N.Y. Insurance Law § 4111: Mutual companies; assessments

§ 4111. Mutual companies; assessments. (a) Except as provided in

section four thousand one hundred thirteen of this article, every

domestic mutual property/casualty insurance company shall in its by-laws

and policies prescribe the contingent mutual liability of its members

for the payment of assessments, in such a way that each member shall be

liable to pay the member's proportionate share, subject to the

limitations hereinafter specified, of the amount of any assessment or

assessments permitted for any purpose under any provisions of this

chapter or necessary to make good an impairment of the minimum surplus

of such company. The contingent liability of a member may be limited to

an amount not less than one additional annual premium on each policy

held by a member. The aggregate amount of all assessments whether levied

by the board of directors of such insurer or by the superintendent as

liquidator or rehabilitator of the insurer, or otherwise, shall be no

greater amount than that specified in the by-laws and policies. Except

as provided in section four thousand one hundred thirteen of this

article, no such insurance company shall make, issue or deliver any

policy of insurance, which does not prescribe the contingent liability

of the policyholder in clear and explicit language printed in type not

smaller than eight point.

(b) If any domestic mutual property/casualty insurance company does

not have admitted assets at least equal in amount to the aggregate of

its liabilities and its minimum surplus as required by the provisions of

this chapter, and if such impairment is not otherwise made good, the

board of directors of the company may, with the approval of the

superintendent and within such time as he prescribes, order an

assessment in the manner specified in the by-laws for an amount which

will provide sufficient funds to make good the impairment, except that

no member shall be liable for an assessment exceeding the limit

specified in his policy in accordance with subsection (a) hereof. All

orders of assessment made by the board of directors shall be filed with

the superintendent and shall not take effect unless and until approved

by him. The superintendent may refuse any such approval if, in his

judgment, refusal will best promote the interests of the policyholders

and creditors of the company, and of the insuring public. Every

assessment shall be made upon all members liable to assessment therefor

in the proportion hereinafter specified. Every person, firm or

corporation who or which was a member of such company at any time during

one year prior to the making of an order of assessment by the board of

directors shall be liable to pay and shall pay the member's

proportionate share of any assessment which may be made in accordance

with law, if the member is notified of the assessment within one year

after making of an order of assessment. A member's proportionate part of

any assessment shall be determined by applying to the premium earned on

the member's policy or policies in force during a period of one year

next preceding the order of assessment the ratio of the total assessment

to the total premiums earned during such period on all policies subject

to assessment.

(c) Unless specifically authorized by the provisions of this chapter

to issue non-assessable policies in this state, no foreign mutual

property/casualty insurance company shall be or continue to be

authorized to do business in this state unless its by-laws and policies

issued in this state contain provisions for the levying and collection

of assessments upon members, at least for the payment of losses and

expenses, which conform in substance to subsection (b) hereof.

(d) In the case of a mutual property/casualty insurance company

subject to paragraph two of subsection (a) of section four thousand one

hundred seven of this article, an assessment authorized by this section

shall be made when, in addition to the grounds set forth in this

section, if the ratio of net premium writings to surplus as regards

policyholders is four to one or greater, based upon the last annual

statement or any quarterly statement projected on an annual basis,

subject to the approval of the superintendent, and if, at any time, upon

examination, the superintendent determines that an assessment should be

made pursuant to subsection (b) hereof or this subsection the

superintendent shall make an appropriate order that the assessment be

made.