Powers and duties of the association.

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A. The association shall:

(1) be obligated to the extent of the covered claims existing prior to the determination of insolvency and arising within thirty (30) days after the determination, or before the insured replaces the policy or causes its cancellation. In no event shall the association be obligated to a policyholder or claimant in an amount in excess of the obligation of the insolvent insurer under the policy from which the claim arises;

(2) be deemed the insurer to the extent of its obligation on the covered claims and to such extent shall have all rights, duties and obligations of the insolvent insurer as if the insurer had not become insolvent;

(3) allocate claims paid and expenses incurred among the three (3) accounts separately, and assess member insurers separately for each account, amounts necessary to pay the obligation of the association under Paragraph (1) of this subsection subsequent to an insolvency, expenses of handling claims, the cost of examinations and other expenses authorized by this article. The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the calendar year preceding the assessment on the kinds of insurance in the account bears to the net direct written premiums of all member insurers for the calendar year preceding the assessment on the kinds of insurance in the account. Each member insurer shall be notified of the assessment not later than thirty (30) days before it is due. No member insurer may be assessed in any year on any account an amount greater than two percent of that member insurer's net direct written premiums for the preceding calendar year on the kinds of insurance in the account. If the maximum assessment, together with the other assets of the association in any account, does not provide in any one year, in any account, an amount sufficient to make all necessary payments from that account, the funds available may be prorated and the unpaid portion shall be paid as soon thereafter as funds become available. The association 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 association may exempt or defer, in whole or in part, the assessment of any member insurer if the assessment would cause the member 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 member insurer is authorized to transact insurance. Each member insurer serving as a servicing facility may set off against any assessment any authorized payments made on covered claims and expenses incurred in the payment of the claims by such member insurer if they are chargeable to the account for which the assessment is made;

(4) investigate claims brought against the association and adjust, compromise, settle and pay covered claims to the extent of the association's obligation and deny all other claims and may review settlements, releases and judgments to which the insolvent insurer or its insureds were parties to determine the extent to which such settlements, releases and judgments may be properly contested;

(5) notify persons as the superintendent directs under Paragraph 1 of Subsection B of Section 775 [59A-43-9 NMSA 1978] of this article;

(6) handle claims through its employees or through one or more insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the approval of the superintendent, but the designation of such insurer may be declined by the member insurer; and

(7) reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association and shall pay the other expenses of the association authorized by this article.

B. The association may:

(1) employ or retain persons necessary to handle claims and perform other duties of the association. Though not a covered claim as defined in Paragraph C of Section 770 [59A-43-4 NMSA 1978] of this article, the association may, if it determines it necessary to the settlement and disposition of claims, pay adjustment fees and expenses, and attorney's fees and expenses incurred prior to the determination that an insurer is an insolvent insurer;

(2) borrow funds necessary to effect the purpose of this article in accordance with the plan of operation;

(3) sue or be sued and intervene in any court having jurisdiction over an insolvent insurer;

(4) negotiate and become a party to contracts necessary to carry out the purpose of this article;

(5) perform other acts necessary or proper to effectuate the purpose of this article; and

(6) refund to the member insurers in proportion to the contribution of each member insurer to that account that amount by which the assets of the account exceed the liabilities if, at the end of any calendar year, the board of directors finds that the assets of the association in any account exceed the liabilities of that account as estimated by the board of directors for the coming year.

History: Laws 1984, ch. 127, § 773.


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