{"data":{"id":"us-ky/krs-304.42-080","jurisdiction":"us-ky","citation":"KRS 304.42-080","heading":"Powers and duties of association.","body":"(1) If a member insurer is an impaired insurer, the association may, in its discretion,\nand subject to any conditions imposed by the association that do not impair the\ncontractual obligations of the impaired insurer and that are approved by the\ncommissioner:\n(a) Guarantee, assume, reissue, or reinsure, or cause to be guaranteed, assumed,\nreissued, or reinsured, any or all of the policies or contracts of the impaired\ninsurer; or\n(b) Provide such monies, pledges, loans, notes, guarantees, or other means as are\nproper to effectuate paragraph (a) of this subsection and assure payment of the\ncontractual obligations of the impaired insurer pending action under paragraph\n(a) of this subsection.\n(2) If a member insurer is an insolvent insurer, the association shall, in its discretion,\neither:\n(a) 1. Guarantee, assume, reissue, or reinsure, or cause to be guaranteed,\nassumed, reissued, or reinsured, the policies or contracts of the insolvent\ninsurer; or\n2. Assure payment of the contractual obligations of the insolvent ins urer;\nand\n3. Provide such monies, pledges, loans, notes, guarantees, or other means\nas are reasonably necessary to discharge such duties; or\n(b) Provide benefits and coverages in accordance with the following provisions:\n1. Assure payment of benefits that would have been payable under policies\nor contracts of the insolvent insurer, for claims incurred:\na. With respect to group policies and contracts, not later than the\nearlier of the next renewal date under such policies or contracts or\nforty-five (45) days, but in no event less than thirty (30) days, after\nthe date on which the association becomes obligated with respect\nto such policies or contracts;\nb. With respect to nongroup policies, contracts, and annuities not\nlater than the earlier of the next renewal date (if any) under such\npolicies or contracts or one (1) year, but in no event less than thirty\n(30) days, from the date on which the association be comes\nobligated with respect to such policies or contracts;\n2. Make diligent efforts to provide all known insureds, enrollees, or\nannuitants for nongroup policies and contracts, or group policy or\ncontract owners with respect to group policies and contract s thirty (30)\ndays' notice of the termination under subparagraph 1. of this paragraph\nof the benefits provided;\n3. With respect to individual policies and contracts covered by the\nassociation, make available to each known insured, enrollee, or\nannuitant, or owner if other than the insured, enrollee, or annuitant, and\nwith respect to an individual formerly an insured, enrollee, or annuitant\nunder a group policy or contract who is not eligible for replacement\ngroup coverage, make available substitute coverage  on an individual\nbasis in accordance with the provisions of subparagraph 4. of this\nparagraph, if the insureds, enrollees, or annuitants had a right under law\nor the terminated policy, contract, or annuity to convert coverage to\nindividual coverage or to continue an individual policy, contract, or\nannuity in force until a specified age or for a specified time, during\nwhich the insurer or health maintenance organization had no right\nunilaterally to make changes in any provision of the policy, contract, or\nannuity or had a right only to make changes in premium by class;\n4. a. In providing substitute coverage required under subparagraph 3. of\nthis paragraph the association may offer either to reissue the\nterminated coverage or to issue an alternative policy or  contract at\nactuarially justified rates.\nb. Alternative or reissued policies or contracts shall be offered\nwithout requiring evidence of insurability, and shall not provide\nfor any waiting period or exclusion that would not have applied\nunder the terminated policy or contract.\nc. The association may reinsure any alternative or reissued policy or\ncontract;\n5. a. Alternative policies or contracts adopted by the association shall\nbe subject to approval by the commissioner. The association may\nadopt alternativ e policies or contracts of various types for future\nissuance without regard to any particular impairment or\ninsolvency.\nb. Alternative policies or contracts shall contain at least the minimum\nstatutory provisions required in this state and provide benefits  that\nshall not be unreasonable in relation to the premium charged. The\nassociation shall set the premium in accordance with a table of\nrates which it shall adopt. The premium shall reflect the amount of\ninsurance or coverage to be provided and the age and  class of risk\nof each insured, but shall not reflect any changes in the health of\nthe insured or enrollee after the original policy or contract was last\nunderwritten.\nc. Any alternative policy or contract issued by the association shall\nprovide coverage of a type similar to that of the policy or contract\nissued by the impaired or insolvent insurer, as determined by the\nassociation;\n6. If the association elects to reissue terminated coverage at a premium rate\ndifferent from that charged under the terminated  policy or contract, the\npremium shall be actuarially justified and set by the association in\naccordance with the amount of insurance or coverage provided and the\nage and class of risk, subject to approval by the commissioner; and\n7. The association's obli gations with respect to coverage under any policy\nor contract of the impaired or insolvent insurer or under any reissued or\nalternative policy or contract shall cease on the date such coverage,\ncontract, or policy is replaced by another similar policy or c ontract by\nthe policy or contract owner, enrollee, the insured, or the association.\n(3) When proceeding under subsection (2)(b) of this section with respect to any policy\nor contract carrying guaranteed minimum interest rates, the association shall assure\nthe payment or crediting of a rate of interest consistent with KRS 304.42 -\n030(2)(b)3.\n(4) Nonpayment of premiums within thirty -one (31) days after the date required under\nthe terms of any guaranteed, assumed, alternative, or reissued policy or contract for\nsubstitute coverage shall terminate the association's obligations under such policy,\ncontract, or coverage under this subtitle with respect to such policy, contract, or\ncoverage, except with respect to any claims incurred or any net cash surrender value\nwhich may be due in accordance with the provisions of this subtitle.\n(5) Premiums due for coverage after entry of an order of liquidation of an insolvent\ninsurer shall belong to and be payable at the direction of the association, and the\nassociation shall b e liable for unearned premiums due to policy or contract owners\narising after the entry of such order.\n(6) The protection provided by this subtitle shall not apply where any guaranteed\nprotection is provided to residents of this state by the laws of the do miciliary state\nor jurisdiction of the impaired or insolvent insurer other than this state.\n(7) In carrying out its duties under subsection (2) of this section, the association may:\n(a) Subject to approval by a court in this state, impose permanent policy or\ncontract liens in connection with any guarantee, assumption, or reinsurance\nagreement, if the association finds that the amounts which can be assessed\nunder this subtitle are less than the amounts needed to assure full and prompt\nperformance of the asso ciation's duties under this subtitle, or that the\neconomic or financial conditions as they affect member insurers are\nsufficiently adverse to render the imposition of such permanent policy or\ncontract liens to be in the public interest; and\n(b) Subject to approval by a court in this state, impose temporary moratoriums or\nliens on payments of cash values and policy loans, or any other right to\nwithdraw funds held in conjunction with policies or contracts, in addition to\nany contractual provisions for deferra l of cash or policy loan value. In\naddition, in the event of a temporary moratorium or moratorium charge\nimposed by the receivership court on payment of cash values or policy loans,\nor on any other right to withdraw funds held in conjunction with policies or\ncontracts, out of the assets of the impaired or insolvent insurer, the association\nmay defer the payment of cash values, policy loans, or other rights by the\nassociation for the period of the moratorium or moratorium charge imposed by\nthe receivership court, except for claims covered by the association to be paid\nin accordance with a hardship procedure established by the liquidator or\nrehabilitator and approved by the receivership court.\n(8) A deposit in this state, held under law or required by the comm issioner for the\nbenefit of creditors, including policy or contract owners, not turned over to the\ndomiciliary liquidator upon the entry of a final order of liquidation or order\napproving a rehabilitation plan of a member insurer domiciled in this state or  in a\nreciprocal state, shall be promptly paid to the association. The association:\n(a) Shall be entitled to retain a portion of any amount so paid to it equal to the\npercentage determined by dividing the aggregate amount of policy or contract\nowners' clai ms related to that insolvency for which the association has\nprovided statutory benefits by the aggregate amount of all policy or contract\nowners' claims in this state related to that insolvency; and\n(b) Shall remit to the domiciliary receiver the amount so  paid to the association\nand retained in accordance with paragraph (a) of this subsection. Any amount\nso paid to the association less the amount retained by it in accordance with\nparagraph (a) of this subsection shall be treated as a distribution of estate\nassets under KRS 304.33 -440 or similar provision of the state of domicile of\nthe impaired or insolvent insurer.\n(9) If the association fails to act within a reasonable period of time with respect to an\ninsolvent insurer as provided in subsection (2) of th is section, the commissioner\nshall have the powers and duties of the association under this subtitle with respect\nto the insolvent insurer.\n(10) The association may render assistance and advice to the commissioner, upon his or\nher request, concerning rehab ilitation, payment of claims, continuance of coverage,\nor the performance of other contractual obligations of any impaired or insolvent\ninsurer.\n(11) The association shall have standing to appear or intervene before any court or\nagency in this state with j urisdiction over an impaired or insolvent insurer\nconcerning which the association is or may become obligated under this subtitle or\nwith jurisdiction over any person or property against whom the association may\nhave rights through subrogation or otherwise . Such standing shall extend to all\nmatters germane to the powers and duties of the association, including, but not\nlimited to, proposals for reinsuring, reissuing, modifying, or guaranteeing the\npolicies or contracts of the impaired or insolvent insurer a nd the determination of\nthe policies or contracts and contractual obligations. The association shall also have\nthe right to appear or intervene before a court or agency in another state with\njurisdiction over an impaired or insolvent insurer for which the association is or\nmay become obligated or with jurisdiction over any person or property against\nwhom the association may have rights through subrogation or otherwise.\n(12) (a) Any person receiving benefits under this subtitle shall be deemed to have\nassigned the rights under, and any causes of action against any person for\nlosses arising under, resulting from, or otherwise relating to, the covered\npolicy or contract to the association to the extent the benefits received because\nof this subtitle, whether ben efits are payments of or on account of contractual\nobligations, continuation of coverage, or provision of substitute or alternative\npolicies, contracts, or coverages. The association may require an assignment\nto it of such rights and cause of action by any  payee, policy or contract owner,\nbeneficiary, insured, enrollee, or annuitant as a condition precedent to the\nreceipt of any right or benefits conferred by this subtitle upon such person.\n(b) The subrogation rights of the association under this subsection shall have the\nsame priority against the assets of the impaired or insolvent insurer as that\npossessed by the person entitled to receive benefits under this subtitle.\n(c) In addition to paragr aphs (a) and (b) of this subsection, the association shall\nhave all common law rights of subrogation and any other equitable or legal\nremedy that would have been available to the impaired or insolvent insurer or\nowner, beneficiary, enrollee, or payee of a policy or contract with respect to\nsuch policy or contract, including without limitation, in the case of a\nstructured settlement annuity, any rights of the owner, beneficiary, enrollee, or\npayee of the annuity, to the extent of benefits received under this  subtitle\nagainst a person originally or by succession responsible for the losses arising\nfrom the personal injury relating to the annuity or payment therefor.\n(d) If the preceding provisions of this subsection are invalid or ineffective with\nrespect to an y person or claim for any reason, the amount payable by the\nassociation with respect to the related covered obligations shall be reduced by\nthe amount realized by any other person with respect to the person or claim\nthat is attributable to the policies, co ntracts, or portion thereof covered by the\nassociation.\n(e) If the association has provided benefits with respect to a covered obligation\nand a person recovers amounts as to which the association has rights as\ndescribed in the preceding paragraphs of this subsection, the person shall pay\nto the association the portion of the recovery attributable to the policies,\ncontracts, or portion thereof covered by the association.\n(13) In addition to the rights and powers elsewhere in this subtitle, the association may:\n(a) Enter into such contracts as are necessary or proper to carry out the provisions\nand purposes of this subtitle;\n(b) Sue or be sued, including taking any legal actions necessary or proper to\nrecover any unpaid assessments under KRS 304.42-090 and to settle claims or\npotential claims against it;\n(c) Borrow money to effect the purposes of this subtitle; any notes or other\nevidence of indebtedness of the association not in default shall be legal\ninvestments for domestic member insurers and may be carried  as admitted\nassets;\n(d) Employ or retain such persons as are necessary or appropriate to handle the\nfinancial transactions of the association, and to perform such other functions\nas may become necessary or proper under this subtitle;\n(e) Take such legal action as may be necessary or appropriate to avoid or recover\npayment of improper claims;\n(f) Exercise, for the purposes of this subtitle and to the extent approved by the\ncommissioner, the powers of a domestic life insurer, health insurer, or health\nmaintenance organization, but in no case may the association issue policies or\ncontracts other than those issued to perform its obligations under this subtitle;\n(g) Organize itself as a corporation or in other legal form permitted by the laws of\nthe state;\n(h) Request information from a person seeking coverage from the association in\norder to aid the association in determining its obligations under this subtitle\nwith respect to the person, and the person shall promptly comply with the\nrequest;\n(i) Unless prohibited by law, in accordance with the terms and conditions of the\npolicy or contract, file for actuarially justified rate or premium increases for\nany policy or contract for which it provides coverage under this subtitle; and\n(j) Take other necessary or approp riate action to discharge its duties and\nobligations under this subtitle or to exercise its powers under this subtitle.\n(14) The association may join an organization of one (1) or more other state associations\nof similar purposes, to further the purposes a nd administer the powers and duties of\nthe association.\n(15) (a) At any time within one (1) year after the date on which the association\nbecomes responsible for the obligations of a member insurer, the association\nmay elect to succeed to the rights and obl igations of the member insurer that\naccrue on or after that date and that relate to policies, contracts, or annuities\ncovered in whole or in part by the association, under any one (1) or more\nindemnity reinsurance agreements entered into by the member insu rer as a\nceding member insurer and selected by the association. The association may\nnot exercise any such election with respect to a reinsurance agreement if the\nreceiver, rehabilitator, or liquidator of the member insurer has previously and\nexpressly disa ffirmed the reinsurance agreement. The election shall be\neffected by a notice to the receiver, rehabilitator, or liquidator and to the\naffected reinsurer. If the association makes an election, subparagraphs 1. to 4.\nof this paragraph shall apply with respe ct to the agreements selected by the\nassociation:\n1. The association shall be responsible for all unpaid premiums due under\nthe agreements for periods both before and after the date, and shall be\nresponsible for the performance of all other obligations to be performed\nafter the coverage date, in each case which relate to policies, contracts,\nor annuities covered, in whole or in part, by the association. The\nassociation may charge policies, contracts, or annuities covered in part\nby the association, through reasonable allocation methods, the costs for\nreinsurance in excess of the obligations of the association;\n2. The association shall be entitled to any amounts payable by the reinsurer\nunder the agreements with respect to losses or events that occur in\nperiods after the coverage date and that relate to policies, contracts, or\nannuities covered by the association, in whole or in part. Upon receipt of\nany such amounts the association shall be obliged to pay to the\nbeneficiary under the policy, contract, or annu ity on account of which\nthe amounts were paid a portion of the amount equal to the excess of:\na. The amount received by the association, over\nb. The benefits paid by the association on account of the policy,\ncontract, or annuity less the retention of the i mpaired or insolvent\nmember insurer applicable to the loss or event;\n3. Within thirty (30) days following the association's election, the\nassociation and each indemnity reinsurer shall calculate the net balance\ndue to or from the association under each suc h reinsurance agreement as\nof the date of the association's election with respect to policies,\ncontracts, or annuities covered in whole or in part by the association,\nwhich calculation shall give full credit to all items paid by either the\nmember insurer o r its receiver, rehabilitator, or liquidator, or the\nindemnity reinsurer during the period between the coverage date and the\ndate of the association's election. Either the association or indemnity\nreinsurer shall pay the net balance due the other within fi ve (5) days of\nthe completion of the calculation. If the receiver, rehabilitator, or\nliquidator has received any amounts due the association under\nsubparagraph 2. of this paragraph, the receiver, rehabilitator, or\nliquidator shall remit those amounts to th e association as promptly as\npracticable; and\n4. If the association, within sixty (60) days of the election, pays the\npremiums due for periods both before and after the coverage date that\nrelate to policies, contracts, or annuities covered by the associati on in\nwhole or in part, the member insurer shall not be entitled to terminate\nthe reinsurance agreements insofar as the agreements relate to policies,\ncontracts, or annuities covered by the association in whole or in part and\nshall not be entitled to set o ff any unpaid premium due for periods prior\nto the coverage date against amounts due the association.\n(b) If the association transfers its obligations to another insurer, and if the\nassociation and the other insurer agree, the other insurer shall succeed t o the\nrights and obligations of the association under paragraph (a) of this subsection\neffective as of the date agreed upon by the association and the other insurer\nand regardless of whether the association has made the election referred to in\nparagraph (a) of this subsection if:\n1. The indemnity reinsurance agreements automatically terminate for new\nreinsurance unless the indemnity reinsurer and the other member insurer\nagree to the contrary;\n2. The obligations described in subparagraph 2. of paragraph (a) of this\nsubsection no longer apply on and after the date the indemnity\nreinsurance agreement is transferred to the third party member insurer;\nand\n3. The association has not previously expressly  determined in writing that\nit will not exercise the election referred to in paragraph (a) of this\nsubsection.\n(c) The provisions of this subsection shall supersede the provisions of any state\nlaw or of any affected reinsurance agreements that provide for or require any\npayment of reinsurance proceeds, on account of losses or events that occur in\nperiods after the coverage date, to the receiver, liquidator, or rehabilitator of\nthe insolvent member insurer. The receiver, rehabilitator, or liquidator shall\nremain entitled to any amounts payable by the reinsurer under the reinsurance\nagreements with respect to losses or events that occur in periods prior to the\ncoverage date, subject to applicable setoff provisions.\n(d) Except as otherwise expressly provided in  this subsection, nothing in this\nsubsection shall alter or modify the terms and conditions of the indemnity\nreinsurance agreements of the insolvent member insurer. Nothing in this\nsubsection shall abrogate or limit any rights of any reinsurer to claim tha t it is\nentitled to rescind a reinsurance agreement. Nothing in this subsection shall\ngive a policyholder, contract owner, enrollee, certificate holder, or beneficiary\nan independent cause of action against an indemnity reinsurer that is not\notherwise set forth in the indemnity reinsurance agreement.\n(16) The board of directors of the association shall have discretion and may exercise\nreasonable business judgment to determine the means by which the association is to\nprovide the benefits of this subtitle in an economical and efficient manner.\n(17) If the association has arranged or offered to provide the benefits of this subtitle to a\ncovered person under a plan or arrangement that fulfills the association's obligations\nunder this subtitle, the person shall n ot be entitled to benefits from the association\nin addition to or other than those provided under the plan or arrangement.\n(18) Venue in a suit against the association under this subtitle shall be in Franklin\nCounty. The association shall not be required t o give an appeal bond in an appeal\nthat relates to a cause of action arising under this subtitle.","path":[],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=48764","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:57:58Z","sha256":"0ebd4d4412aa811d524c779a4a544fdba5c4926022b9f7d9a04ee8fa1b3be181","source_id":"us-ky","stale":false,"prev":"us-ky/krs-304.42-070","next":"us-ky/krs-304.42-090"},"notice":"GroundRules: Original legal text. Not legal advice."}