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The 190th General Court of the Commonwealth of Massachusetts

Section 5: Powers and duties of Fund

Section 5. (1) The Fund shall:

(a) be obligated to the extent of the covered claims against the insolvent insurer existing prior to the declaration of insolvency and arising within sixty days after the declaration of insolvency, or before the policy expiration date if less than sixty days after the declaration, or before the insured replaces the policy or requests cancellation, if he does so within sixty days of the declaration, but such obligation shall include only that amount of each covered claim which, unless it is a claim for compensation or other benefits which arises out of and is within the coverage of a workers' compensation policy, is less than three hundred thousand dollars.

(b) be deemed the insurer to the extent of its obligation on the covered claims and shall have all rights, duties and obligations of the insolvent insurer to such extent;

(c) assess insurers the amounts necessary to pay the obligations of the Fund and the expenses of handling covered claims subsequent to an insolvency and to pay the cost of examinations under paragraph (1) of section eight and other permissible expenses incurred under this chapter. The assessments of each insurer shall be in the proportion that the net direct written premiums of the insurer for the calendar year preceding the assessment bears to the net direct written premiums of all insurers for the calendar year preceding the assessment. Each insurer shall be notified of the assessment not later than thirty days before it is due. No insurer may be assessed in any year an amount greater than two per cent of that insurer's net direct written premiums for the calendar year preceding the assessment. If the maximum assessment, together with the other assets of the Fund, does not provide in any one year an amount sufficient to make all necessary payments, the funds available may be prorated and the unpaid portion shall be paid as soon thereafter as funds become available. The Fund shall pay claims in any order which it may deem reasonable, including the payment of claims as such are received from the claimants or in groups or categories of claims. The Fund may exempt or defer, in whole or in part, the assessment of any insurer, if the assessment would cause the insurer's financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the insurer is authorized to transact insurance, provided, however, that during the period of deferment, no dividends shall be paid to shareholders or policyholders. Deferred assessments shall be paid when such payment will not reduce capital or surplus below required minimums. Such payments shall be refunded to those companies receiving larger assessments by virtue of such deferment, or at the election of any such company, credited against future assessments. Each insurer serving as a servicing facility may set off against any assessment authorized payments made on covered claims and expenses incurred in the payment of such claims by such insurer;

(d) investigate claims brought against the Fund and adjust, compromise, settle and pay covered claims to the extent of the Fund's obligation and shall deny all other claims;

(e) notify such persons as the commissioner may direct;

(f) handle claims through its employees or through one or more insurers designated as servicing facilities. Designation of an insurer as a servicing facility is subject to the approval of the commissioner and may be declined by the insurer; and

(g) reimburse each servicing facility for obligations of the Fund paid by the facility and for expenses incurred by the facility while handling claims on behalf of the Fund and shall pay the other expenses of the Fund incurred under this chapter.

(2) The Fund may:

(a) appear in, defend, and appeal, any action on a claim brought against the Fund;

(b) employ such personnel as are necessary to handle claims and perform other duties of the Fund;

(c) borrow funds necessary to carry out the purposes of this chapter in accordance with the plan;

(d) sue or be sued;

(e) request that the commissioner order an examination of any insurer when a majority of the board of directors in good faith believes such insurer may be in a financial condition hazardous to the policyholders or the public;

(f) make reports and recommendations to the commissioner upon any matter germane to the solvency, liquidation, rehabilitation or conservation of any insurer. Such reports and recommendations shall not be open to public inspection; and

(g) make recommendations for the detection and prevention of insurer insolvencies.