AN ACT RELATIVE TO THE MASSACHUSETTS INSURERS INSOLVENCY FUND.
Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same as follows:
SECTION 1. Subsection (2) of section 1 of chapter 175D of the General Laws, as appearing in the 2004 Official Edition, is hereby amended by striking out the second paragraph and inserting in place thereof the following paragraph:-
“Covered claim”, shall not include (1) claims excluded pursuant to section 17 due to the high net worth of an insured, and (2) any amount due a reinsurer, insurer, insurance pool or underwriting association; provided, that a claim for the amount, asserted against a person insured under a policy issued by an insurer which has become an insolvent insurer, which, if it were not a claim by or for the benefit of a reinsurer, insurer, insurance pool or underwriting association, would be a “covered claim” may be filed directly with the receiver of the insolvent insurer, but in no event may the claim be asserted against the insured of the insolvent insurer.
SECTION 2. Said chapter 175D is hereby further amended by adding the following section:-
Section 17. (1) For purposes of this section “high net worth insured” shall mean any insured whose net worth exceeds $25 million on December 31 of the year before the year in which the insurer becomes an insolvent insurer; but, an insured’s net worth on that date shall be considered to include the aggregate net worth of the insured and all of its subsidiaries and affiliates as calculated on a consolidated basis. “High net worth insured” shall not include a federal, state or local government entity.
(2) The fund shall not be obligated to pay a first party claim by a high net worth insured.
(3) The fund shall have the right to recover from a high net worth insured amounts paid by the fund to or on behalf of the insured, whether for indemnity, defense or otherwise.
(4) The fund shall not be obligated to pay a claim that would otherwise be a covered claim that is an obligation to or on behalf of a person who has a net worth greater than that allowed by the insurance guaranty association law of the state of residence of the claimant at the time specified by that state’s applicable law, and which fund has denied coverage to that claimant on that basis.
(5) The fund shall establish reasonable procedures subject to the approval of the commissioner for requesting financial information from insureds on a confidential basis for purposes of applying this section; but, the financial information may be shared with any other state guaranty association or fund similar to the fund and the liquidator for the insolvent insurer on the same confidential basis. A request to an insured seeking financial information shall advise the insured of the consequences of failing to provide the financial information. If an insured refuses to provide the requested financial information where it is requested and available, the fund may, until such time as the information is provided, provisionally consider the insured to be a high net worth insured for the purposes of subsections (2) and (3).
(6) In a lawsuit contesting the applicability of this section where the insured has refused to provide financial information under the procedure established pursuant to subsection (5), the insured shall bear the burden of proof concerning its net worth at the relevant time. If the insured fails to prove that its net worth at the relevant time was less than the applicable amount, the court shall award the fund its full costs, expenses and reasonable attorneys’ fees in contesting the claim.
SECTION 3. This act shall apply to insolvent insurers so determined on or after the effective date of this act.
Approved November 5, 2006.