Bill Text: DE SB48 | 2015-2016 | 148th General Assembly | Draft
Bill Title: An Act To Amend Title 18 Of The Delaware Code Relating To Rehabilitation And Liquidation.
Spectrum: Slight Partisan Bill (Democrat 2-1)
Status: (Introduced - Dead) 2015-06-11 - Stricken [SB48 Detail]
Download: Delaware-2015-SB48-Draft.html
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SPONSOR: |
Sen. Bushweller & Rep. B. Short |
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Sen. Lopez |
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DELAWARE STATE SENATE 148th GENERAL ASSEMBLY |
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SENATE BILL NO. 48 |
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AN ACT TO AMEND TITLE 18 OF THE DELAWARE CODE RELATING TO REHABILITATION AND LIQUIDATION. |
Section 1.Amend Chapter 59, Title 18, Subchapter I of the Delaware Code by making insertions as shown by underlining and deletions as shown by strike through, as follows:
(2) "Insurer" means any of the following:
a. any person, firm, corporation, association or aggregation of persons
doing an insurance business and subject to the insurance supervisory authority
of or to liquidation, rehabilitation, reorganization or conservation by the
Commissioner or the equivalent insurance supervisory official of another state.;
or
b. any agents, managing general agents, third party administrators, brokers, premium finance companies, affiliates, and all other non-risk bearing entities or persons engaged in any aspect of the business of insurance on behalf of an insurer, as defined under §§102(3) or 5901(2)(a) of this title, against which a formal delinquency procedure has been or is being filed under this subchapter, including, but not limited to, entities or persons that provide management, administrative, accounting, data processing, marketing, underwriting, claims handling, or any other similar services to that insurer, whether or not those entities are licensed to engage in the business of insurance in Delaware, if the entity or person is an affiliate of that insurer.
§5902 Jurisdiction of delinquency proceedings; venue; change of venue; exclusiveness of remedy; appeal.
(f) The Court of Chancery shall have exclusive jurisdiction to entertain, hear, or determine all matters in any way relating to any delinquency proceeding under this subchapter, including, but not limited to, all disputes involving purported assets of the insurer.
(g) Notwithstanding the provisions of paragraph (f) of this section, the court may authorize the receiver to seek injunctive or other appropriate relief from other courts, either within or without this state, if, in the opinion of the court, this action will be an aid to any delinquency proceeding.
(h) An arbitration provision of any contract with an insurer that is subject to a delinquency proceeding under this subchapter is not enforceable unless the receiver elects to accept arbitration.Only the court that has jurisdiction of the delinquency proceeding may entertain, hear or determine any matter that otherwise would be subject to an arbitration provision.
§5905 Grounds for rehabilitation; domestic insurers.
The Commissioner may apply to the court for an order appointing the Commissioner as receiver of and directing the Commissioner to rehabilitate a domestic insurer upon one or more of the following grounds, if the insurer:
(1) Is impaired or insolvent or is in unsound condition or in such condition or using such methods and practices in the conduct of its business as to render its further transaction of insurance presently or prospectively hazardous to its policyholders or policyholders of an insurer as defined in §5901(2)(a) of this title;
§5920 Uniform Insurers Liquidation Act.
(a) Paragraphs (2)(a) and (3)-(13)
inclusive of §5901, together with §§5902, 5903 and 5913-5920 of this
title constitute and may be referred to as the Uniform Insurers Liquidation
Act.
Section 2.Amend Chapter 59, Title 18, Subchapter I of the Delaware Code by making insertions as shown by underlining, as follows:
§5934 Statutes of Limitation/Laches.
(a) If applicable law, an order, or an agreement fixes a period within which the insurer may commence an action, and this period is not expired before the day on which the initial petition in a delinquency proceeding is filed, the receiver may not by reason of the filing of the initial petition in a delinquency proceeding be barred from commencing the action if the receiver commences the action on or before the later of:
(1) the end of the period;or
(2) three years after the day on which the most recent receivership order is entered.
(b) Except as provided by Subsection (a) of this section, if applicable law, an order, or an agreement fixes a period within which the insurer may file any pleading, demand, notice, or proof of claim or loss, cure a default in a case or proceeding, or perform any other similar act, and the period has not expired before the date of the filing of the petition initiating formal delinquency proceedings, the receiver may file, cure, or perform, as the case may be, only before the later of:
(1) the end of the period, including any suspension of the period occurring on or after the filing of the initial petition in the delinquency proceeding; or
(2) 60 days after the later of the date of entry of an order for either rehabilitation or liquidation.
(c) If the otherwise applicable limitations period has not expired prior to the initial filing of the petition commencing a delinquency proceeding, any other action or proceeding filed by a receiver may be commenced at any time within three years after the date upon which the cause of action accrues or three years after the date on which the receiver is appointed, whichever is later.
§5935 Actions By and Against the Receiver.
(1)(a) An allegation by the receiver of improper or fraudulent conduct against a person may not be the basis of a defense to the enforcement of a contractual obligation owed to the insurer by a third party.
(b) Notwithstanding Subsection (1)(a) of this section, a third party described in this Subsection (1) is not barred by this section from seeking to establish independently as a defense that the conduct is materially and substantially related to the contractual obligation for which enforcement is sought.
(2)(a) Subject to Subsection (2)(b) of this section, a prior wrongful or negligent action of any present or former officer, manager, director, trustee, owner, employee, or agent of the insurer may not be asserted as a defense to a claim by the receiver:
(i) under a theory of:
(A) estoppel;
(B) comparative fault;
(C) intervening cause;
(D) proximate cause;
(E) reliance;
(F) unclean hands;
(G) in pari delicto; or
(F) mitigation of damages; or
(ii) otherwise.
(b) Notwithstanding Subsection (2)(a):
(i) the affirmative defense of fraud in the inducement may be asserted against the receiver in a claim based on a contract; and
(ii) a principal under a surety bond or a surety undertaking is entitled to credit against any reimbursement obligation to the receiver for the value of any property pledged to secure the reimbursement obligation to the extent that:
(A) the receiver has possession or control of the property; or
(B) the insurer or its agents misappropriated, including commingling, the property.
(c) Evidence of fraud in the inducement is admissible only if it is contained in the records of the insurer.
(3) Action or inaction by an insurance regulatory authority may not be asserted as a defense to a claim by the receiver.
(4)(a) Subject to Subsection (4)(b) of this section, a judgment or order entered against an insured or the insurer in contravention of a stay or injunction under this chapter, or at any time by default or collusion, may not be considered as evidence of liability or of the quantum of damages in adjudicating claims filed in the estate arising out of the subject matter of the judgment or order.
(b) Subsection (4)(a) of this section does not apply to an affected guaranty association's claim for amounts paid on a settlement or judgment in pursuit of the affected guaranty association's statutory obligations.
(5) The receiver may not be considered a governmental entity for the purposes of any state law awarding fees to a litigant who prevails against a governmental entity.
Section 3.Effective date.
This Act shall take effect thirty (30) days from passage.
SYNOPSIS
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This bill amends Title 18, Chapter 59 – Rehabilitation and Liquidation, Subchapter I – General Provisions.In Section 1, §5901(2) amends the definition of "Insurer" in order to allow the Commissioner to include in delinquency proceedings affiliates of an insurance company which are providing insurance-related services to that insurance company, where delinquency proceedings have been filed, or are being filed against that insurance company.This definition of "insurer" is limited to Chapter 59.§5902 adds new provisions (f) and (g) to provide that the Court of Chancery has exclusive jurisdiction over all matters relating to delinquency proceedings, subject to the Court's ability to allow the receiver to seek relief in other courts; and (h) has been added to provide that arbitration provisions are not enforceable against the receiver unless the receiver elects to accept arbitration.This provision allows the receiver to determine the most expeditious manner of determining claims in the receivership proceeding.§5905 adds an addition to the end of Section (1) to implement the change in definition of insurers in Section 5901(2), so as to make a ground for delinquency the transaction of insurance business by an affiliate which is presently or prospectively hazardous to the policyholders of the affiliated insurance company.§5920 has been amended to add Sections 5901(2)(a) and (3) and to delete Section 5902 in order to set forth which sections of chapter 59 are excerpted from the "Uniform Insurers Liquidation Act. In Section 2, two new subsections are being added:§5934 Statutes of Limitations/Laches - extends any unexpired statutes of limitations for claims of the receiver to the later of three years from the date of the most recent receivership order or the time remaining on unexpired statute of limitations; and§5935 Actions By and Against the Receiver - Subsections (1) and (2) have been added to make clear that wrongful actions on the part of management, owners, agents or the like of insure companies in delinquency are not imputed to the receiver in order to defeat claims against third parties. Subsection (3) has been added to make clear that regulatory negligence is not a defense to a claim of a receiver.Subsection (4) has been added to make clear that a judgment against an insured or insurer in contravention of a stay or injunction under Chapter 59 may not be used to determine damages in claims against the estate.Subsection (5) has been added to make clear that the receiver is not a governmental entity for purposes of state laws awarding fees to litigants prevailing against a government entity. |
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Author:Senator Bushweller
