KRS 304.36-080: Powers and duties of association.

(1) The association shall:

(a) 1. Be obligated to the extent of the covered claims existing:

a. Prior to the order of liquidation and arising within thirty (30) days

after the order of liquidation;

b. Before the policy expiration date if less than thirty (30) days after

the order of liquidation; or

c. Before the insured replaces the policy or on request, effects

cancellation, if the insured does so within thirty (30) days of the

order of liquidation.

2. The obligation shall be satisfied by paying to the claimant an amount as

follows:

a. The full amount of a covered claim for benefits arising from a

workers' compensation insurance policy purchased to satisfy the

requirements of KRS 342.340;

b. An amount not exceeding ten thousand dollars ($10,000) per

policy for a covered claim for the return of unearned premium;

c. An amount not exceeding five hundred thousand dollars

($500,000) per insured event for all covered claims resulting from

that event for benefits arising from a cybersecurity insurance

policy; or

d. An amount not exceeding three hundred thousand dollars

($300,000) per claimant for all other covered claims;

(b) 1. Not be obligated to pay a claimant an amount in excess of the obligation

of the insolvent insurer under the policy or coverage from which the

claim arises.

2. Notwithstanding any other provisions of this subtitle, a covered claim

shall not include:

a. A claim filed with the association after the earlier of:

i. Twelve (12) months after the date of the order of liquidation;

or

ii. The final date set by the court for the filing of claims against

the liquidator or receiver of an insolvent insurer; or

b. Any claim filed with the association or a liquidator for protection

afforded und er the insured's policy for incurred but not reported

losses.

3. Any obligation of the association to defend an insured shall cease upon

the association's payment or tender of an amount equal to the lesser of

the association's covered claim obligation limi t or the applicable policy

limit.

4. Notwithstanding any other provisions of this subtitle, except in the case

of a claim for benefits under workers' compensation coverage, any

obligation of the association to any and all persons shall cease when ten

million dollars ($10,000,000) shall have been paid in the aggregate by

the association and any one (1) or more associations similar to the

association of any other state or states or any property and casualty

security fund that obtains contributions from insurers on a preinsolvency

basis to or on behalf of any insured and its affiliates on covered claims

or allowed claims arising under the policy or policies of any one (1)

insolvent insurer.

5. For purposes of this paragraph, the term "affiliates" means any pers on

who directly or indirectly, through one (1) or more intermediaries,

controls, is controlled by, or is under common control with another

person.

6. If the claimant has a covered claim or allowed claim against the

association or any associations similar to the association or any property

and casualty insurance security fund of another state, under the policy or

policies of any one (1) insolvent insurer, the association may establish a

plan to allocate amounts payable by the association in a manner as the

association in its discretion deems equitable;

(c) 1. Be deemed the insurer to the extent of its obligation on the covered

claims and to that extent shall have all rights, duties, and obligations of

the insolvent insurer as if the insurer had not become ins olvent,

including, but not limited to, the right to pursue and retain salvage and

subrogation recoverable on paid covered claim obligations.

2. In the case of a covered claim involving obligations assumed by an

assuming insurer from a ceding insurer, the association shall:

a. Have the right to recover a deposit, bond, or other assets that may

have been required to be posted by the ceding insurer to the extent

of covered claim payments; and

b. Be subrogated to any rights the ceding insurer's policyholders ma y

have against the ceding insurer;

(d) 1. Assess insurers amounts necessary to pay the obligations of the

association under paragraph (a) of this subsection subsequent to an

insolvency, the expenses of handling covered claims subsequent to an

insolvency, the cost of examinations under KRS 304.36 -130, and other

expenses authorized by this subtitle.

2. 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 th e assessment bears to the net direct written premiums

of all member insurers for the calendar year preceding the assessment.

3. Each member insurer shall be notified of the assessment not later than

thirty (30) days before it is due.

4. No member insurer may be assessed in any year an amount greater than

two percent (2%) of that member insurer's net direct written premiums

for the calendar year preceding the assessment.

5. If the maximum assessment, together with the other assets of the

association, does not provide in any one (1) year an amount sufficient to

make all necessary payments, the funds available shall be prorated and

the unpaid portion shall be paid as soon thereafter as funds become

available.

6. The association shall pay claims in any order whi ch it may deem

reasonable including the payment of claims as such are received from

the claimants or in groups or categories of claims.

7. The association may exempt or defer, in whole or in part, the assessment

of any member insurer, if:

a. 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; and

b. During the period of deferment, no dividends are paid by the

member insurer to shareholders or policyholders.

8. Deferred assessments shall be paid when the payments will not reduce

capital and surplus below required minimums, and the payments shall be

refunded to those companies receiving larger assessments by virtue of

the deferment or at the election of any such c ompany, credited against

future assessments.

9. Each member 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 member

insurer;

(e) 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;

(f) Notify such persons as the commissioner directs under KRS 304.36-100(2)(a);

(g) 1. Handle claims through its employees or through one (1) or more

insurers or other persons designated as servicing facilities.

2. Designation of a servicing facility is subject to the approval of the

commissioner, but the designation may be decli ned by a member

insurer;

(h) 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

(i) Pay the other expenses of the association authorized by this subtitle.

(2) The association may:

(a) Appear in, defend, and appeal any action on a claim brought against the

association;

(b) Employ or retain such persons as are necessary to handle claims and perform

other duties of the association;

(c) Borrow funds necessary to effect the purposes of this subtitle in accord with

the plan of operation;

(d) Sue or be sued;

(e) Negotiate and become a party to such contracts as are necessary to carry out

the purpose of this subtitle;

(f) Perform such other acts as are necessary or proper to effectuate the purpose of

this subtitle; and

(g) Refund to the member insurers in proportion to the contribution of each

member insurer to the association that amount by which the assets of the

association exceed the liabilities, if, at the end of any calendar year, the board

of directors finds that the assets of the association exceed the liabilities of the

association as estimated by the board of directors for the coming year.