for faithful performance.

7. Any other provisions deemed appropriated by the Board.

Article 4. Records and Reports.

A. A written record of the proceedings of each Board meeting shall be made. The original of this record shall be retained by the Chairman with copies being furnished to each Board member and the Superintendent.

B. The Board shall make an annual report to the Superintendent and to the member insurers. Such report shall include a review of the Association's activities and an accounting of its income and disbursements for the past year.

C. After the appointment of a receiver, liquidator or statutory successor and the levy of an assessment by the Association, the Board shall, once every year, appoint certain of the member insurers to serve as an Audit Committee. Such committee shall see to the proper auditing of all the books and records of the Association and shall report its findings to the Board.

Article 5. Membership.

A. Insurers which were admitted as of May 9, 1970 to transact the kinds of insurance covered by the Act in the State of Maine shall be members of the Association. Each insurer admitted after May 9, 1970 to transact the kinds of insurance covered by the Act shall automatically become, effective on the date of its admission, a member of the association. An insurer which ceases to be admitted after May 9, 1970 shall automatically cease to be a member effective on the day following the termination or expiration of its license to transact the kinds of insurance covered by the Act; provided that such insurer shall remain liable for any assessments based on insolvency's occurring prior to the termination of its license.

B. Any member insurer aggrieved by an action of the Association shall appeal to the Board before appealing to the Superintendent. If such member insurer is aggrieved by a final action or decision of the Board or if the Board does not act on such complaint within 30 days, the member insurer may appeal to the Superintendent within 30 days after such action or decision of the Board or the expiration of such 30 days.

Article 6. Indemnification of Officers, Directors and Others.

A. Definitions. For purposes of this Article 6:

1. Director/officer means each member of the Board, each individual serving as a representative of a member insurer on the Board, each employee, officer or agent of the Association, each employee, officer or agent of any association or other entity which performs services, including without limitation claims handling services, on behalf of the Association (in their capacity of performing such services on behalf of the Association only) and each person who is serving or has served at the request of the Association or such other entity as a director, officer, trustee, fiduciary, principal, partner, member of a committee, employee, consultant or agent of any other entity (sometimes referred to in this Article 6 as an Association Related Entity).

2. Proceeding means any action, suit or proceeding, whether civil, criminal, administrative or investigative, and any appeal therefrom, brought in or before, or threatened to be brought in or before, any court, tribunal, administrative or legislative body or agency, and any claim which could be the subject of a Proceeding.

B. Indemnification. The Association shall indemnify and hold harmless any Director/officer that was or is a party or is threatened to be made a party to any proceeding (any such Director/officer being referred to hereinafter as 'Indemnitee') by reason of the fact that Indemnitee is or was a Director/officer or by reason of any action alleged to have been taken or omitted in any such capacity, whether such service, action or omission takes place before or after the date this Article 6 becomes effective, from and against any and all expenses, including attorneys fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee in connection with such Proceeding; provided that no Indemnification may be provided for Indemnitee with respect to any mater as to which Indemnitee shall have been finally adjudicated:

(a) not to have acted honestly or in the reasonable belief that Indemnities action was in or not opposed to the best interest of the Association or its member insurers; or

(b) with respect to any criminal Proceeding, to have had reasonable cause to believe that Indemnitee's conduct was unlawful.

The termination of any proceeding by judgment, order or conviction adverse to Indemnitee, or by settlement or a plea of nolo contendere or its equivalent, shall not by itself create a presumption that Indemnitee did not act honestly or in a reasonable belief that Indemnitee's action was in or not opposed to the best interest of the Association or its member insurers and, with respect to any criminal Proceeding, had reasonable cause to believe that Indemnitee's conduct was unlawful.

C. Indemnification Not Available. Notwithstanding any provision of Section B the Association shall not indemnify or hold harmless Indemnitee with respect to any Proceeding asserted by or in the right of the Association as to which Indemnitee is finally adjudicated to be liable to the Association unless the court in which such Proceeding was brought shall determine that, in view of all the circumstances of the case. Indemnitee is fairly and reasonably entitled to indemnification for such amounts as the court shall deem reasonable.

D. Successful Defense of Proceeding. Any provision of Sections B, C or E to the contrary notwithstanding, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any Proceeding referred to in Sections B or C, Indemnitee shall be indemnified and held harmless from and against any and all expenses, including attorneys' fees, actually and reasonably incurred by Indemnitee in connection therewith. The right to indemnification granted by this Section D may be enforced by a separate action against the Association if an order for indemnification is not entered by a court in the Proceeding wherein Indemnitee was successful on the merits or otherwise.

E. Determination of Proper Indemnification. Any indemnification under Section B unless ordered by a court, shall be made by the Association only as authorized in the specific case upon a determination that Indemnitee has met the requisite standard of conduct set forth in Section 6. That determination shall be made (i) by the Board upon a majority vote of a quorum consisting of directors who are not parties to that Proceeding, and whose representatives on the Board are not parties to that Proceeding, or (ii) if such a quorum is not obtainable, or even if obtainable, if a quorum of disinterested directors (which for purposes hereof shall exclude member insurers whose representatives on the Board are parties to such Proceeding) so directs, by independent legal counsel in a written opinion, or (iii) in the absence of a determination pursuant to clauses (i) or (ii), by the Board upon a majority vote of a quorum of directors, including directors who are parties to such Proceeding, after providing each member insurer of the Association notice of its intention to make such determination and asking such member insurers to provide the Association with notice of any objections thereto: provided that the determination provided in clause (iii) shall not be effective until sixty (60) days following such Board notice and shall not be effective at all in the event a majority of the member insurers provide notice to the Association within such sixty (60) day period of their objection to such determination. Such a determination once made may not be revoked and, upon the making of that determination, Indemnitee may enforce the indemnification against the Association by a separate action notwithstanding any attempted or actual subsequent action by the Board.

F. Advances. Expenses incurred in defending a Proceeding shall be paid by the Association in advance of the final disposition of such Proceeding upon receipt by the Association of:

(a) A written undertaking by or on behalf of Indemnitee to repay that amount if Indemnitee is finally adjudicated: (i) not to have acted honestly or in a reasonable belief that Indemnitee's action was in or not opposed to the best interest of the Association or its member Insurers: (ii) with respect to any criminal Proceeding, to have had reasonable cause to believe that Indemnitee's conduct was unlawful; or (iii) with respect to any Proceeding brought by or in the right of the Association, to be liable to the Association, unless the court in which that Proceeding was brought permits Indemnification in accordance with Section C; and 

(b) a written affirmation by Indemnitee that Indemnitee has met the standard of conduct necessary for indemnification by the Association as authorized in the Plan.

The undertaking required by subsection (a) shall be an unlimited general obligation of Indemnitee, but need not be secured and may be accepted without reference to financial ability to make the repayment.

G. Partial Indemnification. If Indemnitee is entitled under any provision of this Article 6 to indemnification by the Association for a portion of the liability or expense of any Proceeding but not, however, for the total amount thereof, the Association shall nevertheless indemnify Indemnitee for the portion of such liability or expense to which Indemnitee is entitled.

H. Allocation of Indemnification Expense. The expense of indemnification provided hereunder shall be assessed against and paid by the member insurers in the proportion that the net direct written premiums of each member insurer for the calendar year preceding such assessment bears to the net direct written premiums of all member insurers for the calendar year preceding such assessment, except in the case of Insurers who shall cease to be a member of the Association, as to which assessments shall be as follows: any insurer which ceases to be a member of the Association shall remain liable for assessments on account of the expense of indemnification with respect to any and all acts and omissions occurring prior to the time such insurer ceases to be a member of the Association, and in the case of such insurers the assessment for indemnification expense shall be in the proportion that the net direct written premiums of the insurer for the calendar year preceding the year in which the act or omission with respect to which indemnification is claimed bears to the net direct written premiums of all member insurers for the calendar year preceding the year in which the act or omission with respect to which indemnification is claimed.

I. Non-Exclusive. Nothing in this Article 6 shall limit any lawful rights to indemnification existing independently of this Article 6. This Article 6 is intended to operate as a supplement and additional safeguard to, and not in place of, the immunity granted by Section 4448 of the Act.

J. Amendment. The provisions of this Article 6 may be amended or repealed by the member insurers: provided however that no amendment or repeal of such provisions shall adversely affect the rights of a person or entity entitled to Indemnification under this Article 6 with respect to acts or omissions occurring prior to such amendment or repeal.

Article 7. Conformity to Statute.

The Act as written, and as may be amended, is incorporated as part of the Plan.