{"data":{"id":"us-ky/krs-304.42-140","jurisdiction":"us-ky","citation":"KRS 304.42-140","heading":"Liquidation, rehabilitation or conservation proceedings.","body":"(1) Nothing in this subtitle shall be construed to reduce the liability for unpaid\nassessments of the insureds on an impaired or insolvent insurer operating under a\nplan with assessment liability.\n(2) Records shall be kept of all meetings of the board of direc tors to discuss the\nactivities of the association in carrying out its powers and duties under KRS 304.42-\n080. The records of the association with respect to an impaired or insolvent insurer\nshall not be disclosed prior to the termination of a liquidation, rehabilitation, or\nconservation proceeding involving the impaired or insolvent insurer, prior to the\ntermination of the impairment or insolvency of the member insurer, or prior to the\norder of a court of competent jurisdiction. Nothing in this subsection s hall limit the\nduty of the association to render a report of its activities under KRS 304.42-150.\n(3) For the purpose of carrying out its obligations under this subtitle, the association\nshall be deemed to be a creditor of the impaired or insolvent insurer  to the extent of\nassets attributable to covered policies reduced by any amounts to which the\nassociation is entitled as subrogee pursuant to subsection (8) of KRS 304.42 -080.\nAssets of the impaired or insolvent insurer attributable to covered policies and\ncontracts shall be used to continue all covered policies and contracts and pay all\ncontractual obligations of the impaired or insolvent insurer as required by this\nsubtitle. Assets attributable to covered policies or contracts, as used in this\nsubsection, is that proportion of the assets which the reserves that should have been\nestablished for the policies or contracts bear to the reserves that should have been\nestablished for all policies or contracts or health benefit plans written by the\nimpaired or insolvent insurer.\n(4) As a creditor of the impaired or insolvent insurer as established in subsection (3) of\nthis section and consistent with KRS 304.33 -440, the association and other similar\nassociations shall be entitled to receive a disbursement of assets  out of the\nmarshaled assets, from time to time as the assets become available to reimburse it,\nas a credit against contractual obligations under this subtitle. If the liquidator has\nnot, within one hundred twenty (120) days of a final determination of ins olvency of\na member insurer by the receivership court, made an application to the court for the\napproval of a proposal to disburse assets out of marshaled assets to guaranty\nassociations having obligations because of the insolvency, then the association sh all\nbe entitled to make application to the receivership court for approval of its own\nproposal to disburse these assets.\n(5) (a) Prior to the termination of any liquidation, rehabilitation, or conservation\nproceeding, the court may take into consideration the contributions of the\nrespective parties, including the association, the shareholders, enrollees,\ncertificate holders, contract owners, and policy owners of the insolvent\ninsurer, and any other party with a bona fide interest, in making an equitable\ndistribution of the ownership rights of such insolvent insurer. In such a\ndetermination, consideration shall be given to the welfare of the enrollees,\ncertificate holders, contract owners, and policy owners of the continuing or\nsuccessor member insurer;\n(b) No distribution to stockholders, if any, of an impaired or insolvent insurer\nshall be made until and unless the total amount of valid claims of the\nassociation for funds expended in carrying out its powers and duties under\nKRS 304.42 -080 with respect to the  member insurer have been fully\nrecovered by the association.\n(6) (a) If an order for liquidation or rehabilitation of a member insurer domiciled in\nthis state has been entered, the receiver appointed under such order shall have\na right to recover on behal f of the member insurer, from any affiliate that\ncontrolled it, the amount of distributions, other than stock dividends paid by\nthe member insurer on its capital stock, made at any time during the five (5)\nyears preceding the petition for liquidation or re habilitation subject to the\nlimitations of paragraphs (b) to (d) of this subsection;\n(b) No distribution shall be recoverable if the member insurer shows that when\npaid the distribution was lawful and reasonable, and that the member insurer\ndid not know and could not reasonably have known that the distribution might\nadversely affect the ability of the member insurer to fulfill its contractual\nobligations;\n(c) Any person who was an affiliate that controlled the member insurer at the time\nthe distributions were paid shall be liable up to the amount of distributions he\nreceived. Any person who was an affiliate that controlled the member insurer\nat the time the distributions were declared, shall be liable up to the amount of\ndistributions which would have been r eceived if they had been paid\nimmediately. If two (2) persons are liable with respect to the same\ndistributions, they shall be jointly and severally liable;\n(d) The maximum amount recoverable under this subsection shall be the amount\nneeded in excess of all other available assets of the insolvent insurer to pay the\ncontractual obligations of the insolvent insurer;\n(e) If any person liable under paragraph (c) of this subsection is insolvent, all its\naffiliates that controlled it at the time the dividend was paid shall be jointly\nand severally liable for any resulting deficiency in the amount recovered from\nthe insolvent affiliate.","path":[],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=48769","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:57:58Z","sha256":"231054c279cea8c0da0397618524fef29544ca573a27aa341f056c4cfdc2e50b","source_id":"us-ky","stale":false,"prev":"us-ky/krs-304.42-130","next":"us-ky/krs-304.42-150"},"notice":"GroundRules: Original legal text. Not legal advice."}