KRS 304.36-050: Definitions for subtitle.

As used in this subtitle, unless the context otherwise requires:

(1) "Affiliate" means a person who directly or indirectly, through one (1) or more

intermediaries, controls, is controlled by, or is under common control with an

insolvent insurer on December 31 of the year immediately preceding the date that

the insurer becomes an insolvent insurer;

(2) "Association" means the Kentucky Insurance Guaranty Association created under

KRS 304.36-060;

(3) "Claimant" means any insured making a first-party claim or any person instituting a

liability claim, except that no person who is an affiliate of the insolvent insurer may

be a claimant;

(4) (a) "Control" means the possession, direct or indirect, of power to direct or cause

the direction of the management and policies of a person, whether through the

ownership of voting securities, by contract other than a loan contract or a

commercial contract for goods or nonmanagement services, or otherwise,

unless the power is the result of an official position with or corporate office

held by the person.

(b) Control shall be presumed to exist if any person, directly or indirectly, owns,

controls, holds with the power to vote, or holds proxies representing ten

percent (10%) or more of any other person. This presumption may be reb utted

by a showing that control does not exist in fact;

(5) (a) "Covered claim":

1. Means an unpaid claim, including a claim for unearned premiums,

submitted by a claimant, which arises out, is within the coverage, and is

subject to the applicable limits o f an insurance policy to which this

subtitle applies issued by a member insurer, if the member insurer

becomes an insolvent insurer after June 16, 1972, and:

a. The claimant or insured is a resident of this state at the time of the

insured event, except that for entities other than an individual, the

residence of a claimant, insured, or policyholder is the state in

which its principal place of business is located at the time of the

insured event; or

b. The claim is a first -party claim for damage to property with a

permanent location in this state; and

2. Includes the obligations assumed by an assuming insurer from a ceding

insurer when the assuming insurer subseque ntly becomes an insolvent

insurer if:

a. At the time of the assuming insurer's insolvency, the ceding

insurer is no longer admitted to transact business in this state; and

b. Both the assuming insurer and the ceding insurer were member

insurers at the time the assumption was made.

(b) For purposes of paragraph (a) of this subsection, "issued by a member

insurer" shall not include an insurance policy issued by a nonmember insurer

and later allocated to, transferred to, assumed by, or otherwise made the sole

responsibility of a member insurer under a state statute commonly known as a

"Division" or an "Insurance Business Transfer" statute.

(c) "Covered claim" shall not include the following:

1. Any amount due any reinsurer, insurer, insurance pool, or underwrit ing

association, as subrogation recoveries or otherwise;

2. Any amount sought as a return of premium under any retrospective

rating plan or dividends plan;

3. Legal expenses for policyholders who were not Kentucky residents on

the date of the insured event;

4. Legal expenses for policyholders who were Kentucky residents on the

date of the insured event if the legal expenses exceed the association's

statutory cap;

5. Any first-party claim by an insured whose net worth exceeds ten million

dollars ($10,000,000) on December 31 of the year prior to the year in

which the insurer becomes an insolvent insurer. An insured's net worth

on that date shall be deemed to include the aggregate net worth of the

insured and all of its subsidiaries as calculated on a consolidated basis;

6. Any first -party claim by an insured that is an affiliate of an insolvent

insurer;

7. Any amount awarded as punitive or exemplary damages;

8. An obligation incurred after the expiration date of the insurance policy;

9. An obligation incurred a fter the insurance policy has been replaced by

the insured, canceled at the insured's request, or canceled by the receiver

or liquidator;

10. An obligation to a state, other than Kentucky, or federal government; or

11. Any claim for interest;

(6) "Insolvent insurer" means an insurer:

(a) That was a member insurer at the time the policy was issued; and

(b) Against whom a final order of liquidation, with a finding of insolvency, has

been entered by a court of competent jurisdiction in the insurer's state of

domicile;

(7) "Insured event," in an occurrence policy and claims-made policy, means the act that

gave rise to the claim;

(8) (a) "Member insurer" means any person who:

1. Writes any kind of insurance to which this subtitle applies under KRS

304.36-030(2), including the exchange of reciprocal or inter -insurance

contracts; and

2. Is licensed to transact insurance in this state.

(b) "Member insurer" shall not include a self-insurer.

(c) As used in paragraph (b) of this subsection, "self-insurer":

1. Means a person that covers its liability through a qualified individual or

group self -insurance program or any other formal program created for

the specific purpose of covering liabilities typ ically covered by

insurance; and

2. Includes but is not limited to:

a. Liability self-insurance groups under Subtitle 48 of KRS Chapter

304;

b. Workers' compensation self -insured groups under Subtitle 50 of

KRS Chapter 304; and

c. Self-insurers and self-insured groups under KRS Chapter 342.

(d) For purposes of determining a withdrawing member's assessment liability, an

insurer shall cease to be a member insurer effective on the day following the

termination or expiration of its license to transact the kinds of insurance to

which this subtitle applies, except that the insurer shall remain liable as a

member insurer for any and all obligations, including obligations for

assessments levied prior to the termination or expiration of the insurer's

license and asse ssments levied after the termination or expiration, that relate

to any insurer that became an insolvent insurer prior to the termination or

expiration of the insurer's license; and

(9) (a) "Net direct written premiums" means direct gross premiums written, or in the

case of an insurer organized under KRS Chapter 299, assessments,

membership fees, and policy fees levied and collected, in this state, less

returns thereon and dividends paid or credited to policyholders on such direct

business.

(b) "Net direct w ritten premiums" shall not include premiums on contracts

between insurers or reinsurers.