Md. Code, Insurance § 9-101
The provisions of this subtitle that apply to authorized insurers also apply to nonprofit health service plans and health maintenance organizations.
Md. Code, Insurance, Title 9
Md. Code, Insurance, Title 9
in effectMd. Code, Insurance § 9-102
(a) In determining whether the continued operation of an authorized insurer engaging in insurance business in the State would be hazardous to policyholders or creditors of the authorized insurer or the general public, the Commissioner may consider:
(1) adverse findings reported in financial condition and market conduct examination reports, audit reports, and actuarial opinions, reports, or summaries;
(2) the Insurance Regulatory Information System and other financial analysis solvency tools and reports of the National Association of Insurance Commissioners;
(3) whether the authorized insurer has made adequate provision, according to presently accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses of the insurer, when considered in light of the assets held by the insurer with respect to such reserves and related actuarial items including, but not limited to, the investment earnings on such assets and the considerations anticipated to be received and retained under such policies and contracts;
(4) the ability of an assuming reinsurer to perform, including whether the reinsurance program of the authorized insurer provides sufficient protection for its remaining surplus, after taking into account the cash flow of the authorized insurer and classes of business written by the authorized insurer and the financial condition of the assuming reinsurer;
(5) whether in the last 12–month period or any shorter period, the authorized insurer’s operating loss, calculated to include net capital gain or loss, change in non–admitted assets, and cash dividends paid to stockholders, is greater than 50% of that part of the authorized insurer’s policyholder surplus that is in excess of the minimum required surplus;
(6) whether the authorized insurer’s operating loss in the last 12–month period or any shorter period, excluding net capital gains, is greater than 20% of the authorized insurer’s policyholder surplus that is in excess of the minimum required surplus;
(7) whether a reinsurer, obligor, or any entity within the authorized insurer’s insurance holding system is insolvent, threatened with insolvency, or delinquent in the payment of a monetary or other obligation, and which, in the opinion of the Commissioner, may affect the solvency of the insurer;
(8) contingent liabilities, pledges, or guarantees that, either individually or collectively, involve a total amount that the Commissioner believes may affect the solvency of the authorized insurer;
(9) whether a controlling person of the authorized insurer is delinquent in transmission or payment of net premiums to the insurer;
(10) the age and collectibility of receivables;
(11) whether the management of the authorized insurer, including an officer, director, or any other person that has direct or indirect control over operation, fails to possess and demonstrate the competence, fitness, and reputation considered necessary to serve the authorized insurer in a position of control;
(12) whether the management of the authorized insurer has failed to respond to inquiries about the condition of the authorized insurer or has responded to an inquiry with false or misleading information;
(13) whether the authorized insurer has failed to meet financial and holding company filing requirements in the absence of a reason satisfactory to the Commissioner;
(14) whether the management of the authorized insurer has:
(i) filed a false or misleading sworn financial statement;
(ii) released a false or misleading financial statement to a lending institution or the general public;
(iii) made a false or misleading entry in the books of the authorized insurer; or
(iv) omitted an entry of a material amount in the books of the authorized insurer;
(15) whether the authorized insurer has grown so rapidly that it lacks adequate financial and administrative capacity to meet its obligations in a timely manner;
(16) whether the authorized insurer has experienced or will experience in the foreseeable future cash flow or liquidity problems;
(17) whether the management of an authorized insurer has established reserves that do not comply with minimum standards established by the State’s insurance laws, statutory accounting standards, sound actuarial principles, and standards of practice;
(18) whether the management of an authorized insurer persistently engages in material under–reserving that results in adverse development;
(19) whether transactions among affiliates, subsidiaries, or controlling persons for which the insurer receives assets or capital gains, or both, do not provide sufficient value, liquidity, or diversity to assure the authorized insurer’s ability to meet its outstanding obligations as they mature; or
(20) any other finding determined by the Commissioner to be hazardous to policyholders, creditors of the authorized insurer, or the general public.
(b) In determining whether the financial condition of an authorized insurer would cause its continued operation in the State to be hazardous to policyholders or creditors of the authorized insurer or the general public, the Commissioner may:
(1) disregard a credit or amount receivable resulting from transactions with a reinsurer that is insolvent, impaired, or otherwise subject to a delinquency proceeding;
(2) make appropriate adjustments, including disallowance, consistent with the National Association of Insurance Commissioners Accounting Policies and Procedures Manual and State laws and regulations, to asset values attributable to investments in or transactions with parents, subsidiaries, or affiliates of the authorized insurer;
(3) refuse to recognize the stated value of accounts receivable if the ability to collect the receivables is highly speculative because of the age of the account or financial condition of the debtor; or
(4) increase the liability of the authorized insurer in an amount equal to any contingent liability, pledge, or guarantee not otherwise included in the statement of liability if there is a substantial risk that the authorized insurer will have to discharge the liability, pledge, or guarantee within the next 12–month period.
Md. Code, Insurance § 9-103
If the Commissioner determines that the continued operation of an authorized insurer may be hazardous to policyholders or creditors of the authorized insurer or the general public, the Commissioner may issue an order that requires the authorized insurer to:
(1) reduce the total amount of present and potential liability for benefits under policies through reinsurance;
(2) reduce, suspend, or limit the volume of business being accepted or renewed;
(3) reduce general insurance and commission expenses by specified methods;
(4) increase capital and surplus;
(5) suspend or limit the declaration and payment of dividends to policyholders or stockholders;
(6) file reports in a form acceptable to the Commissioner about the market value of its assets;
(7) limit or withdraw from certain investments or discontinue certain investment practices to the extent that the Commissioner considers necessary;
(8) document the adequacy of premium rates in relation to risks insured;
(9) file, in addition to regular annual statements, interim financial reports on the form adopted by the National Association of Insurance Commissioners or in another form required by the Commissioner;
(10) correct corporate governance practice deficiencies and adopt and utilize governance practices acceptable to the Commissioner;
(11) provide a business plan to the Commissioner in order to continue to transact business in the State; or
(12) notwithstanding any other provision of law limiting the frequency or amount of premium rate adjustments, adjust rates for any nonlife insurance product written by the authorized insurer that the Commissioner considers necessary to improve the financial condition of the insurer.
Md. Code, Insurance § 9-104
An authorized insurer aggrieved by an order of the Commissioner under this subtitle has the right to a hearing and the right to appeal from the action of the Commissioner in accordance with §§ 2-210 through 2-215 of this article.
Md. Code, Insurance § 9-201
(a) In this subtitle the following words have the meanings indicated.
(b) “Ancillary state” means a state other than a domiciliary state.
(c) “Creditor” means a person with a claim against an impaired insurer.
(d) “Delinquency proceeding” means a proceeding under this subtitle to liquidate, rehabilitate, reorganize, or conserve an insurer or other entity subject to this subtitle.
(e) “Domiciliary state” means:
(1) the state in which an insurer is incorporated or organized; or
(2) the state of entry of an alien insurer.
(f) “Federal home loan bank” means a federal home loan bank established under the Federal Home Loan Bank Act, 12 U.S.C. §§ 1421 through 1449.
(g) “Foreign country” means territory outside of any state.
(h) “General assets” means:
(1) all property that is not specifically mortgaged, pledged, deposited, or otherwise encumbered for the security or benefit of specified persons or a limited class of persons;
(2) to the extent that property of an insurer is specifically encumbered, the amount of the property or its proceeds that exceeds the amount necessary to discharge the encumbrance; and
(3) assets held in trust and assets held on deposit for the security or benefit of all policyholders and creditors in the United States.
(i) “Impaired insurer” means:
(1) a stock insurer whose assets, less all liabilities and required reserves, do not equal or exceed the capital stock and surplus required for authority to engage in insurance business as a stock insurer;
(2) a mutual insurer, reciprocal insurer, dental plan organization, or nonprofit health service plan whose assets, less liabilities and required reserves, do not equal or exceed the minimum surplus required under this article for authority to engage in insurance business as a mutual insurer, reciprocal insurer, dental plan organization, or nonprofit health service plan; or
(3) as determined by the Commissioner, an insurer that does not have the financial ability to pay an obligation within 30 days after it becomes due.
(j) “Insurance business” includes any of the acts of an insurance business specified in § 4–205 of this article.
(k) “Insurer–member” means an insurer that is a member of a federal home loan bank.
(l) “Receiver” includes a conservator, rehabilitator, and liquidator.
(m) “Reciprocal state” means a state other than this State in which the substance and effect of the provisions of this subtitle are in force, including the requirement that the Commissioner or equivalent insurance supervisory official be the receiver of an insurer subject to a delinquency proceeding and a provision for avoidance of fraudulent conveyances and preferential transfers.
(n) (1) “Secured claim” means a claim that:
(i) is secured by mortgage, trust deed, pledge, deposit as security, escrow, or otherwise; or
(ii) has become a lien on specific assets through judicial process.
(2) “Secured claim” does not include a special deposit claim or a claim against general assets.
(o) (1) “Special deposit claim” means a claim secured by a deposit required by law for the security or benefit of a limited class of persons.
(2) “Special deposit claim” does not include a claim against general assets.
(p) (1) Except as provided in paragraph (2) of this subsection, “state” means a state of the United States, the District of Columbia, or Puerto Rico.
(2) When capitalized, “State” means Maryland.
(q) “Transfer” means:
(1) the sale or other direct or indirect disposition of property or an interest in property;
(2) the fixing of a lien on property or an interest in property; or
(3) the retention of a security title to property delivered to a debtor.
Md. Code, Insurance § 9-202
(a) Sections 9-201(b), (d), (e), (f), (g), (j), (k), (l), (m), and (n), 9-203, 9-207(a), 9-218, 9-219, 9-220, 9-226(f) and (g), and 9-227(a), (e), (f), (g), (h), and (i) of this subtitle are the “Uniform Insurers Liquidation Act”.
(b) (1) The Uniform Insurers Liquidation Act shall be interpreted and construed to effectuate its general purpose to make uniform the laws of those states that enact it.
(2) To the extent that a provision of the Uniform Insurers Liquidation Act conflicts with other provisions of this subtitle, the provision of the Uniform Insurers Liquidation Act controls.
Md. Code, Insurance § 9-203
(a) This subtitle applies to a person that:
(1) has done, purports to do, is doing, or is licensed to do an insurance business; and
(2) is subject to the insurance supervisory authority of, or to liquidation, rehabilitation, reorganization, or conservation by, the Commissioner or equivalent insurance supervisory official of another state.
(b) The provisions of this subtitle that apply to insurers also apply to:
(1) a corporation that operates a nonprofit health service plan under Title 14, Subtitle 1 of this article;
(2) an insurer that is doing or has done insurance business in the State and against whom claims arising from that insurance business may exist now or in the future;
(3) a person that purports to do insurance business in the State;
(4) an insurer that has an insured resident or located in the State;
(5) a person organized or in the process of organizing with intent to do insurance business in the State; and
(6) a person that does, or has done, any of the acts of an insurance business specified in § 4-205 of this article.
Md. Code, Insurance § 9-204
A delinquency proceeding is the exclusive method of liquidating, rehabilitating, reorganizing, or conserving an insurer.
Md. Code, Insurance § 9-205
The Commissioner, deputy commissioner, special deputy commissioner, or any person acting as receiver in a rehabilitation, liquidation, or conservation as a result of a court order issued on or after January 1, 1985, shall have the immunity from liability described in § 5-410 of the Courts Article.
Md. Code, Insurance § 9-206
(a) (1) This subsection applies even if a paper or instrument:
(i) is not executed by the Commissioner or a deputy, employee, or attorney of record of the Commissioner; and
(ii) is not connected with the commencement of an action or proceeding by or against the Commissioner or with the subsequent conduct of the action or proceeding.
(2) Subject to subsection (b) of this section, the Commissioner may not be required to pay to a public officer in the State a fee for filing, recording, or issuing a transcript or certificate or for authenticating a paper or instrument that relates to the exercise by the Commissioner of a power or duty of the Commissioner under this subtitle.
(b) (1) The Commissioner or deputy commissioner, when acting as receiver or ancillary receiver under this subtitle, shall pay all court costs out of the assets of the insurer before any distribution to creditors or termination of rehabilitation.
(2) In all cases, these costs and those specified in subsection (a) of this section shall:
(i) be charged in the accounts of the Commissioner to the court; or
(ii) be paid by the insurer as a condition of termination of the action or proceeding.
Md. Code, Insurance § 9-207
(a) (1) In a delinquency proceeding in which the Commissioner has been appointed receiver, the Commissioner may:
(i) appoint one or more special deputy commissioners to act for the Commissioner; and
(ii) employ counsel, clerks, and assistants.
(2) Compensation of the special deputies, counsel, clerks, and assistants and all expenses of taking possession of the insurer and of conducting the delinquency proceeding:
(i) shall be set by the Commissioner, subject to approval by the court; and
(ii) shall be paid out of the assets or funds of the insurer.
(3) Within the limits of duties imposed on a special deputy concerning a delinquency proceeding, the special deputy:
(i) shall possess all powers given to the receiver; and
(ii) in the exercise of those powers, is subject to all the duties imposed on the receiver concerning the delinquency proceeding.
(b) In a civil proceeding filed against a special deputy commissioner appointed under this subtitle, the special deputy commissioner is entitled to representation by the Attorney General as specified in Title 12, Subtitle 3, Part II of the State Government Article.
Md. Code, Insurance § 9-208
A delinquency proceeding may be brought against:
(1) an insurer that is doing or has done insurance business in the State and against whom claims arising from that insurance business may exist now or in the future;
(2) a person that purports to do insurance business in the State;
(3) an insurer that has insureds resident or located in the State;
(4) a person organized, or in the process of organizing, with intent to do insurance business in the State;
(5) a corporation that operates a nonprofit health service plan under Title 14, Subtitle 1 of this article; and
(6) a person that does, or has done, any of the acts of an insurance business specified in § 4-205 of this article.
Md. Code, Insurance § 9-209
(a) The Circuit Court of Baltimore City:
(1) has exclusive original jurisdiction over delinquency proceedings; and
(2) may issue all necessary and proper orders to carry out this subtitle.
(b) If service is made in accordance with the Maryland Rules or other applicable law, a court with subject matter jurisdiction over an action brought under this subtitle also has jurisdiction over:
(1) a person, including an insurance producer and another person that has written policies, that has acted in any manner on behalf of an insurer against which a delinquency proceeding has been commenced, in an action resulting from or incidental to the person’s relationship with the insurer;
(2) a reinsurer that at any time has entered into a contract of reinsurance with an insurer against which a delinquency proceeding has been commenced, or an insurance producer for the reinsurer, in an action on or incidental to the reinsurance contract;
(3) an officer, director, manager, trustee, organizer, promoter, or attorney in fact of an insurer against which a delinquency proceeding has been commenced, in an action resulting from or incidental to the person’s relationship with the insurer;
(4) a person that, at the time of or after commencement of the delinquency proceeding, held or was in control of assets in which the receiver claims an interest on behalf of the insurer, in an action concerning the assets; and
(5) a person obligated to the insurer in any way, in an action on or incidental to the obligation.
(c) The venue of all delinquency proceedings is in Baltimore City.
Md. Code, Insurance § 9-210
(a) The Commissioner shall commence a delinquency proceeding against an insurer by applying to the court for an order that directs the insurer to show cause why the court should not grant the relief requested.
(b) (1) The court may consider an application for commencement of a delinquency proceeding only if the application is filed by the Commissioner in the name of the State.
(2) After a hearing under the terms of the show–cause order, the court:
(i) shall either grant or deny the application; and
(ii) may order other relief as the nature of the case and the interests of the policyholders, creditors, stockholders, members, subscribers, or the public may require.
Md. Code, Insurance § 9-211
(a) The Commissioner may apply to the court for an order that directs the Commissioner to conserve or rehabilitate a domestic insurer or an alien insurer domiciled in the State, if the domestic insurer or alien insurer:
(1) is an impaired insurer;
(2) has refused to submit to the Commissioner or a deputy or examiner of the Commissioner, for reasonable examination, any of the property, books, records, accounts, or affairs of the insurer, or of a subsidiary or related company of the insurer within the insurer’s control;
(3) has concealed or removed its assets or records;
(4) has failed to comply with an order of the Commissioner to make good an impairment of capital or surplus or both;
(5) without first obtaining the written approval of the Commissioner:
(i) has transferred or attempted to transfer substantially all of its property or business; or
(ii) has entered into a transaction that merges, consolidates, or reinsures substantially all of its property or business in or with the property of another insurer;
(6) has willfully violated its charter, articles of incorporation, a State law, or an order of the Commissioner;
(7) after reasonable notice, has failed promptly and effectively to terminate the employment, status, and influence over the management of the insurer of a person that has executive authority in fact over the insurer and has refused to be examined under oath about the affairs of the insurer in the State or elsewhere;
(8) has been or is the subject of an application for appointment of a receiver, trustee, custodian, sequestrator, or similar fiduciary of the insurer or its property in an action not filed under this article, regardless of whether the appointment:
(i) has been made;
(ii) might deny the courts of the State of jurisdiction; or
(iii) might prejudice an orderly delinquency proceeding under this subtitle;
(9) has consented to the order for conservation or rehabilitation through a majority of its directors, stockholders, members, or subscribers;
(10) has failed to pay a final judgment rendered against it in the State on an insurance contract issued or assumed by the insurer, within 60 days after the latest of:
(i) the day on which the judgment became final;
(ii) the day on which the time for taking an appeal expired; and
(iii) the day on which an appeal was dismissed before final termination;
(11) after examination by the Commissioner, is found to be in a condition in which further transaction of its business will be hazardous to its policyholders, bondholders, creditors, or the public;
(12) has failed to remove a person that has executive authority in fact over the insurer after the Commissioner has found that person to be dishonest or untrustworthy in a manner that might affect the business of the insurer;
(13) has reasonable cause to know, or should know, that there has been:
(i) embezzlement from the insurer;
(ii) wrongful sequestration or diversion of assets of the insurer;
(iii) forgery or fraud that affects the insurer; or
(iv) other illegal conduct in, by, or with respect to the insurer;
(14) is controlled directly or indirectly by a person that the Commissioner finds to be untrustworthy; or
(15) has failed to file a financial report required by law within the time allowed by law and, after written demand by the Commissioner, has failed to give an immediate adequate explanation.
(b) (1) If the appointment of the Commissioner as receiver is not then in effect, and even if no previous order has directed the Commissioner to rehabilitate a domestic insurer or the United States branch of an alien insurer that has trusteed assets in the State, the Commissioner may apply to the court for an order that appoints the Commissioner as receiver and that directs the Commissioner to liquidate the business of the domestic insurer or the United States branch of the alien insurer if the domestic insurer or alien insurer:
(i) has not done business for at least 1 year;
(ii) is an impaired insurer and has commenced voluntary liquidation or dissolution, or attempts to commence or prosecute an action or proceeding to liquidate its business or affairs, to dissolve its corporate charter, or to procure the appointment of a receiver, trustee, custodian, or sequestrator under any law except this article;
(iii) is doing business in a fraudulent manner; or
(iv) is in a condition in which further rehabilitation efforts on any grounds specified in subsection (a) of this section appear to be futile.
(2) If at any time during a rehabilitation proceeding the Commissioner determines that further efforts to rehabilitate the domestic insurer or alien insurer would be useless, the Commissioner may apply to the court for an order of liquidation.
(c) The Commissioner may apply to the court for an order that appoints the Commissioner as receiver or ancillary receiver, and that directs the Commissioner to conserve the assets of a foreign insurer that are located in the State:
(1) on any ground specified in subsection (a) or (b) of this section; or
(2) on the ground that the assets of the foreign insurer have been sequestrated in the jurisdiction in which the foreign insurer is domiciled or in another jurisdiction.
(d) The Commissioner may apply to the court for an order that appoints the Commissioner as receiver or ancillary receiver, and that directs the Commissioner to conserve the assets of an alien insurer that are located in the State:
(1) on any ground specified in subsection (a) or (b) of this section;
(2) on the ground that the alien insurer has failed to comply within the time designated by the Commissioner with an order of the Commissioner to make good an impairment of the trusteed funds of the alien insurer; or
(3) on the ground that the assets of the alien insurer have been sequestrated in the jurisdiction in which the alien insurer is domiciled or in another jurisdiction.
(e) The Commissioner may apply to the court for an order that appoints the Commissioner as ancillary receiver and that directs the Commissioner to liquidate the business of a foreign insurer that has assets, business, or claims in this State on appointment in the domiciliary state of the foreign insurer of a receiver or other officer by whatever name called to liquidate the business of the foreign insurer.
Md. Code, Insurance § 9-212
(a) (1) An order to rehabilitate a domestic insurer, or an alien insurer domiciled in the State, shall:
(i) appoint the Commissioner as rehabilitator;
(ii) direct the Commissioner:
1. to take possession of the property of the insurer and conduct the business of the insurer under the general supervision of the court; and
2. to take action as the court directs to remove the causes and conditions that have made rehabilitation necessary;
(iii) vest title to all property of the insurer in the rehabilitator; and
(iv) require the rehabilitator to make accountings to the court that:
1. are at intervals as the court specifies in its order, but not less frequently than two times each year; and
2. include the opinion of the rehabilitator about the likelihood of success of the rehabilitation.
(2) Issuance of an order of rehabilitation:
(i) does not constitute an anticipatory breach of any contract of the insurer; and
(ii) is not grounds for retroactive revocation or retroactive cancellation of a contract of the insurer, unless the rehabilitator revokes or cancels the contract.
(b) (1) Subject to paragraph (2) of this subsection, the Commissioner, or an interested person on due notice to the Commissioner, may apply to the court at any time for an order that:
(i) terminates a rehabilitation proceeding; and
(ii) allows the insurer to resume possession of its property and the conduct of its business.
(2) An order under this subsection may not be issued unless, after a hearing, the court determines that:
(i) the purposes of the rehabilitation proceeding have been fully accomplished; and
(ii) § 9-223 of this subtitle has been satisfied.
(c) (1) An order to liquidate the business of a domestic insurer shall direct the Commissioner promptly:
(i) to take possession of the property of the insurer;
(ii) to liquidate the business of the insurer;
(iii) to deal with the property and business of the insurer in the name of the Commissioner or in the name of the insurer, as the court directs; and
(iv) to notify all creditors that may have claims against the insurer to present their claims.
(2) The Commissioner may apply for, and the court may issue, an order to dissolve the corporate existence of a domestic insurer:
(i) on application of the Commissioner for an order to liquidate the domestic insurer; or
(ii) at any time after the court has granted the order of liquidation.
(3) An order to liquidate the business of the United States branch of an alien insurer that has trusteed assets in the State shall:
(i) be on the same terms as those required for a domestic insurer under paragraph (1) of this subsection; but
(ii) include only the assets of the business of the United States branch of the alien insurer.
(d) An order to conserve the assets of a foreign insurer or alien insurer shall require the Commissioner promptly to take possession of and conserve the property of the insurer in the State, subject to further direction by the court.
(e) An order to liquidate the assets in the State of a foreign insurer shall require the Commissioner promptly to take possession of and liquidate the property of the insurer in the State, subject to further direction by the court and with due regard to the rights and powers of the domiciliary receiver as provided in this subtitle.
Md. Code, Insurance § 9-213
(a) In this section, “appointed receiver” means a person, other than the Commissioner, that the court appoints as a conservator, rehabilitator, or receiver under this section.
(b) (1) On motion of the court or the Commissioner, the court may issue an order that appoints or substitutes a person other than the Commissioner as conservator, rehabilitator, or receiver:
(i) on initial application by the Commissioner for an order to appoint the Commissioner as conservator, rehabilitator, or receiver under this subtitle; or
(ii) at any time during the course of a conservatorship, rehabilitation, or receivership under this subtitle.
(2) An appointed receiver has the same powers and duties that the Commissioner has under this subtitle as conservator, rehabilitator, or receiver.
(c) (1) In addition to any other report required by the court, the court shall require an appointed receiver at least quarterly to file with the Commissioner and court a report about:
(i) the status of the conservatorship, rehabilitation, or receivership; and
(ii) the activities of the appointed receiver since the last report filed under this paragraph.
(2) The report required under paragraph (1) of this subsection at a minimum shall include:
(i) information of the character required by Title 13 of the Maryland Rules that applies to receivers generally;
(ii) any other information necessary to provide a complete report on the financial affairs and condition of the conservatorship, rehabilitation, or receivership;
(iii) a complete account of all efforts by the appointed receiver since the last report:
1. to sell or dispose of the remaining business, assets, or policies of the insurer; or
2. to otherwise bring to a prompt conclusion the conservatorship, rehabilitation, or receivership; and
(iv) copies of any actuarial or other evaluations of the insurance business and assets under the control of the appointed receiver.
(3) The report shall be audited unless for good cause the court waives the audit.
(d) Subject to any protective order that the court considers appropriate, information filed under seal shall be provided to both the Commissioner and the affected guaranty association.
(e) The appointed receiver shall give the Commissioner and any guaranty association that may be obligated to pay claims during the conservatorship, rehabilitation, or receivership full access to all documents and records related to the conservatorship, rehabilitation, or receivership that are in the possession of the appointed receiver.
(f) The Commissioner may be a party to a conservatorship, rehabilitation, or receivership for which there is an appointed receiver.
(g) (1) Subject to approval of the court, the Commissioner and any guaranty association that may be obligated to pay claims during the conservatorship, rehabilitation, or receivership may negotiate for sale of all or part of the assets or book of business of the insurer placed in conservatorship, rehabilitation, or receivership.
(2) The appointed receiver:
(i) shall cooperate fully in any sales negotiation under paragraph (1) of this subsection; and
(ii) may object to the terms of a sale of the assets or book of business of the insurer that results from the negotiation.
(3) After notice and an opportunity to be heard, the court may limit the efforts of the Commissioner or guaranty association to undertake or continue negotiations for the sale of the assets or book of business of the insurer if the negotiations would impair the ability of the appointed receiver to engage in similar negotiations or discharge other responsibilities.
(h) (1) If the Commissioner determines that an appointed receiver is not adequately discharging the duties and responsibilities of the position, the Commissioner may file with the court an application that seeks to discharge the appointed receiver and to appoint the Commissioner as conservator, rehabilitator, or receiver or to appoint a new appointed receiver.
(2) If the Commissioner establishes by a preponderance of the evidence that grounds exist for discharge of an appointed receiver, the court shall grant the application of the Commissioner to discharge the appointed receiver and to appoint the Commissioner as conservator, rehabilitator, or receiver or to appoint a new appointed receiver.
Md. Code, Insurance § 9-214
Within 15 days after appointment as receiver or conservator for an insurer against which a delinquency proceeding has been commenced, the receiver or conservator shall notify each policyholder of the insurer, by letter or other means approved by the court, of the commencement of the delinquency proceeding and of the possibility that the insurance of the policyholder may be canceled.
Md. Code, Insurance § 9-215
(a) On application of the Commissioner at any time, the court may issue ex parte an order that:
(1) directs the Commissioner to take possession and control of all or part of:
(i) the property, books, accounts, documents, and other records of an insurer; and
(ii) the premises that the insurer occupies for the transaction of its business; and
(2) enjoins the insurer and its officers, directors, stockholders, members, subscribers, agents, and all other persons from the transaction of its business without written consent of the Commissioner.
(b) (1) The court shall specify the duration of a seizure order issued under this section.
(2) The duration of the seizure order shall be the time that the court considers necessary for the Commissioner to determine the condition of the insurer.
(3) On motion of the court or either party and after notice that the court considers appropriate, the court may hold hearings and extend, shorten, or modify the terms of the seizure order.
(4) If the Commissioner fails to commence a delinquency proceeding after having had a reasonable opportunity to do so, the court shall vacate the seizure order.
(5) An order of the court under a delinquency proceeding vacates the seizure order.
(c) Issuance of a seizure order under this section does not constitute an anticipatory breach of any contract of the insurer.
(d) (1) At any time after issuance of an ex parte order under this section, an insurer subject to the order may petition the court for a hearing and review of the order.
(2) Within 15 days after receipt of the petition, the court shall hold the hearing and review the order.
(e) (1) If at any time after issuance of a seizure order the court determines that a person whose interest is or will be substantially affected by the order did not appear at the hearing and has not been served, the court may order that notice be given to that person.
(2) The order that notice be given does not stay the effect of any other order previously issued by the court.
(f) At any time during a delinquency proceeding, the court may issue an injunction or order to prevent:
(1) interference with the Commissioner or the delinquency proceeding;
(2) waste of the assets of the insurer;
(3) commencement or prosecution of an action;
(4) obtaining of preferences, judgments, attachments, or other liens; or
(5) levy against the insurer or all or part of its assets.
(g) (1) Except when disclosure is necessary to comply with a court order, all documents and records that relate to a proceeding under this section, including records of the insurer, files of the Administration, and court records and papers, are confidential.
(2) The clerk of the court shall hold all documents and records filed with the court in a proceeding under this section in a confidential file.
(3) After hearing arguments from the parties, the court may order that a document or record be made public.
(h) Notwithstanding any other provision of law, the Commissioner may not be required to post a bond as a prerequisite for issuance of an order under this section.
(i) (1) (i) After the 14th day following the filing of a delinquency proceeding, a federal home loan bank may not be stayed or prohibited from exercising its rights regarding collateral pledged by an insurer–member.
(ii) If a federal home loan bank exercises its rights regarding collateral pledged by an insurer–member who is subject to a delinquency proceeding, the federal home loan bank shall repurchase any outstanding capital stock:
1. that exceeds the amount of federal home loan bank stock that the insurer–member is required to hold as a minimum investment; and
2. to the extent the federal home loan bank in good faith determines the repurchase to be:
A. permissible under applicable laws, regulations, regulatory obligations, and the federal home loan bank’s capital plan; and
B. consistent with the federal home loan bank’s current capital stock practices applicable to its entire membership.
(2) After the appointment of a receiver for an insurer–member, the federal home loan bank, within 10 business days after a request from the receiver, shall provide a process and establish a timeline for the following:
(i) the release of collateral that exceeds the amount required to support secured obligations remaining after any repayment of loans, as determined in accordance with the applicable agreements between the federal home loan bank and the insurer–member;
(ii) the release of any of the insurer–member’s collateral remaining in the federal home loan bank’s possession after full repayment of all outstanding secured obligations of the insurer–member;
(iii) the payment of any fees owed by the insurer–member to the federal home loan bank;
(iv) the operation of deposits and other accounts of the insurer–member with the federal home loan bank; and
(v) the possible redemption or repurchase of federal home loan bank stock or excess stock of any class that an insurer–member is required to own.
(3) On request of a receiver for an insurer–member, the federal home loan bank shall provide any options available to the insurer–member to renew or restructure a loan, subject to:
(i) market conditions;
(ii) the terms of any outstanding loans made to the insurer–member;
(iii) the applicable policies of the federal home loan bank; and
(iv) the federal home loan bank’s compliance with federal laws and regulations.
Md. Code, Insurance § 9-216
An appeal may be taken to the Appellate Court of Maryland from:
(1) an order that grants or refuses rehabilitation, liquidation, or conservation; and
(2) any other order in a delinquency proceeding that has the character of a final order as to the particular part of the delinquency proceeding covered by the order.
Md. Code, Insurance § 9-217
(a) To facilitate the rehabilitation, liquidation, conservation, or dissolution of an insurer under this subtitle, the Commissioner, subject to the approval of the court, may:
(1) borrow money;
(2) execute, acknowledge, and deliver notes or other evidences of indebtedness for the loan;
(3) secure the repayment of the loan by the mortgage, pledge, assignment, or transfer in trust of all or part of the property of the insurer; and
(4) take any other action necessary and proper to consummate the loan and to provide for its repayment.
(b) The Commissioner is not obligated personally or in an official capacity to repay a loan made under this section.
Md. Code, Insurance § 9-218
(a) Whenever under this subtitle a receiver is to be appointed in a delinquency proceeding for a domestic insurer or alien insurer, the court shall:
(1) appoint the Commissioner as receiver; and
(2) order the Commissioner promptly to take possession of the assets of the domestic insurer or alien insurer and to administer the assets under the orders of the court.
(b) (1) Subject to paragraph (2) of this subsection, beginning on the date of issuance of an order that directs the Commissioner to rehabilitate or liquidate a domestic insurer or to liquidate the United States branch of an alien insurer domiciled in the State, the Commissioner as domiciliary receiver is vested by operation of law with title to and may take possession of all of the property, contracts, rights of action, books, and records of the domestic insurer or alien insurer, wherever located.
(2) An ancillary receiver in a reciprocal state has the rights and powers as to assets located in that state that are specified in this subtitle for an ancillary receiver appointed in this State.
(c) The filing of the order that directs possession to be taken, or a certified copy of the order, in an office where instruments affecting title to property are required to be filed provides the same notice as would be provided by a deed, bill of sale, or other evidence of title that is so filed.
(d) (1) The Commissioner as domiciliary receiver shall administer properly all assets that come into the possession or control of the Commissioner.
(2) If considered desirable to protect the assets, the court at any time may require a bond from the Commissioner or Deputy Commissioner.
(3) On taking possession of the assets of a domestic insurer or alien insurer and subject to the direction of the court, the Commissioner immediately shall:
(i) conduct the business of the domestic insurer or alien insurer; or
(ii) take action authorized by this subtitle to rehabilitate, liquidate, or conserve the affairs or assets of the domestic insurer or alien insurer.
Md. Code, Insurance § 9-219
(a) (1) Whenever under this subtitle an ancillary receiver is to be appointed in a delinquency proceeding for an insurer not domiciled in the State, the court shall appoint the Commissioner as ancillary receiver.
(2) The Commissioner shall file a petition requesting appointment as ancillary receiver under § 9-211(e) of this subtitle if:
(i) the Commissioner finds that there are sufficient assets of the insurer located in the State to justify the appointment of an ancillary receiver; or
(ii) ten or more persons resident in the State with claims against the insurer file a petition with the Commissioner requesting the appointment of an ancillary receiver.
(b) For the purpose of liquidating an insurer domiciled in a reciprocal state, the domiciliary receiver:
(1) is vested by operation of law with title to all of the property, contracts, and rights of action, and all of the books and records of the insurer located in this State;
(2) immediately may recover balances due from local insurance producers and obtain possession of any books and records of the insurer found in this State;
(3) subject to subsection (c)(1) of this section, may recover other assets of the insurer located in this State; and
(4) may sue in this State to recover any assets of the insurer to which the domiciliary receiver is entitled under the law of this State.
(c) (1) On appointment of an ancillary receiver in this State, the ancillary receiver:
(i) has the sole right to recover other assets of the insurer specified in subsection (b)(3) of this section during the ancillary receivership proceeding;
(ii) shall:
1. as soon as practicable liquidate from the securities of the ancillary receiver those special deposit claims and secured claims that are proved and allowed in an ancillary proceeding in this State; and
2. pay the necessary expenses of the ancillary proceeding; and
(iii) shall transfer promptly all remaining assets to the domiciliary receiver.
(2) Subject to paragraph (1) of this subsection, the ancillary receiver and deputies of the ancillary receiver have the same powers and are subject to the same duties concerning administration of the assets of the insurer as a receiver of an insurer domiciled in this State.
Md. Code, Insurance § 9-220
(a) During pendency of a delinquency proceeding in this State or a reciprocal state, an attachment, garnishment, execution, or similar action or proceeding may not be commenced or maintained in a court of this State against the impaired insurer or its assets.
(b) A lien obtained or an action or proceeding prohibited by subsection (a) of this section is void as against any rights arising in the delinquency proceeding, if the lien was obtained or the action or proceeding commenced within 4 months before or at any time after commencement of a delinquency proceeding.
Md. Code, Insurance § 9-221
(a) A transfer of or lien on the property of an insurer is voidable if the transfer or lien is:
(1) made or created within 4 months before the issuance of a show–cause order under this subtitle;
(2) made or created with the intent to give a creditor a preference or to enable the creditor to obtain a greater percentage of the debt than another creditor of the same class; and
(3) accepted by the creditor having reasonable cause to believe that the preference will occur.
(b) Each director, officer, employee, stockholder, member, subscriber, and any other person acting on behalf of an insurer that is concerned in a voidable transfer under subsection (a) of this section and each person that, as a result of the voidable transfer, receives any property of the insurer or benefits from the voidable transfer:
(1) is personally liable; and
(2) shall account to the Commissioner.
(c) The Commissioner as receiver in a delinquency proceeding may:
(1) avoid a transfer of or lien on the property of an insurer that a creditor, stockholder, subscriber, or member of the insurer might have avoided; and
(2) recover the transferred property or its value from the person that received it unless that person was a bona fide holder for value before the date of issuance of a show–cause order under this subtitle.
(d) (1) Except as provided in paragraph (2) of this subsection, the receiver for an insurer–member may not void any transfer of, or any obligation to transfer, money or any other property arising under or in connection with:
(i) a federal home loan bank security agreement;
(ii) a pledge, a security, collateral, or a guarantee agreement; or
(iii) any other similar arrangement or credit enhancement relating to a federal home loan bank security agreement made in the ordinary course of business and in compliance with the applicable federal home loan bank agreement.
(2) The receiver may void a transfer under this section if the transfer was made with intent to hinder, delay, or defraud:
(i) the insurer–member;
(ii) the receiver for the insurer–member; or
(iii) existing or future creditors.
(e) This section may not affect a receiver’s rights regarding advances to an insurer–member in delinquency proceedings under 12 C.F.R. § 1266.
Md. Code, Insurance § 9-222
(a) (1) The Commissioner shall deposit money collected in a delinquency proceeding in a State or national bank, savings bank, or trust company.
(2) Deposits made by the Commissioner under paragraph (1) of this subsection have priority of payment equal to any other priority specified by the banking laws of this State if the depository:
(i) is an institution organized and supervised under the laws of this State; and
(ii) becomes insolvent or liquidates voluntarily or involuntarily.
(3) The Commissioner may deposit all or part of the money collected in a national bank or trust company as a trust fund.
(b) To the extent that an investment or account is insured by the Federal Deposit Insurance Corporation, the Commissioner may invest in shares or deposits in a savings and loan association or building and loan association.
Md. Code, Insurance § 9-223
Unless an insurer has repaid to all guaranty associations all payments of or on account of the contractual obligations of the insurer, including all expenses of and interest on the obligations, or unless a guaranty association has approved a plan of repayment by the insurer, an insurer subject to a delinquency proceeding may not:
(1) be released from the delinquency proceeding unless it is converted into a judicial proceeding to rehabilitate or liquidate;
(2) be allowed to solicit or accept new business;
(3) be allowed to request or accept the restoration of a suspended or revoked license or certificate of authority; or
(4) be returned, or have any of its assets returned, to the control of its stockholders or private management.
Md. Code, Insurance § 9-224
(a) In this section, “association” means:
(1) the Property and Casualty Insurance Guaranty Corporation;
(2) the Life and Health Insurance Guaranty Corporation; or
(3) a similar organization in another state.
(b) Within 120 days after a court of the State makes a final determination that an insurer is an impaired insurer, the Commissioner as receiver shall apply to the court for approval of a proposal to disperse to the association entitled to disbursements unsecured assets out of the marshalled assets of the impaired insurer as those assets become available.
(c) The proposal for disbursement at a minimum shall provide for:
(1) adequate cash reserves for payment of expenses of administration and priority claims;
(2) disbursements of the assets marshalled to date and subsequent disbursements of assets as they become available;
(3) equitable allocation of disbursements to each of the associations that is entitled to disbursements; and
(4) the securing by the Commissioner from each association entitled to disbursements under this section an agreement to return to the Commissioner any assets previously disbursed that may be required to pay:
(i) claims of secured creditors; and
(ii) claims that fall within the priorities specified in § 9-227(b) of this subtitle in accordance with those priorities.
(d) An association may not be required to obtain a bond.
(e) The proposal for disbursement shall require that disbursement be made to the association:
(1) in an amount at least equal to the payments made or to be made by the association for which the association could assert claims against the Commissioner; and
(2) in the amount of available assets, if the assets available for disbursement do not equal or exceed the amount of the payments made or to be made by the association.
(f) (1) Notice of the application for approval of the proposal for disbursement shall be given to the associations and insurance commissioners of each state.
(2) Notice is deemed to have been given if sent by certified mail at least 30 days before submission of the application to the court.
(3) The court may approve the proposal if:
(i) the required notice has been given under this subsection; and
(ii) the proposal complies with subsection (c)(1) and (4) of this section.
Md. Code, Insurance § 9-225
(a) Within 3 years after the date of the issuance of an order of rehabilitation or liquidation of a domestic mutual insurer or domestic reciprocal insurer, the Commissioner may file with the court:
(1) a petition for assessment; and
(2) a report that states:
(i) the reasonable value of the assets of the mutual insurer or reciprocal insurer;
(ii) the liabilities of the mutual insurer or reciprocal insurer to the extent determined by the Commissioner at the time of the report;
(iii) as provided in § 3-111 of this article, the aggregate amount of any assessment that the Commissioner considers reasonably necessary to pay in full:
1. all claims;
2. the costs and expenses of the collection of assessments; and
3. the costs and expenses of the delinquency proceeding; and
(iv) any other information about the affairs or the property of the mutual insurer or reciprocal insurer that the Commissioner considers material.
(b) (1) On the filing and reading of the report and petition specified in subsection (a) of this section, the court ex parte may order the Commissioner to assess all members or subscribers of the mutual insurer or reciprocal insurer who may be subject to assessment, in an aggregate amount as the court finds reasonably necessary to pay in full:
(i) all valid claims that are timely filed and proved in the delinquency proceeding;
(ii) the costs and expenses of imposing and collecting the assessments; and
(iii) the costs and expenses of the delinquency proceeding.
(2) The order shall require the Commissioner to assess each member or subscriber for the member’s or subscriber’s proportion of the aggregate assessment in accordance with a reasonable classification of the members or subscribers and a formula made by the Commissioner and approved by the court.
(3) The court may order an additional assessment on all members or subscribers who may be subject to assessment on the filing and reading of an amendment or supplement to the report and petition specified in subsection (a) of this section if the amendment or supplement is filed within 3 years after the date of issuance of the order of rehabilitation or liquidation.
(4) After issuance of an order under this subsection, the Commissioner shall assess each member or subscriber in accordance with the order.
(c) (1) The total of all assessments against a member or subscriber with respect to a policy, whether imposed under this subtitle or another provision of this article:
(i) may not be more than as specified in the policy of the member or subscriber; and
(ii) shall be as limited under this article.
(2) An assessment may not be imposed against a member or subscriber with respect to a nonassessable policy that is issued in accordance with this article.
(d) The assessment of a member or subscriber is presumed correct if made by the Commissioner in accordance with a court order that:
(1) fixes the aggregate amount of the assessment against all members or subscribers; and
(2) approves the classification and formula made by the Commissioner under subsection (b) of this section.
(e) (1) The Commissioner shall mail, or send by electronic means in accordance with § 2–116 of this article, to each member or subscriber at the last address of record with the insurer a notice that:
(i) states the amount of the assessment to be paid by the member or subscriber;
(ii) specifies when the assessment should be paid; and
(iii) requires payment not less than 20 days after the Commissioner mails the notice.
(2) In a proceeding to collect an assessment, it is not a defense that a member or subscriber failed to receive the notice or failed to receive the notice within the time specified in the notice for payment of the assessment.
(3) If a member or subscriber fails to pay the assessment within the period specified in the notice, the Commissioner may obtain an order in the delinquency proceeding that requires the member or subscriber to show cause at a time and place fixed by the court why judgment for the amount of the assessment and all costs should not be entered against the member or subscriber.
(4) A copy of the order and petition for assessment shall be served on the member or subscriber within the time and in the manner designated in the order.
(5) After service of a copy of the order and petition is made on the member or subscriber:
(i) if the member or subscriber fails to appear at the time and place specified in the order, the court shall enter judgment against the member or subscriber as requested in the petition; or
(ii) if the member or subscriber appears in the manner and form required by law in response to the order, the court shall hear and determine the matter and enter judgment.
(6) The Commissioner may collect the assessment through any other lawful means.
Md. Code, Insurance § 9-226
(a) (1) If on issuance of an order of liquidation under this subtitle or at any time during a liquidation proceeding the insurer is not clearly solvent, the court, after notice it considers proper and a hearing, shall issue an order that the insurer is an impaired insurer.
(2) Notwithstanding any previous notice given to creditors, after issuance of an order under paragraph (1) of this subsection, the Commissioner shall notify each person that may have a claim against the insurer that the claim is forever barred unless the person files the claim with the Commissioner at a place and within the time specified in the notice.
(3) The time specified in the notice:
(i) shall be as set by the court for filing claims; but
(ii) may not be less than 6 months after issuance of the order that the insurer is an impaired insurer.
(4) The notice shall be given in the manner and for the reasonable period of time that the court orders.
(b) (1) Each claimant shall set forth in reasonable detail:
(i) the amount of the claim or the basis on which the amount can be determined;
(ii) the facts on which the claim is based; and
(iii) any priority asserted by the claimant.
(2) Each claim shall:
(i) be verified by the affidavit of the claimant or a person authorized to act on behalf of the claimant who has knowledge of the facts; and
(ii) be supported by any documents that may be material to the claim.
(3) Each claim filed in the State shall be filed with the domiciliary receiver or ancillary receiver in the State on or before the last date specified under this subtitle for filing of claims.
(c) The receiver shall:
(1) report a claim to the court:
(i) within 10 days after receiving the claim; or
(ii) within an additional period set by the court for good cause shown; and
(2) recommend in the report action to be taken on the claim.
(d) (1) On receipt of the report of the receiver, the court shall:
(i) set a time for hearing the claim; and
(ii) direct the claimant or receiver to give notice as the court determines to each person that appears to the court to be interested in the claim.
(2) The notice given in accordance with this subsection shall:
(i) specify the time and place of the hearing; and
(ii) state concisely:
1. the amount and nature of the claim;
2. any priority asserted by the claimant; and
3. the recommendation of the receiver about the claim.
(e) (1) At the hearing specified under subsection (d) of this section:
(i) each person with an interest in the claim may appear; and
(ii) the court shall issue an order in which the court allows, allows in part, or disallows the claim.
(2) An order under this subsection is a final order subject to appeal.
(f) (1) In a delinquency proceeding commenced in this State against a domestic insurer, a claimant who resides in a reciprocal state may file a claim with:
(i) any ancillary receiver in the reciprocal state; or
(ii) the domiciliary receiver.
(2) Each claim filed under this subsection must be filed on or before the last date set for the filing of claims in the delinquency proceeding in the domiciliary state.
(3) A controverted claim of a claimant who resides in a reciprocal state may be proved:
(i) in this State; or
(ii) if an ancillary proceeding has been commenced in the reciprocal state, in the ancillary proceeding.
(4) If the claimant elects to prove a claim in the ancillary proceeding, and if the same notice and opportunity to be heard is given the domiciliary receiver of this State as is provided under subsection (g) of this section for an ancillary proceeding in this State, the final allowance of the claim by the courts of the ancillary state shall be accepted in this State as conclusive as to:
(i) the amount of the claim; and
(ii) any priority of the claim against special deposits or other security located in the ancillary state.
(g) (1) In a delinquency proceeding in a reciprocal state against an insurer domiciled in that state, a claimant who resides in this State may file a claim with:
(i) any ancillary receiver appointed in this State; or
(ii) the domiciliary receiver.
(2) Each claim filed under this subsection must be filed on or before the last date set for the filing of claims in the delinquency proceeding in the domiciliary state.
(3) A controverted claim of a claimant who resides in this State may be proved:
(i) in the domiciliary state, as provided by the law of the domiciliary state; or
(ii) if an ancillary proceeding has been commenced in this State, in the ancillary proceeding.
(4) If the claimant elects to prove the claim in this State, the claimant shall:
(i) file the claim with the ancillary receiver; and
(ii) give written notice to the domiciliary receiver by certified mail, return receipt requested, bearing a postmark from the United States Postal Service, or by personal service at least 40 days before the date set for the hearing.
(5) The notice shall contain:
(i) a concise statement of the amount of the claim;
(ii) the facts on which the claim is based; and
(iii) any priority asserted by the claimant.
(6) The domiciliary receiver may appear or be represented in any proceeding in this State that involves adjudication of the claim if, within 30 days after the claimant gives the notice required by this subsection, the domiciliary receiver gives written notice of an intent to contest the claim:
(i) to the ancillary receiver and to the claimant; and
(ii) by certified mail, return receipt requested, bearing a postmark from the United States Postal Service, or by personal service.
(7) The final allowance of the claim by the courts of this State shall be accepted as conclusive as to:
(i) the amount of the claim; and
(ii) any priority of the claim against special deposits or other security located in this State.
Md. Code, Insurance § 9-227
(a) In this section, “preferred claim” means a claim that is given priority of payment from the general assets of an insurer under the law of the State or the United States.
(b) (1) The first $500 of compensation or wages owed to an officer or employee of an insurer for services rendered within 3 months before the commencement of a delinquency proceeding against the insurer shall be paid before payment of any other debt or claim.
(2) Subject to paragraph (3) of this subsection, the Commissioner may pay the compensation required to be paid under this subsection as soon as practicable after commencement of the delinquency proceeding.
(3) At all times, the Commissioner shall reserve funds that the Commissioner believes are sufficient for expenses of administration.
(4) The priority required under this subsection is instead of any other similar priority that may be authorized by law as to wages or compensation.
(c) Priority over all other claims in a liquidation proceeding, other than claims for wages specified in subsection (b) of this section, expenses of administration, and taxes, shall be given to:
(1) claims by policyholders, beneficiaries, insureds, or holders of funding agreements issued under § 16–113 of this article, that arise from and within the coverage of and are not in excess of the applicable limits of policies and insurance contracts issued by the insurer;
(2) liability claims against insureds that are within the coverage of and are not in excess of the applicable limits of policies and insurance contracts issued by the insurer; and
(3) claims of:
(i) the Property and Casualty Insurance Guaranty Corporation;
(ii) the Life and Health Insurance Guaranty Corporation; and
(iii) any similar organization in another state.
(d) Notwithstanding the provisions of subsections (b) and (c) of this section, if there are known or potential claims due the federal government, the following shall be the priority of distribution:
(1) expenses of administration;
(2) the following claims without priority among them:
(i) claims made by policyholders, beneficiaries, insureds, or holders of funding agreements issued under § 16–113 of this article, that arise from and within the coverage of and are not in excess of the applicable limits of policies and insurance contracts issued by the insurer;
(ii) liability claims against insureds that are within the coverage of and are not in excess of the applicable limits of policies and insurance contracts issued by the insurer; and
(iii) claims of:
1. the Property and Casualty Insurance Guaranty Corporation;
2. the Life and Health Insurance Guaranty Corporation; and
3. any similar organization in another state;
(3) claims of the federal government not included in item (2) of this subsection;
(4) the first $500 of compensation or wages owed to an officer or employee of an insurer for services rendered within 3 months before the commencement of a delinquency proceeding against the insurer, which shall be instead of any other similar priority that may be authorized by law as to wages or compensation;
(5) claims for taxes and debts due any state or local government; and
(6) all other claims of general creditors not falling within any other priority under this subsection.
(e) (1) The owners of special deposit claims against an insurer for which a receiver is appointed in this State or another state have priority against their special deposits as provided by the law that governs the creation and maintenance of special deposits.
(2) If there is a deficiency in a special deposit so that the claims secured by the special deposit are not fully discharged, the claimants may share in the general assets after general creditors, and claimants against other special deposits who have received smaller percentages from their respective special deposits, have been paid percentages of their claims equal to the percentage paid from the special deposit.
(f) (1) The owner of a secured claim against an insurer for which a receiver has been appointed in this State or another state may:
(i) surrender the security and file the claim as a general creditor; or
(ii) have the claim discharged by resort to the security.
(2) If the owner of a secured claim has the claim discharged by resort to the security, any deficiency shall be treated as a claim against the general assets of the insurer on the same basis as the claims of unsecured creditors.
(3) The amount of a deficiency is conclusive if adjudicated:
(i) in an ancillary proceeding under this subtitle; or
(ii) by a court of competent jurisdiction in a proceeding in which the domiciliary receiver has had notice and an opportunity to be heard.
(4) If the amount of a deficiency is not conclusive, the amount shall be determined in a delinquency proceeding in the domiciliary state.
(g) (1) Current financing money that, in accordance with regulations adopted by the Health Services Cost Review Commission, are provided by an insurer, nonprofit health service plan, or health maintenance organization to a hospital for discounted hospital rates are deemed to be security for the amount of outstanding charges owed by the insurer, nonprofit health service plan, or health maintenance organization to the hospital for bills or claims for services provided by the hospital before the delinquency proceeding.
(2) A hospital that retains any current financing money as security under this subsection:
(i) is deemed to be the owner of a secured claim against the insurer, nonprofit health service plan, or health maintenance organization for which a receiver has been appointed; and
(ii) may discharge its claim against the insurer, nonprofit health service plan, or health maintenance organization as provided under subsection (f) of this section.
(h) (1) In a delinquency proceeding against an insurer domiciled in the State, claims owing to residents of ancillary states are preferred claims if similar claims are preferred under the law of this State.
(2) All claims owing to residents of ancillary states or nonresidents have equal priority of payment from general assets regardless of where the general assets are located.
(i) In a delinquency proceeding against an insurer domiciled in a reciprocal state, claims owing to residents of this State are preferred claims if similar claims are preferred under the law of that state.
Md. Code, Insurance § 9-228
(a) (1) Subject to paragraph (2) of this subsection, contingent and unliquidated claims may not share in a distribution of the assets of an insurer that has been adjudicated to be an impaired insurer by an order issued under this subtitle.
(2) If properly presented, a contingent and unliquidated claim shall be considered and may be allowed to share if:
(i) the claim becomes absolute against the insurer on or before the last day for filing claims against the assets of the insurer; or
(ii) there is a surplus and the liquidation is subsequently conducted on the basis that the insurer is solvent.
(b) If an insurer has been adjudicated to be an impaired insurer, a person that has a cause of action against an insured of the insurer under a liability policy issued by the insurer has the right to file a claim in the liquidation proceeding, even if the claim may be contingent, and the claim may be allowed if:
(1) a reasonable inference may be made from proof presented on the claim that the person would be able to obtain a judgment in a cause of action against the insured;
(2) the person provides suitable proof, unless for good cause shown the court directs otherwise, that no further valid claim against the insurer arising out of the cause of action can be made other than the claim already presented; and
(3) the total liability of the insurer to all claimants arising out of the same act of the insured is not greater than the maximum liability of the insurer were the insurer not in liquidation.
(c) (1) A judgment against an insured after the date of issuance of a liquidation order may not be considered in the liquidation proceeding as evidence of liability or of the amount of damages.
(2) A judgment against an insured by default or collusion before issuance of a liquidation order may not be considered in the liquidation proceeding as conclusive evidence of the liability of the insured to a person with a cause of action against the insured or the amount of damages to which the person is entitled.
(d) (1) Except as provided in paragraph (2) of this subsection, a claim of a person that has a secured claim may not be allowed at a sum greater than the difference between:
(i) the value of the claim without security; and
(ii) the value of the security itself on:
1. the date of issuance of the liquidation order; or
2. another date set by the court for determining rights and liabilities as provided in subsection (e) of this section.
(2) If the claimant surrenders the security to the Commissioner, the claim shall be allowed in the full amount for which it is valued.
(e) Subject to the provisions of this subtitle on the rights of claimants holding contingent claims, and unless otherwise directed by the court, the rights and liabilities of an insurer, the creditors, policyholders, stockholders, members, and subscribers of the insurer, and other persons interested in the estate of the insurer are fixed on the date on which the order that directs the liquidation of the insurer is filed in the office of the clerk of the court that issued the order.
Md. Code, Insurance § 9-229
(a) Except as provided in subsection (b) of this section, in all cases of mutual debts and credits between an insurer and another person in connection with a delinquency proceeding, the debts and credits shall be offset and the balance only shall be allowed or paid.
(b) An offset may not be allowed in favor of another person if:
(1) on the date of issuance of a liquidation order or otherwise, as specified in § 9-228(e) of this subtitle, the obligation of the insurer to the person would not entitle the person to share as a claimant in the assets of the insurer;
(2) the obligation of the insurer to the person was purchased by or transferred to the person for use as an offset; or
(3) the obligation of the person is to pay:
(i) an assessment imposed on the members of a mutual insurer or the subscribers of a reciprocal insurer; or
(ii) a balance on the subscription to the capital stock of a stock insurer.
Md. Code, Insurance § 9-229.1
§9–229.1.
(a) (1) In this section the following words have the meanings indicated.
(2) “Commodity contract” means:
(i) a contract for the purchase or sale of a commodity for future delivery on, or subject to the rules of, a board of trade designated as a contract market by the Commodity Futures Trading Commission under the federal Commodity Exchange Act or board of trade outside the United States;
(ii) an agreement that is:
1. subject to regulation under § 19 of the federal Commodity Exchange Act; and
2. commonly known to the commodities trade as a margin account, margin contract, leverage account, or leverage contract; or
(iii) an agreement or transaction that is:
1. subject to regulation under § 4c(b) of the federal Commodity Exchange Act; and
2. commonly known to the commodities trade as a commodity option.
(3) “Contractual right” means any right, whether or not evidenced in writing, arising under:
(i) statutory law, common law, or law merchant;
(ii) a rule or bylaw of a national securities exchange, national securities clearing organization, or securities clearing agency; or
(iii) a rule, bylaw, or resolution of the governing body of a contract market or its clearing organization.
(4) “Forward contract” means a contract, other than a commodity contract, for the purchase, sale, or transfer of:
(i) a commodity, as defined in § 1 of the federal Commodity Exchange Act; or
(ii) any similar good, article, service, right, or interest that presently is or in the future becomes the subject of dealing in the forward contract trade, or a product or by–product thereof, with a maturity date more than 2 days after the date the contract is entered into, including, but not limited to, a repurchase transaction, reverse repurchase transaction, consignment, lease, swap, hedge transaction, deposit, loan, option, allocated transaction, unallocated transaction, or a combination of these or an option on any of them.
(5) (i) “Netting agreement” means a contract or agreement, including terms and conditions incorporated by reference in the contract or agreement, that:
1. documents one or more transactions between the parties to the contract or agreement for or involving one or more qualified financial contracts; and
2. provides for the netting or liquidation of qualified financial contracts or the present or future payment obligations or payment entitlements under qualified financial contracts, including liquidation or close–out values relating to the obligations or entitlements, among the parties to the netting agreement.
(ii) “Netting agreement” includes a master agreement that, together with all schedules, confirmations, definitions, and addenda to and transactions under any thereof, shall be treated as one netting agreement.
(6) “Qualified financial contract” means a commodity contract, forward contract, repurchase agreement, reverse repurchase agreement, securities contract, swap agreement, or any similar agreement that the Commissioner determines by regulation or order to be a qualified financial contract for purposes of this subtitle.
(7) (i) “Repurchase agreement” or “reverse repurchase agreement” means an agreement, including related terms, that provides for the transfer of certificates of deposit, eligible bankers’ acceptances, or securities that are direct obligations of, or that are fully guaranteed as to principal and interest by, the United States or an agency of the United States against the transfer of funds by the transferee of the certificates of deposit, eligible bankers’ acceptances, or securities with a simultaneous agreement by the transferee to transfer to the transferor certificates of deposit, eligible bankers’ acceptances, or securities as described above in this subparagraph at a certain date not later than 1 year after the transfers or on demand, against the transfer of funds.
(ii) For purposes of the definitions of “repurchase agreement” and “reverse repurchase agreement” in subparagraph (i) of this paragraph, the items that may be subject to a repurchase agreement or a reverse repurchase agreement include mortgage–related securities, a mortgage loan, and an interest in a mortgage loan, and do not include any participation in a commercial mortgage loan unless the Commissioner determines by regulation or order to include the commercial mortgage loan participation.
(8) (i) “Securities contract” means a contract for the purchase, sale, or loan of a security, including:
1. an option for the repurchase or sale of a security, certificate of deposit, or group or index of securities, including an interest therein or based on the value thereof;
2. an option entered into on a national securities exchange relating to foreign currencies; or
3. the guarantee of a settlement of cash or securities by or to a securities clearing agency.
(ii) In subparagraph (i) of this paragraph, “security” includes a mortgage loan, mortgage–related securities, and an interest in any mortgage loan or mortgage–related security.
(9) “Swap agreement” means an agreement, including the terms and conditions incorporated by reference in the agreement, that is a rate swap agreement, basis swap, commodity swap, forward rate agreement, interest rate future, interest rate option, forward foreign exchange agreement, spot foreign exchange agreement, rate cap agreement, rate floor agreement, rate collar agreement, currency swap agreement, cross–currency rate swap agreement, currency future, currency option, or any other similar agreement, and includes any combination of agreements and an option to enter into an agreement.
(b) Notwithstanding any other provision of State law, a person may not be stayed or otherwise prohibited from exercising:
(1) a contractual right to terminate, liquidate, or close out any netting agreement or qualified financial contract with an insurer because of:
(i) the insolvency, financial condition, or default of the insurer at any time, provided that the right is enforceable under applicable law other than this subtitle; or
(ii) the commencement of a delinquency proceeding under this subtitle;
(2) any right under a pledge, security, collateral, or guarantee agreement or any other similar security arrangement or credit support document relating to a netting agreement or qualified financial contract; or
(3) subject to any provision of § 9-229(b) of this subtitle, any right to offset or net out any termination value, payment amount, or other transfer obligation arising under or in connection with a netting agreement or qualified financial contract if the counterparty or its guarantor is organized under the laws of the United States, a state, or a foreign jurisdiction approved by the Securities Valuation Office of the National Association of Insurance Commissioners as eligible for netting.
(c) (1) Notwithstanding a provision in a netting agreement that the nondefaulting party is not required to pay any net or settlement amount due to the defaulting party, on termination of the netting agreement, the net or settlement amount, if any, owed by a nondefaulting party to an insurer against which an application or petition has been filed under this subtitle, shall be transferred to or on the order of the receiver for the insurer, even if the insurer is the defaulting party.
(2) Any limited two-way payment provision in a netting agreement with an insurer that has defaulted shall be deemed to be a full two-way payment provision as against the defaulting insurer.
(3) Any such net or settlement amount shall be a general asset of the insurer, except to the extent such net or settlement amount is subject to one or more secondary liens or encumbrances.
(d) In making a transfer of a netting agreement or qualified financial contract of an insurer subject to a delinquency proceeding under this subtitle, the receiver shall:
(1) transfer to one party, other than an insurer subject to a delinquency proceeding under this subtitle, all netting agreements and qualified financial contracts between a counterparty or an affiliate of a counterparty and the insurer that is the subject of the delinquency proceeding, including:
(i) all rights and obligations of each party under each netting agreement and qualified financial contract; and
(ii) all property, including any guarantees or credit support documents, securing any claims of each party under each netting agreement and qualified financial contract; or
(2) transfer none of the netting agreements, qualified financial contracts, rights, obligations, or property referred to in item (1) of this subsection, with respect to the counterparty and any affiliate of the counterparty.
(e) (1) If a receiver for an insurer makes a transfer of one or more netting agreements or qualified financial contracts, the receiver shall use its best efforts to notify any person who is party to the netting agreements or qualified financial contracts of the transfer by 12:00 p.m., the receiver’s local time, on the business day following the transfer.
(2) In this subsection, “business day” means a day other than a Saturday, a Sunday, or any day on which either the New York Stock Exchange or the Federal Reserve Bank of New York is closed.
(f) (1) Notwithstanding any provision of this subtitle other than paragraph (2) of this subsection, a receiver may not avoid a transfer of money or other property arising under or in connection with a netting agreement or qualified financial contract, or any pledge, security, collateral, or guarantee agreement or any other similar security arrangement or credit support document relating to a netting agreement or qualified financial contract, that is made before the commencement of a delinquency proceeding under this subtitle.
(2) A transfer may be avoided under § 9-221 of this subtitle if the transfer was made with actual intent to hinder, delay, or defraud the insurer, a receiver appointed for the insurer, or existing or future creditors.
(g) (1) In exercising any of its power under this subtitle to disaffirm or repudiate a netting agreement or qualified financial contract, a receiver shall take action with respect to each netting agreement or qualified financial contract and all transactions entered into in connection with each netting agreement or qualified financial contract, in its entirety.
(2) Notwithstanding any other provision of this subtitle, any claim of a counterparty against the estate arising from a receiver’s disaffirmance or repudiation of a netting agreement or qualified financial contract that has not been previously affirmed in the liquidation or immediately preceding rehabilitation proceeding shall be determined and shall be allowed or disallowed:
(i) as if the claim had arisen before the date of the filing of the petition for liquidation; or
(ii) if a rehabilitation proceeding is converted to a liquidation proceeding, as if the claim had arisen before the date of the filing of the petition for rehabilitation.
(3) (i) The amount of the claim identified in paragraph (2) of this subsection shall be the actual direct compensatory damages determined as of the date of the disaffirmance or repudiation of the netting agreement or qualified financial contract.
(ii) In subparagraph (i) of this paragraph, “actual direct compensatory damages” does not include punitive or exemplary damages, damages for lost profits or lost opportunity, or damages for pain and suffering, but does include normal and reasonable costs of cover or other reasonable measures of damages used in the derivatives market for the contract and agreement claims.
(h) All rights of counterparties under this subtitle shall apply to netting agreements and qualified financial contracts entered into on behalf of:
(1) the general account; or
(2) separate accounts if the assets of each separate account are available only to counterparties to netting agreements and qualified financial contracts entered into on behalf of that separate account.
(i) This section does not apply to a person that is an affiliate of the insurer that is the subject of a delinquency proceeding under this subtitle.
Md. Code, Insurance § 9-230
(a) This section may not be construed to abridge otherwise existing legal rights, including the right to resist a petition for liquidation, other delinquency proceedings, or other orders.
(b) In a delinquency proceeding or in an investigation preliminary to the delinquency proceeding, an officer, manager, director, trustee, owner, employee, or agent of an insurer, another person with authority over any part of the affairs of the insurer, or a person that exercises control directly or indirectly over an activity of the insurer through a holding company or other affiliate of the insurer shall:
(1) reply promptly in writing to an inquiry from the Commissioner in which the Commissioner requests a written reply;
(2) make available to the Commissioner any accounts, books, documents, information, records, or property of or relating to the insurer that is in the control, custody, or possession of the person; and
(3) otherwise cooperate with the Commissioner.
(c) A person may not obstruct or interfere with the Commissioner in the conduct of a delinquency proceeding or in an investigation preliminary or incidental to the delinquency proceeding.
(d) An officer, manager, director, trustee, owner, employee, or agent of an insurer, another person with authority over any part of the affairs of the insurer, or a person that exercises control directly or indirectly over an activity of the insurer through a holding company or other affiliate of the insurer may not fail to cooperate with the Commissioner under subsection (b) of this section, obstruct or interfere with the Commissioner in the conduct of a delinquency proceeding or in an investigation preliminary or incidental to a delinquency proceeding, or violate an order of the Commissioner issued under this subtitle.
(e) (1) A person that violates subsection (d) of this section is guilty of a misdemeanor and on conviction is subject to a fine not exceeding $10,000 or imprisonment not exceeding 1 year or both.
(2) After a hearing before the Commissioner, a person that violates subsection (d) of this section is subject to a civil penalty not exceeding $10,000 and to the revocation or suspension of any insurance license issued by the Commissioner.
Md. Code, Insurance § 9-231
(a) In this section, “chief executive officer” means a person charged by the board of directors or trustees of an insurer to administer and implement policies and procedures of the insurer.
(b) The provisions of this section that apply to insurers also apply to:
(1) a corporation that operates a nonprofit health service plan under Title 14, Subtitle 1 of this article;
(2) a dental plan organization, as defined in § 14-401 of this article;
(3) a surplus lines insurer; and
(4) a health maintenance organization.
(c) (1) A chief executive officer shall immediately provide the Commissioner and all members of the board of directors or the trustees of an insurer with written notice that the insurer is an impaired insurer, if the chief executive officer:
(i) knows that the insurer is an impaired insurer; and
(ii) for a period of 60 days, has been unable to remedy the impairment.
(2) A director, officer, or trustee of an insurer who knows that the insurer is an impaired insurer shall immediately notify the chief executive officer of the impairment.
(d) Notice provided to the Commissioner under this section has the confidentiality specified in § 7-106 of this article.
(e) If a person knows that the action will result in or contribute to an insurer becoming an impaired insurer, the person may not:
(1) conceal property that belongs to the insurer;
(2) transfer or conceal property of the person or property that belongs to the insurer in contemplation of a delinquency proceeding;
(3) conceal, destroy, mutilate, alter, or falsify a document that relates to the property of the insurer;
(4) withhold a document from a receiver, trustee, or other officer of the court entitled to its possession under this subtitle; or
(5) give, obtain, or receive anything of value for acting or forbearing to act in a delinquency proceeding.
(f) (1) In addition to any other applicable penalty provided in this article, a person that violates subsection (e) of this section is guilty of a misdemeanor and on conviction is subject to a fine not exceeding $50,000 or imprisonment not exceeding 3 years or both.
(2) In addition to any other applicable penalty provided in this article, a person that violates subsection (c) of this section is subject to a civil penalty not exceeding $50,000.
(g) The Commissioner may issue a cease and desist order in accordance with § 27-103 of this article against a person that violates subsection (c) or subsection (e) of this section.
Md. Code, Insurance § 9-232
A director or officer of an insurer, association, or fraternal benefit society that receives a premium or assessment on behalf of the insurer, association, or fraternal benefit society and, at the time of receipt, knows that the insurer, association, or fraternal benefit society is insolvent is guilty of a misdemeanor and on conviction is subject to a fine not exceeding $500 or imprisonment not exceeding 6 months or both.
Md. Code, Insurance § 9-301
(a) In this subtitle the following words have the meanings indicated.
(b) “Account” means:
(1) the title insurance account;
(2) the motor vehicle insurance account;
(3) the workers’ compensation account; or
(4) the account for all other insurance to which this subtitle applies.
(c) “Corporation” means the Property and Casualty Insurance Guaranty Corporation.
(d) (1) “Covered claim” means an insolvent insurer’s unpaid obligation, including an unearned premium:
(i) that:
1. A. for insurance other than insurance that covers members of a purchasing group, arises out of a policy of the insolvent insurer issued to a resident or payable to a resident on behalf of an insured of the insolvent insurer; or
B. for insurance that covers members of a purchasing group, arises out of insurance that covers the members of the purchasing group to the extent that the insurance is obtained by the purchasing group, the insurance is written by an authorized insurer, and the claim is made by a person residing or located in the State; or
2. arises out of a surety bond issued by the insolvent insurer for the protection of a third party that is a resident;
(ii) that is presented on or before the last date fixed for the filing of claims in the domiciliary delinquency proceeding as a claim to the corporation or to the receiver in the State;
(iii) that:
1. except for a surety bond claim, was incurred or existed before, on, or within 30 days after the determination of insolvency; or
2. for a surety bond claim that arises out of a surety bond issued by a domestic insurer, was incurred or existed before, on, or within 18 months after the determination of insolvency, whether or not the surety bond is issued for no stated period or for a stated period; and
(iv) that arises out of a policy or surety bond of the insolvent insurer issued for a kind of insurance to which this subtitle applies.
(2) “Covered claim” does not include:
(i) an amount due a reinsurer, insurer, insurance pool, or underwriting association, as a subrogation recovery or otherwise; or
(ii) an amount due that arises out of insurance covering the members of a purchasing group if the insurance obtained by the purchasing group is written by an unauthorized insurer.
(3) (i) “Covered claim” does not include a first party claim by an insured whose net worth exceeds $50,000,000 on December 31 of the year before the year in which the insurer becomes an insolvent insurer.
(ii) For purposes of this paragraph, the net worth of an insured is deemed to include the aggregate net worth of the insured and all of its subsidiaries calculated on a consolidated basis.
(4) Notwithstanding any other provision of this subtitle, “covered claim” does not include:
(i) a claim filed with the Corporation after the earlier of:
1. 18 months after the date of the order of liquidation; or
2. the final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer; or
(ii) a claim filed with the Corporation or a liquidator for protection afforded under the insured’s policy for losses that are incurred but not reported.
(e) “Insolvent insurer” means an insurer:
(1) that is authorized to transact insurance business or authorized to issue surety bonds in the State when the policy or surety bond is issued or when the event giving rise to the claim occurs; and
(2) against whom a court of competent jurisdiction in the insurer’s state of domicile has passed a final order of liquidation with a finding of insolvency.
(f) (1) “Member insurer” means an authorized insurer that writes a kind of insurance, including the exchange of reciprocal or interinsurance contracts, to which this subtitle applies.
(2) “Member insurer” includes the Maryland Automobile Insurance Fund.
(g) (1) “Net direct written premiums” means direct gross premiums written in the State on policies or surety bonds to which this subtitle applies, less return premiums on the policies or surety bonds and dividends paid or credited to policyholders, or principals or obligees of surety bonds on the direct business.
(2) “Net direct written premiums” does not include:
(i) premiums on contracts between insurers or reinsurers; or
(ii) premiums received by insurers under the Maryland Property Insurance Availability Act.
(h) “Resident” means:
(1) an individual domiciled in the State; or
(2) a corporation or entity whose principal place of business is in the State.
(i) (1) “Surety bond” means insurance that guarantees the performance of contracts, other than policies, and that guarantees and executes bonds, undertakings, and contracts of suretyship.
(2) “Surety bond” does not include mortgage guaranty, financial guaranty, or other forms of insurance offering protection against investment risks.
Md. Code, Insurance § 9-302
The purposes of this subtitle are:
(1) to provide a mechanism for the prompt payment of covered claims under certain policies and to avoid financial loss to residents of the State who are claimants or policyholders of an insolvent insurer; and
(2) to provide for the assessment of the cost of payments of covered claims and protection among insurers.
Md. Code, Insurance § 9-303
This subtitle applies to all kinds of direct insurance, except:
(1) life insurance;
(2) health insurance;
(3) mortgage guaranty insurance;
(4) annuities;
(5) insurance written on a surplus lines basis under Title 3, Subtitle 3 of this article;
(6) insurance written by a risk retention group; and
(7) insurance written by an unauthorized insurer.
Md. Code, Insurance § 9-304
(a) (1) There is a Property and Casualty Insurance Guaranty Corporation.
(2) The Corporation is a private, nonprofit, nonstock corporation.
(b) As a condition of its authority to transact insurance business in the State, each member insurer must be and remain a member of the Corporation.
(c) The Corporation shall:
(1) perform its functions in accordance with a plan of operation established and approved under § 9–307 of this subtitle; and
(2) exercise its powers through a Board of Directors established under § 9–305 of this subtitle.
(d) For administration and assessment purposes, the Corporation shall be divided into the following four separate accounts:
(1) the title insurance account;
(2) the motor vehicle insurance account;
(3) the workers’ compensation account; and
(4) the account for all other insurance to which this subtitle applies.
(e) Except as otherwise provided in this subtitle, the Corporation has perpetual existence and the powers, privileges, and immunities granted by the applicable provisions of the Corporations and Associations Article.
(f) (1) The Corporation is not and may not be deemed a department, unit, agency, or instrumentality of the State for any purpose.
(2) All debts, claims, obligations, and liabilities of the Corporation, whenever incurred, shall be the debts, claims, obligations, and liabilities of the Corporation only and not of the State or the State’s agencies, instrumentalities, officers, or employees.
(g) (1) The money of the Corporation is not part of the General Fund of the State.
(2) The State may not budget for or provide General Fund appropriations to the Corporation.
(3) The debts, claims, obligations, and liabilities of the Corporation are not a debt of the State or a pledge of the credit of the State.
Md. Code, Insurance § 9-305
(a) (1) The Board of Directors of the Corporation consists of at least five members but not more than nine members.
(2) The members of the Board shall be elected from among the member insurers.
(3) The terms of the members of the Board shall be as set by the plan of operation.
(4) A vacancy on the Board shall be filled for the remainder of the term by a majority vote of the remaining members of the Board.
(b) (1) The Board of Directors shall elect a chairman from among its members and appoint three of its members to be an executive committee.
(2) The Board may elect other officers.
(c) When electing members of the Board of Directors or filling vacancies on the Board, consideration shall be given to, among other things, whether all member insurers are fairly represented.
(d) A member of the Board of Directors may be reimbursed by the Corporation for expenses incurred in carrying out duties as a member of the Board.
Md. Code, Insurance § 9-306
(a) (1) Except as to surety bonds, the Corporation shall be obligated to the extent of the covered claims existing on or before the determination of insolvency or arising:
(i) within 30 days after the determination of insolvency;
(ii) before the policy expiration date, if that date is less than 30 days after the determination of insolvency; or
(iii) before the insured replaces the policy or causes its cancellation, if the insured does so within 30 days after the determination of insolvency.
(2) Except as provided in paragraph (3) of this subsection, the obligation of the Corporation under this subsection shall include only that amount of each covered claim that is in excess of $100 and less than $300,000.
(3) The Corporation shall pay the full amount of any covered claim arising out of a workers’ compensation policy.
(4) The Corporation is not obligated to a policyholder or claimant in an amount in excess of the obligation of the insolvent insurer under the policy out of which the claim arises.
(b) (1) As to surety bonds, the Corporation shall be obligated to the extent of the covered claims existing on or before the determination of insolvency, or arising within 18 months after the determination of insolvency, whether or not the surety bonds are issued with no stated period or for a stated period.
(2) The obligation of the Corporation under this subsection shall include only that amount of each covered claim payable to each claimant that is in excess of $100 and less than $300,000.
(3) The Corporation is not liable for an aggregate amount in excess of $1,000,000 under any one surety bond.
(4) If the covered claims are in excess of $1,000,000 under any one surety bond, the Corporation shall make a prorated payment on account of each covered claim in the ratio that the covered claim bears to the total amount of all covered claims under the surety bond.
(5) The Corporation is not obligated to a claimant in an amount in excess of the obligation of the insolvent insurer under the surety bond out of which the claim arises.
(c) The Corporation shall be deemed the insurer to the extent of the Corporation’s obligation on the covered claims and, to that extent, shall have the rights, duties, and obligations that the insolvent insurer would have had if the insurer had not become insolvent.
(d) (1) The Corporation shall:
(i) allocate claims paid and expenses incurred among the four accounts separately; and
(ii) assess member insurers separately for each account in amounts necessary to pay:
1. the obligation of the Corporation under subsection (a) or (b) of this section after an insolvency;
2. the expense of handling covered claims after an insolvency; and
3. other expenses authorized by this subtitle.
(2) The Corporation shall assess each member insurer in the proportion that the net direct written premiums of the member insurer for the preceding calendar year on the kinds of insurance covered by the account bears to the net direct written premiums of all member insurers for the preceding calendar year on the kinds of insurance covered by the account.
(3) The Corporation shall give each member insurer at least 30 days’ notice of an assessment before it is due.
(4) The Corporation may not assess a member insurer in any year on an account in an amount greater than 2% of that member insurer’s net direct written premiums for the preceding calendar year on the kinds of insurance covered by the account.
(5) In any 1 year, if the sum of the maximum assessment for an account and the other assets of the Corporation in the account does not provide an amount sufficient to make all necessary payments from that account, the funds available shall be prorated and the unpaid part shall be paid as soon as funds are available.
(6) The Corporation may exempt or defer, wholly or partly, the assessment of a member insurer if 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 business.
(7) A member insurer may set off against an assessment the authorized payments made on covered claims and expenses incurred in paying those covered claims if they are chargeable to the account for which the assessment is made.
(e) (1) The Corporation:
(i) shall investigate claims brought against the Corporation and adjust, compromise, settle, and pay covered claims to the extent of the Corporation’s obligation and deny all other claims;
(ii) may review settlements, releases, and judgments to which the insolvent insurer or its insureds were parties to determine the extent to which the settlements, releases, and judgments may be properly contested;
(iii) shall notify persons as the Commissioner directs under § 9-308(b)(1) of this subtitle;
(iv) shall handle claims through its employees or through one or more insurers or other persons designated as servicing facilities;
(v) shall reimburse each servicing facility for obligations of the Corporation paid by the facility and for expenses incurred by the facility while handling claims on behalf of the Corporation; and
(vi) shall pay other expenses of the Corporation that are authorized by this subtitle.
(2) (i) Designation of a servicing facility by the Corporation is subject to the approval of the Commissioner.
(ii) A member insurer may decline designation as a servicing facility.
(f) The Corporation may:
(1) employ or retain persons necessary to handle claims and perform other duties of the Corporation;
(2) borrow money necessary to carry out the purposes of this subtitle in accordance with the plan of operation;
(3) sue or be sued;
(4) negotiate and become a party to contracts necessary to carry out the purposes of this subtitle;
(5) perform any other act necessary or proper to carry out the purposes of this subtitle; and
(6) refund to the member insurers in proportion to the contribution of each member insurer to an account, the amount by which the assets of the account at the end of any calendar year exceed the liabilities of that account as estimated by the Board of Directors for the coming year.
(g) (1) To the extent appropriate or necessary for the Corporation, or a similar association or corporation in another state, to carry out its duties under this subtitle, the Corporation may bring an action against a third party administrator, producer, agent, attorney, or other representative of an insolvent insurer to obtain custody and control of all files and records, regardless of format, related to claims information that involves the insolvent insurer.
(2) In an action brought under this subsection, the Corporation:
(i) has the absolute right through emergency equitable relief to obtain custody and control of all claims information in the custody or control of the third party administrator, producer, agent, attorney, or other representative of the insolvent insurer, regardless of where the claims information is physically located; and
(ii) is not subject to any defense, lien, or other legal or equitable ground that might be asserted against the liquidator of the insolvent insurer for refusal to surrender claims information.
(3) If an action is required under this subsection after refusal to provide claims information in response to a written demand for the claims information, the court shall award the Corporation its costs, expenses, and reasonable attorney fees incurred in bringing the action.
(4) This subsection does not affect the rights and remedies that the custodian of the applicable claims information may have against the insolvent insurer if those rights and remedies do not conflict with the right of the Corporation to custody and control of the claims information under this subsection.
Md. Code, Insurance § 9-307
(a) (1) (i) The Corporation shall submit to the Commissioner a plan of operation and any amendments to it necessary or suitable to ensure the fair, reasonable, and equitable administration of the Corporation.
(ii) The plan of operation and any amendments to it take effect when approved in writing by the Commissioner.
(2) (i) If the Corporation fails to submit suitable amendment to the plan of operation, the Commissioner, after notice and hearing, shall adopt reasonable regulations as necessary or advisable to carry out this subtitle.
(ii) Regulations adopted under this paragraph shall continue in effect until modified by the Commissioner or superseded by an amendment to the plan of operation submitted by the Corporation and approved by the Commissioner.
(b) Each member insurer shall comply with the plan of operation.
(c) The plan of operation shall:
(1) establish procedures for the performance of the powers and duties of the Corporation specified in § 9-306 of this subtitle;
(2) establish procedures for handling the assets of the Corporation;
(3) establish the amounts to be reimbursed and the method of reimbursing members of the Board of Directors under § 9-305 of this subtitle;
(4) establish procedures for filing claims with the Corporation;
(5) establish acceptable forms of proof of covered claims;
(6) establish regular places and times for meetings of the Board of Directors;
(7) establish procedures for keeping records of the financial transactions of the Corporation, its agents, and the Board of Directors;
(8) provide that a member insurer that is aggrieved by a final action or decision of the Corporation may appeal to the Commissioner within 30 days after the action or decision; and
(9) contain any additional provisions necessary or proper to perform the powers and duties of the Corporation.
(d) (1) Notice of a claim to the receiver or liquidator of an insolvent insurer shall be deemed notice to the Corporation or its agent.
(2) The receiver or liquidator periodically shall submit to the Corporation a list of claims of which the receiver or liquidator has received notice.
(e) (1) The plan of operation may provide that any or all of the powers and duties of the Corporation, except those under § 9-306(d) and (f)(2) of this subtitle, may be delegated to a person that performs or will perform functions similar to those of the Corporation or its equivalent.
(2) A person to which powers and duties are delegated under the plan of operation shall be:
(i) reimbursed as a servicing facility would be reimbursed; and
(ii) paid for its performance of the functions of the Corporation.
(3) A delegation under this subsection may:
(i) take effect only with the approval of the Board of Directors and Commissioner; and
(ii) be made only to a person that extends protection not substantially less favorable and effective than that provided by this subtitle.
Md. Code, Insurance § 9-308
(a) The Commissioner:
(1) shall notify the Corporation of the existence of an insolvent insurer not later than 3 days after the Commissioner receives notice of the determination of insolvency; and
(2) on request of the Board of Directors, shall provide the Corporation with a statement of the net direct written premiums of each member insurer.
(b) (1) (i) The Commissioner may require that the Corporation notify each insured, or each principal and specific obligee named in a surety bond, of each insolvent insurer and any other known interested party of the determination of insolvency and of their rights under this subtitle.
(ii) The notification required under subparagraph (i) of this paragraph may be by mail at the last known address of the interested party, but if sufficient information for notification by mail is not available, notification by publication in a newspaper of general circulation is sufficient.
(2) The Commissioner:
(i) after notice and hearing, may suspend or revoke the certificate of authority of a member insurer that fails to pay an assessment when due or fails to comply with the plan of operation; or
(ii) subject to paragraph (3) of this subsection, may impose a penalty on a member insurer that fails to pay an assessment when due.
(3) A penalty imposed under paragraph (2)(ii) of this subsection may not exceed 5% of the unpaid assessment per month and may not be less than $100 per month.
(4) If the Commissioner determines that claims are being handled unsatisfactorily, the Commissioner may revoke the designation of a person as a servicing facility.
(c) A final action or order of the Commissioner under this subtitle is subject to judicial review.
Md. Code, Insurance § 9-309
(a) (1) A person recovering from the Corporation under this subtitle is deemed to have assigned to the Corporation the person’s rights under the policy to the extent of the person’s recovery from the Corporation.
(2) Each insured or claimant seeking the protection of this subtitle shall cooperate with the Corporation to the same extent as the insured or claimant would have been required to cooperate with the insolvent insurer.
(3) The Corporation does not have a cause of action against the insured of the insolvent insurer for any sum the Corporation has paid out except for a cause of action that the insolvent insurer would have had if the sum had been paid by the insolvent insurer.
(4) Payment of a claim of the Corporation does not operate to reduce the liability of an insured to the receiver, liquidator, or statutory successor for an unpaid assessment of an insolvent insurer operating on a plan with assessment liability.
(b) (1) The receiver, liquidator, or statutory successor of an insolvent insurer is bound by the settlement of a covered claim by the Corporation or its representatives.
(2) The court having jurisdiction shall grant a covered claim priority equal to that to which the claimant would have been entitled in the absence of this subtitle against the assets of the insolvent insurer.
(3) The court having jurisdiction shall grant the expenses of the Corporation or similar organization in handling claims the same priority as the liquidator’s expenses.
(c) (1) The Corporation periodically shall file with the receiver or liquidator of the insolvent insurer:
(i) statements of the covered claims paid by the Corporation; and
(ii) estimates of anticipated claims on the Corporation.
(2) The statements and estimates filed under paragraph (1) of this subsection shall preserve the rights of the Corporation against the assets of the insolvent insurer.
(d) An insurer may not assert a claim of subrogation against an insured of an insolvent insurer, but may assert a claim against the receiver of the insolvent insurer.
Md. Code, Insurance § 9-310
(a) (1) A person with a claim against an insurer under a policy or surety bond that is also a covered claim against an insolvent insurer shall exhaust first the person’s rights under the policy or surety bond.
(2) The amount payable on a covered claim under this subtitle shall be reduced by the amount of any recovery under the policy or surety bond.
(b) (1) Except as provided in paragraph (2) of this subsection, a person with a claim that may be recovered under more than one insurance guaranty corporation or its equivalent shall seek recovery first:
(i) if the claim is a first party claim for damage to property with a permanent location, from the corporation or its equivalent of the location of the property; and
(ii) if the claim is any other claim, from the corporation or its equivalent of the residence of the insured.
(2) A person with a claim under a surety bond that may be recovered under more than one insurance guaranty corporation or its equivalent shall seek recovery first from the corporation or its equivalent of the place of performance of the obligation described in the surety bond.
(c) A recovery under this subtitle shall be reduced by the amount of recovery from any other insurance guaranty corporation or its equivalent.
Md. Code, Insurance § 9-310.1
§9–310.1.
(a) Any obligation of the Corporation to defend an insured shall cease on payment by the Corporation, by settlement releasing the insured or on a judgment, of an amount equal to the lesser of the Corporation’s covered claim obligation limit or the applicable policy limit.
(b) (1) In this subsection, “affiliate” means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with another person.
(2) Notwithstanding any other provision of this subtitle, except for a claim for benefits under workers’ compensation coverage, any obligation of the Corporation to any and all persons shall cease when $10,000,000 has been paid in the aggregate:
(i) by the Corporation and one or more insurance guaranty corporations or associations similar to the Corporation in other states or property casualty insurance security funds that obtain contributions from insurers on a pre-insolvency basis in other states;
(ii) to or on behalf of an insured and its affiliates; and
(iii) on covered claims or on claims allowed arising under one or more policies of one insolvent insurer.
(3) If the Corporation determines that there may be more than one claimant with a covered claim or allowed claim against the Corporation or any insurance guaranty corporations or associations similar to the Corporation in other states or any property casualty insurance security funds in other states, arising under one or more policies of one insolvent insurer, the Corporation may establish a plan to allocate amounts payable by the Corporation in the manner that the Corporation in its discretion considers equitable.
Md. Code, Insurance § 9-311
(a) The Corporation is subject to examination and regulation by the Commissioner.
(b) By March 30 of each year, the Board of Directors shall submit to the Commissioner a financial report for the preceding calendar year in the form that the Commissioner approves.
Md. Code, Insurance § 9-312
Except for taxes on real or personal property, the Corporation is exempt from the payment of all fees and taxes levied by the State or a subdivision of the State.
Md. Code, Insurance § 9-313
The rate and premium charged for a policy or surety bond to which this subtitle applies:
(1) shall include an amount sufficient to recoup, over a reasonable length of time of not less than 3 years, the amount paid to the Corporation by the member insurer less any amount returned to the member insurer by the Corporation; and
(2) may not be considered excessive because the rate and premium contain an amount reasonably calculated to recoup assessments paid by the member insurer.
Md. Code, Insurance § 9-314
(a) A member insurer, the Corporation or its agents or employees, the Board of Directors, and the Commissioner or the Commissioner’s representatives shall have the immunity from liability described in § 5-412 of the Courts Article.
(b) Notwithstanding subsection (a) of this section, the Corporation is not and may not be deemed a department, unit, agency, or instrumentality of the State.
Md. Code, Insurance § 9-315
(a) To allow proper defense by the Corporation of pending causes of action, each proceeding in which an insolvent insurer is a party or is obligated to defend a party in a court in the State shall be stayed for 60 days after the date of the determination of insolvency.
(b) As to a covered claim arising from a judgment under an order, decision, verdict, or finding based on the default of the insolvent insurer or its failure to defend an insured, the Corporation, on its own behalf or on behalf of the insured, may:
(1) apply to have the judgment, order, decision, verdict, or finding set aside by the same court or administrator that made it; and
(2) defend against the covered claim on the merits.
Md. Code, Insurance § 9-316
(a) The Commissioner shall terminate by order the operation of the Corporation as to a kind of insurance covered by this subtitle for which the Commissioner has found after a hearing that there is in effect a statutory or voluntary plan:
(1) that is permanent and is adequately funded or for which adequate funding is provided; and
(2) that extends or will extend to policyholders and residents protection and benefits with respect to insolvent insurers not substantially less favorable and effective to those policyholders and residents than the protection and benefits provided under this subtitle for that kind of insurance.
(b) (1) By an order issued under subsection (a) of this section, the Commissioner shall authorize insurers to stop paying the Corporation as to the same kind of insurance for which the operation of the Corporation is terminated under the order.
(2) Notwithstanding paragraph (1) of this subsection, assessments and payments shall continue as necessary to liquidate covered claims of insurers determined to be insolvent before the order and to liquidate the related expenses not covered by the other plan.
(c) (1) If the Commissioner orders the termination of the operation of the Corporation as to all kinds of insurance within its scope, the Corporation as soon as possible after the termination shall:
(i) discharge first the functions of the Corporation as to prior insurer insolvencies not covered by the other plan, including the payment of expenses related to the discharge of these functions; and
(ii) distribute, in accordance with paragraph (2) of this subsection, the balance of money and assets remaining to the insurers that are then writing in the State policies of the kinds of insurance covered by this subtitle and that had made payments to the Corporation.
(2) The Corporation shall distribute the balance of money and assets remaining to the insurers pro rata on the basis of the aggregate of the payments made by the respective insurers during the period of 5 years immediately preceding the date of the order.
(3) When the distribution as to all kinds of insurance covered by this subtitle is complete, this subtitle shall terminate.
Md. Code, Insurance § 9-401
(a) In this subtitle the following words have the meanings indicated.
(b) “Account” means:
(1) the health account;
(2) the life insurance account; or
(3) the annuity account.
(c) “Association” means the Corporation or any similar organization that has been formed in another state that serves the same purpose as the Corporation for the other state.
(d) “Contractual obligation” means an obligation under a policy or contract or certificate under a group policy or contract for which coverage is provided under § 9–403 of this subtitle.
(e) “Corporation” means the Life and Health Insurance Guaranty Corporation.
(f) “Covered policy” or “covered contract” means a policy or contract to which this subtitle applies.
(g) (1) “Health benefit plan” means:
(i) a hospital or medical expense policy or certificate;
(ii) a health maintenance organization subscriber contract or group master certificate; or
(iii) any other similar health contract.
(2) “Health benefit plan” does not include:
(i) accident–only insurance;
(ii) credit insurance;
(iii) dental–only insurance;
(iv) vision–only insurance;
(v) Medicare supplement insurance;
(vi) benefits for long–term care, home health care, community–based care, or any combination of these benefits;
(vii) disability insurance;
(viii) coverage for on–site medical clinics; or
(ix) specified disease, hospital confinement indemnity, or limited benefit health insurance if the types of coverage:
1. do not provide coordination of benefits; and
2. are provided under separate policies or certificates.
(h) “Impaired insurer” means a member insurer that:
(1) after July 1, 1971, is not an insolvent insurer and is placed under an order of rehabilitation or conservation by a court of competent jurisdiction; or
(2) is determined by the Commissioner after July 1, 1971, to be unable or potentially unable to fulfill its contractual obligations.
(i) “Individual” means a natural person covered under an individual policy or contract or covered as a member or an enrollee under a group policy or contract.
(j) “Insolvent insurer” means a member insurer that, after July 1, 1971, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.
(k) (1) “Member insurer” means an authorized insurer or a health maintenance organization that is licensed or that holds a certificate of authority to transact in the State any kind of insurance or health maintenance organization business to which this subtitle applies.
(2) “Member insurer” includes an insurer or a health maintenance organization whose license or certificate of authority in the State may have been suspended, revoked, not renewed, or voluntarily withdrawn.
(3) “Member insurer” does not include:
(i) a fraternal benefit society;
(ii) a mandatory State pooling plan;
(iii) a mutual assessment company or other entity that operates on an assessment basis; or
(iv) an insurance exchange.
(l) “Moody’s corporate bond yield average” means the monthly average yield on corporate bonds as published by Moody’s Investors Service, Inc.
(m) (1) “Owner” means the owner or holder of a policy or contract who is:
(i) identified as the legal owner under the terms of the policy or contract or who is otherwise vested with legal title to the policy or contract through a valid assignment completed in accordance with the terms of the policy or contract; and
(ii) properly recorded as the owner of the policy or contract on the books of the member insurer.
(2) “Owner” does not include a person who has only a beneficial interest in a policy or contract.
(n) “Person” includes an individual, a corporation, a limited liability company, a partnership, an association, a governmental body or entity, or a voluntary organization.
(o) (1) “Premiums” means amounts received on covered policies or contracts, less premiums, considerations, and deposits returned, and less dividends and experience credits.
(2) “Premiums” does not include amounts for policies or contracts, or for parts of policies or contracts, for which coverage is not provided under § 9–403(g) of this subtitle.
(p) “Resident” means a person that resides in the State on the date of entry of a court order that determines a member insurer to be an impaired insurer or a court order that determines a member insurer to be an insolvent insurer and to whom a contractual obligation is owed.
(q) “Structured settlement annuity” means an annuity purchased in order to fund periodic payments for a plaintiff or any other claimant in payment for or with respect to personal injury suffered by the plaintiff or other claimant.
(r) “Supplemental contract” means an agreement entered into for the distribution of policy or contract proceeds.
Md. Code, Insurance § 9-402
Subject to certain limitations, the purpose of this subtitle is to protect persons specified in § 9–403(a) through (f) of this subtitle who are policy owners, contract owners, certificate holders, beneficiaries, enrollees, payees, and assignees of life, health, annuity, and supplemental policies, plans, or contracts specified in § 9–403(g) of this subtitle against failure in the performance of contractual obligations due to the impairment or insolvency of the member insurer that issued the policies, plans, or contracts.
Md. Code, Insurance § 9-403
(a) This subtitle is intended to provide coverage to a person who is a resident of this State and, in special circumstances, to a nonresident.
(b) (1) For contracts other than structured settlement annuities, subject to paragraph (2) of this subsection, coverage shall be provided under this subtitle for the policies or contracts specified in subsection (g) of this section to a person who is:
(i) a resident and an owner of or certificate holder or enrollee under the policy or contract; or
(ii) a nonresident and an owner of or certificate holder or enrollee under the policy or contract, if:
1. the member insurer that issued the policy or contract is domiciled in this State;
2. the state in which the nonresident resides has an insurance guaranty corporation or its equivalent similar to the Corporation established by § 9–405 of this subtitle; and
3. the nonresident is not eligible for coverage by the insurance guaranty corporation or its equivalent in the state in which the nonresident resides because the insurer or health maintenance organization was not licensed in that state at the time specified in that state’s guaranty corporation or association law.
(2) Coverage shall be provided under this subtitle for the policies or contracts specified in paragraph (1) of this subsection to a beneficiary, assignee, or payee, including a health care provider rendering services covered under health insurance policies, contracts, or certificates, of a person covered under paragraph (1) of this subsection, regardless of the person’s residence.
(c) Except as provided in subsections (a), (d), and (e) of this section, this subtitle shall provide coverage to a person who is a payee under a structured settlement annuity or beneficiary of a payee if the payee is deceased, if:
(1) (i) the payee is a resident, regardless of where the contract owner resides; or
(ii) the payee is not a resident and:
1. the contract owner of the structured settlement annuity is a resident; or
2. A. the contract owner of the structured settlement annuity is not a resident;
B. the insurer that issued the structured settlement annuity is domiciled in this State; and
C. the state in which the contract owner resides has an association similar to the Corporation; and
(2) the payee or beneficiary, and the contract owner are not eligible for coverage by the association of the state in which the payee or contract owner resides.
(d) This subtitle does not provide coverage to:
(1) a person who is a payee or beneficiary of a contract owner who is a resident of this State, if the payee or beneficiary is provided any coverage by the association of another state;
(2) a person who otherwise would receive coverage under this subtitle, if the person is provided coverage under the laws of another state; or
(3) a person who acquires the right to receive payments through a structured settlement factoring transaction, as defined in 26 U.S.C. §�5891(c)(3)(A), regardless of whether the transaction occurred before or after the effective date of 26 U.S.C. § 5891(c)(3)(A).
(e) To determine coverage under this section under circumstances in which a person could be covered by the association of more than one state, whether as an owner, a payee, an enrollee, a beneficiary, or an assignee, this subtitle shall be construed in conjunction with other state laws to result in coverage by only one association.
(f) (1) To determine coverage under this section, a person may be a resident of only one state.
(2) To determine coverage under this section, a person shall be treated as a resident of the state of domicile of the insurer or health maintenance organization that issued the relevant policy or contract if:
(i) the person is a citizen of the United States and is a resident of a foreign country; or
(ii) the person is a resident of a United States possession, territory, or protectorate that does not have an association similar to the Corporation.
(g) (1) Except as provided in paragraph (2) of this subsection or otherwise limited by this subtitle, coverage shall be provided under this subtitle to persons specified in subsections (b) and (c) of this section for the following policies and contracts issued by member insurers:
(i) direct, nongroup life insurance, health insurance, which for the purposes of this subtitle includes health maintenance organization subscriber contracts and group master certificates, annuities, including structured settlement annuities, and supplemental policies or contracts to any of these; or
(ii) certificates under direct, group policies or contracts, and supplemental policies or contracts to any of these.
(2) Coverage may not be provided under this subtitle for:
(i) any part of a policy or contract that is not guaranteed by the member insurer, or under which the risk is borne by the policyholder or contract holder;
(ii) a policy or contract of reinsurance, unless assumption certificates have been issued;
(iii) except for a part of a policy or contract, including a rider, that provides long–term care or any other health insurance benefits, any part of a policy or contract to the extent that the rate of interest on which it is based or the interest rate, crediting rate, or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value:
1. averaged over the period of 4 years before the date on which the Corporation becomes obligated with respect to the policy or contract, exceeds a rate of interest determined by subtracting 2 percentage points from Moody’s corporate bond yield average for the 4–year period before the date on which the Corporation became obligated or, if the policy or contract was issued less than 4 years before the Corporation became obligated, for that period; or
2. on or after the date on which the Corporation becomes obligated with respect to the policy or contract, exceeds the rate of interest determined by subtracting 3 percentage points from the most recent published Moody’s corporate bond yield average;
(iv) a plan or program of an employer, association, or similar entity to provide life, health, or annuity benefits to its employees or members to the extent that the plan or program is self–funded or uninsured, including benefits payable by an employer, association, or similar entity under:
1. a multiple employer welfare arrangement, as defined in 29 U.S.C. § 1002(40);
2. a minimum premium group insurance plan;
3. a stop–loss group insurance plan; or
4. an administrative services only contract;
(v) any part of a policy or contract to the extent that it provides dividends or experience rating credits or provides that a fee or allowances be paid to any person, including the policy or contract holder, in connection with the service to or administration of the policy or contract;
(vi) a policy or contract issued in the State by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue the policy or contract in the State;
(vii) an annuity contract or group annuity certificate that is not issued to and owned by an individual, except to the extent of annuity benefits guaranteed to an individual by an insurer under the annuity contract or group certificate, including the following contracts:
1. unallocated funding agreements;
2. unallocated annuity contract benefits;
3. deposit administration contracts; or
4. guaranteed investment contract accounts;
(viii) a policy issued by an organization as provided in § 1–202(3) of this article;
(ix) an annuity agreement issued under § 16–114 of this article;
(x) a portion of a policy or contract to the extent that the assessments required by § 9–409 of this subtitle with respect to the policy or contract are preempted by federal or state law;
(xi) an obligation that does not arise under the express written terms of the policy or contract issued by the member insurer to the enrollee, certificate holder, contract owner, or policy owner, including without limitation:
1. claims made on marketing materials;
2. claims based on side letters, riders, or other documents that were issued by the member insurer without meeting applicable policy form or contract filing or approval requirements;
3. misrepresentations of or regarding policy or contract benefits;
4. extra–contractual claims; and
5. a claim for penalties or consequential or incidental damages;
(xii) subject to paragraph (3) of this subsection, a portion of a policy or contract to the extent that it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but which have not been credited to the policy or contract, or as to which the policy or contract owner’s rights are subject to forfeiture, as of the date the member insurer becomes an impaired insurer or insolvent insurer under this subtitle, whichever is earlier;
(xiii) a policy or contract providing any hospital, medical, prescription drug, or other health care benefits under any of the following provisions or regulations adopted under one of the following provisions:
1. Title 42, Chapter 7, Subchapter XVIII, Part C or Part D of the United States Code (“Medicare Part C & D”);
2. Title 42, Chapter 7, Subchapter XIX of the United States Code (“Medicaid”); or
3. Title 15, Subtitle 3 of the Health – General Article; or
(xiv) a structured settlement annuity benefit to which a payee, or beneficiary of a payee if the payee is deceased, has transferred the rights in a structured settlement factoring transaction, as defined in 26 U.S.C. §�5891(c)(3)(A), regardless of whether the transaction occurred before or after the effective date of 26 U.S.C. §�5891(c)(3)(A).
(3) If a policy’s or contract’s interest or changes in value are credited less frequently than annually, then to determine the values that have been credited and are not subject to forfeiture under this subsection, the interest or change in value determined by using the procedures defined in the policy or contract will be credited as if the contractual date of crediting interest or changing values was the date of impairment or insolvency, whichever is earlier, and will not be subject to forfeiture.
Md. Code, Insurance § 9-404
(a) (1) This subtitle shall be liberally construed to carry out its purpose as specified in § 9–402 of this subtitle.
(2) Section 9–402 of this subtitle is an aid and guide to the interpretation of this subtitle.
(b) The words “policy” and “contract” are used interchangeably throughout this subtitle.
(c) A person may be a resident of only one state. For a person other than an individual, that state is the state in which its principal place of business is located.
(d) (1) Subject to paragraph (2) of this subsection, for a plan sponsor or person other than an individual, its principal place of business is the single state in which the individuals who establish policy for the direction, control, and coordination of the operations of the entity, as a whole, primarily exercise that function, as determined by the Corporation in its reasonable judgment by considering the following factors:
(i) the state in which the primary executive and administrative headquarters of the entity is located;
(ii) the state in which the principal office of the chief executive officer of the entity is located;
(iii) the state in which the board of directors, or similar governing person or persons, of the entity conducts the majority of its meetings;
(iv) the state in which the executive or management committee of the board of directors, or similar governing person or persons, of the entity conducts the majority of its meetings;
(v) the state from which the management of the overall operations of the entity is directed; and
(vi) for a benefit plan sponsored by affiliated companies comprising a consolidated corporation, the state in which the holding company or controlling affiliate has its principal place of business, as determined under the factors in this paragraph.
(2) For a plan sponsor, if more than 50% of the participants in the benefit plan are employed in a single state, that state is deemed to be the principal place of business of the plan sponsor.
(3) For an association, a committee, a joint board of trustees, or any other similar group of representatives of the parties who establish or maintain a benefit plan when there is no specific or clear designation of a principal place of business, the principal place of business is the principal place of business of the employer or employee organization that has the largest investment in the benefit plan in question.
Md. Code, Insurance § 9-405
(a) (1) There is a Life and Health Insurance Guaranty Corporation.
(2) The Corporation is a private, nonprofit, nonstock corporation.
(3) The Corporation is established to enable the guaranty of payment of benefits and continuation of coverages.
(b) As a condition of its authority to transact insurance or health maintenance organization business in the State, each member insurer must be and remain a member of the Corporation.
(c) The Corporation shall:
(1) perform its functions in accordance with the plan of operation established and approved under § 9–410 of this subtitle; and
(2) exercise its powers through the Board of Directors established under § 9–406 of this subtitle.
(d) For administration and assessment purposes, the Corporation shall maintain:
(1) the health account;
(2) the life insurance account; and
(3) the annuity account.
(e) The Corporation is under the immediate supervision of the Commissioner and subject to the applicable insurance laws of the State.
(f) Except as otherwise provided in this subtitle, the Corporation has perpetual existence and the powers, privileges, and immunities granted by the applicable provisions of the Corporations and Associations Article.
(g) (1) The Corporation is not and may not be deemed a department, unit, agency, or instrumentality of the State for any purpose.
(2) All debts, claims, obligations, and liabilities of the Corporation, whenever incurred, shall be the debts, claims, obligations, and liabilities of the Corporation only and not of the State or the State’s agencies, instrumentalities, officers, or employees.
(h) (1) The money of the Corporation is not part of the General Fund of the State.
(2) The State may not budget for or provide General Fund appropriations to the Corporation.
(3) The debts, claims, obligations, and liabilities of the Corporation are not a debt of the State or a pledge of the credit of the State.
Md. Code, Insurance § 9-406
(a) (1) The Board of Directors of the Corporation consists of at least 7 members but not more than 11 members.
(2) The members of the Board shall be elected from among the member insurers.
(3) The terms of the members of the Board shall be as set by the plan of operation.
(4) A vacancy on the Board shall be filled for the remainder of the term by a majority vote of the remaining members of the Board.
(b) (1) The Board of Directors shall elect a chairman and appoint an executive committee.
(2) The Board may elect other officers.
(c) When electing members of the Board of Directors or filling vacancies on the Board, consideration shall be given to, among other things, whether all member insurers are fairly represented.
(d) A member of the Board of Directors:
(1) may be reimbursed by the Corporation for expenses incurred in carrying out duties as a member of the Board; but
(2) may not otherwise receive compensation from the Corporation for the member’s service.
(e) (1) The Board of Directors has general oversight authority over funds provided under this subtitle to the Board of Directors or Corporation.
(2) At any time or in any manner as the Board may direct, a receiver, liquidator, rehabilitator, or conservator appointed under this subtitle shall make a detailed accounting of expenditures to the Board.
Md. Code, Insurance § 9-407
(a) For a member insurer that is an impaired insurer, the Corporation, subject to any conditions imposed by the Corporation that do not impair the contractual obligations of the impaired insurer and that are approved by the Commissioner, may:
(1) guarantee, assume, reissue, or reinsure, or cause to be guaranteed, assumed, reissued, or reinsured, any or all of the covered policies or contracts of the impaired insurer; and
(2) provide money, pledges, loans, notes, guarantees, or other appropriate means to:
(i) carry out item (1) of this subsection; and
(ii) ensure payment of the contractual obligations of the impaired insurer, pending action under item (1) of this subsection.
(b) For a member insurer that is an insolvent insurer, the Corporation may:
(1) (i) guarantee, assume, reissue, or reinsure, or cause to be guaranteed, assumed, reissued, or reinsured, any or all of the covered policies or contracts of the insolvent insurer; or
(ii) ensure payment of the contractual obligations of the insolvent insurer; and
(2) provide money, pledges, loans, notes, guarantees, or other appropriate means to discharge the Corporation’s duties under item (1) of this subsection.
(c) If the Corporation fails to act within a reasonable period of time with respect to the impaired insurer or insolvent insurer, the Commissioner shall have the powers and duties of the Corporation under this subtitle.
(d) (1) Premiums due for coverage after entry of an order of liquidation of an insolvent insurer shall belong to and be payable at the direction of the Corporation.
(2) If the liquidator of an insolvent insurer requests, the Corporation shall provide a report to the liquidator regarding premium collection by the Corporation.
(3) The Corporation shall be liable for unearned premiums due to policy or contract owners arising after the entry of the order.
(e) (1) In carrying out its duties under subsection (b) of this section, the Corporation may request that policy liens, contract liens, moratoriums on payments, or other similar means be imposed.
(2) Policy liens, contract liens, moratoriums on payments, or other similar means may be imposed if the Commissioner approves the specific policy liens, contract liens, moratoriums on payments, or other similar means after finding that:
(i) the amounts that can be assessed under this subtitle are less than the amounts needed to ensure full and prompt performance of the impaired insurer’s contractual obligations; or
(ii) the economic or financial conditions, as they affect member insurers, are sufficiently adverse to render the imposition of policy liens, contract liens, moratoriums on payments, or other similar means to be in the public interest.
(3) (i) Before being obligated under subsection (b) of this section, the Corporation may request that temporary moratoriums or liens on payments of cash values and policy loans be imposed.
(ii) If the Commissioner approves, the temporary moratoriums or liens requested by the Corporation under this paragraph may be imposed.
(f) The Corporation is not liable under this section for a covered policy of a foreign insurer or alien insurer whose domiciliary jurisdiction or state of entry provides, by statute or regulation, protection for residents of this State substantially similar to that provided under this subtitle for residents of other states.
(g) On request of the Commissioner, the Corporation may give help and advice to the Commissioner about rehabilitation, payment of claims, continuations of coverage, or the performance of other contractual obligations of an impaired insurer.
(h) (1) The Corporation has standing to appear or intervene before any court or agency with jurisdiction over an impaired insurer or insolvent insurer as to which the Corporation is or may become obligated under this subtitle.
(2) The standing extends to all matters germane to the powers and duties of the Corporation, including proposals for reinsuring, reissuing, modifying, or guaranteeing the covered policies of the impaired insurer or insolvent insurer and the determination of the covered policies and contractual obligations.
(i) (1) A person receiving benefits under this subtitle, whether the benefits are payments of contractual obligations or continuation of coverage, is deemed to have assigned all rights under or causes of action relating to the covered policy to the Corporation to the extent of the benefits received because of this subtitle.
(2) The Corporation may require a payee, enrollee, policy or contract owner, beneficiary, insured, or annuitant to assign to the Corporation all rights to the extent of benefits received under the covered policy as a condition precedent to the receipt of any rights or benefits under this subtitle.
(3) The Corporation is subrogated to the rights assigned under this subsection against the assets of the impaired insurer or insolvent insurer.
(4) The subrogation rights of the Corporation under this subsection have the same priority against the assets of the impaired insurer or insolvent insurer as those of the person entitled to receive benefits under this subtitle.
(j) In carrying out its duties in connection with guaranteeing, assuming, reissuing, or reinsuring policies or contracts under subsections (a) and (b) of this section, the Corporation may, subject to approval of the Commissioner, issue substitute coverage for a policy or contract that provides an interest rate, a crediting rate, or a similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value by issuing an alternative policy or contract, if:
(1) in lieu of the index or other external reference provided for in the original policy or contract, the alternative policy or contract provides for:
(i) a fixed interest rate;
(ii) payment of dividends with minimum guarantees; or
(iii) a different method for calculating interest or changes in value;
(2) there is no requirement for evidence of insurability, waiting period, or other exclusion that would not have applied under the original policy or contract; and
(3) the alternative policy or contract is substantially similar to the original policy or contract in all other material terms.
(k) (1) Subject to paragraphs (2) and (3) of this subsection and unless the contractual obligations of the impaired insurer or insolvent insurer are reduced or excluded under subsection (e) of this section or § 9–403(g)(2) of this subtitle, the contractual obligations of the impaired insurer or insolvent insurer for which the Corporation is or may become liable shall be as great as, but no greater than, the contractual obligations that the impaired insurer or insolvent insurer would have had in the absence of the impairment or insolvency.
(2) The Corporation is not liable for health care received after the date of the impairment or insolvency unless the health care was in progress on the date of the impairment or insolvency or unless other health care coverage is not available from another insurer, health maintenance organization, or nonprofit health service plan.
(3) Benefits for which the Corporation may become liable may not exceed the lesser of:
(i) the contractual obligations for which the member insurer is or would have been liable if it were not an impaired insurer or insolvent insurer; or
(ii) with respect to any one life, regardless of the number of policies or contracts:
1. $300,000 in life insurance death benefits, but not more than $100,000 in net cash surrender and net cash withdrawal values for life insurance;
2. for health insurance benefits:
A. $500,000 for health benefit plans;
B. $300,000 for disability insurance and $300,000 for long–term care insurance, as defined in § 18–101 of this article; and
C. $100,000 for coverages not included as disability insurance, health benefit plans, or long–term care insurance, including any net cash surrender and net cash withdrawal values under items A and B of this item; and
3. A. $250,000 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values; and
B. with respect to each payee under a structured settlement annuity, or beneficiary of the payee if the payee is deceased, $250,000 in present value annuity benefits, in the aggregate, including any net cash surrender and net cash withdrawal values.
(4) (i) Except as provided in subparagraph (ii) of this paragraph, the Corporation may not, with respect to any one life, be liable for coverage greater than an aggregate of $300,000 for the benefits described in paragraph (3)(ii)1, 2, and 3 of this subsection.
(ii) The Corporation may not, with respect to any one life, be liable for coverage greater than an aggregate of $500,000 for health benefit plans under paragraph (3)(ii)2A of this subsection.
(l) The Corporation may join an organization of one or more other state associations of similar purposes, to further the purposes and administer the powers and duties of the Corporation.
(m) In this subtitle, benefits provided by a long–term care rider to a life insurance policy or annuity contract shall be considered the same type of benefits as the base life insurance policy or annuity contract to which the rider relates.
Md. Code, Insurance § 9-407.1
§9–407.1.
(a) At any time within 180 days after the date of an order of liquidation, the Corporation may elect to succeed to the rights and obligations of the ceding member insurer that relate to policies, contracts, or annuities covered, in whole or in part, by the Corporation, in each case under any one or more reinsurance contracts entered into by the insolvent insurer and its reinsurers and selected by the Corporation.
(b) Any assumption under subsection (a) of this section is effective as of the date of the order of liquidation.
(c) The election shall be effected by the Corporation or the National Organization of Life and Health Insurance Guaranty Associations on its behalf sending written notice, return receipt requested, to the affected reinsurers.
(d) To facilitate the earliest practicable decision about whether to assume any of the contracts of reinsurance, and in order to protect the financial position of the estate, the receiver and each reinsurer of the ceding member insurer shall make available on request to the Corporation or to the National Organization of Life and Health Insurance Guaranty Associations on its behalf as soon as possible after commencement of formal delinquency proceedings:
(1) copies of in–force contracts of reinsurance and all related files and records relevant to the determination of whether the contracts should be assumed; and
(2) notices of any defaults under the reinsurance contracts or any known event or condition that, with the passage of time, could become a default under the reinsurance contracts.
(e) (1) This subsection applies to reinsurance contracts assumed by the Corporation.
(2) The Corporation is responsible for all unpaid premiums due under a reinsurance contract assumed by the Corporation for periods both before and after the date of the order of liquidation, and is responsible for the performance of all other obligations to be performed after the date of the order of liquidation, in each case which relate to policies, contracts, or annuities covered, in whole or in part, by the Corporation.
(3) The Corporation may charge policies, contracts, or annuities covered in part by the Corporation, through reasonable allocation methods, the costs for reinsurance in excess of the obligations of the Corporation and shall provide notice and an accounting of these charges to the liquidator.
(4) The Corporation is entitled to any amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events that occur in periods after the date of the order of liquidation and that relate to policies, contracts, or annuities covered, in whole or in part, by the Corporation, if on receipt of any amounts payable, the Corporation is obliged to pay to the beneficiary under the policy, contract, or annuity on account of which the amounts were paid a portion of the amount equal to the lesser of:
(i) the amount received by the Corporation; and
(ii) the excess of the amount received by the Corporation over the amount equal to the benefits paid by the Corporation on account of the policy, contract, or annuity less the retention of the insurer applicable to the loss or event.
(f) (1) (i) Within 30 days after the Corporation’s election, the Corporation and each reinsurer under contracts assumed by the Corporation shall calculate the net balance due to or from the Corporation under each reinsurance contract as of the election date with respect to policies, contracts, or annuities covered, in whole or in part, by the Corporation.
(ii) The calculation under subparagraph (i) of this paragraph shall give full credit to all items paid by either the member insurer or its receiver or the reinsurer prior to the election date.
(2) Within 5 days after the completion of the calculation under paragraph (1) of this subsection, the reinsurer shall pay the receiver any amounts due for losses or events before the date of the order of liquidation, subject to any setoff for premiums unpaid for periods before the date, and the Corporation or reinsurer shall pay any remaining balance due the other, in each case.
(3) Any disputes over the amounts due to either the Corporation or the reinsurer shall be resolved by arbitration under the terms of the affected reinsurance contracts or, if the contract contains no arbitration clause, as otherwise provided by law.
(4) If the receiver has received any amounts due to the Corporation under subsection (e)(4) of this section, the receiver shall remit those amounts to the Corporation as promptly as practicable.
(g) If the Corporation or receiver, on the Corporation’s behalf, within 60 days after the election date, pays the unpaid premiums due for periods both before and after the election date that relate to policies, contracts, or annuities covered, in whole or in part, by the Corporation, the reinsurer is not entitled to:
(1) terminate the reinsurance contracts for failure to pay premiums for the reinsurance contracts that relate to policies, contracts, or annuities covered, in whole or in part, by the Corporation; or
(2) set off any unpaid amounts due under other contracts, or unpaid amounts due from parties other than the Corporation, against amounts due the Corporation.
(h) During the period from the date of the order of liquidation until the election date or, if the election date does not occur, until 180 days after the date of the order of liquidation:
(1) (i) neither the Corporation nor the reinsurer shall have any rights or obligations under reinsurance contracts that the Corporation has the right to assume under subsections (a) through (g) of this section, whether for periods before or after the date of the order of liquidation; and
(ii) the reinsurer, the receiver, and the Corporation shall, to the extent practicable, provide each other data and records reasonably requested; and
(2) if the Corporation has elected to assume a reinsurance contract, the parties’ rights and obligations shall be governed by subsections (a) through (g) of this section.
(i) If the Corporation does not elect to assume a reinsurance contract by the election date under subsections (a) through (g) of this section, the Corporation shall have no rights or obligations, in each case for periods both before and after the date of the order of liquidation, with respect to the reinsurance contract.
(j) When policies, contracts, or annuities, or covered obligations with respect to policies, contracts, or annuities, are transferred to an assuming insurer, reinsurance on the policies, contracts, or annuities may also be transferred by the Corporation, in the case of contracts assumed under subsections (a) through (g) of this section, if:
(1) unless the reinsurer and the assuming insurer agree otherwise, the reinsurance contract transferred does not cover any new policies of insurance, health maintenance organization subscriber contracts and group master certificates, or annuities in addition to those transferred;
(2) the obligations described in subsections (a) through (g) of this section no longer apply with respect to matters arising after the effective date of the transfer; and
(3) notice is given in writing, return receipt requested, by the transferring party to the affected reinsurer at least 30 days before the effective date of the transfer.
(k) (1) The provisions of this section supersede the provisions of any state law or of any affected reinsurance contract that provides for or requires any payment of reinsurance proceeds, on account of losses or events that occur in periods after the date of the order of liquidation, to the receiver of the insolvent insurer or any other person.
(2) The receiver remains entitled to any amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events that occur in periods before the date of the order of liquidation, subject to applicable setoff provisions.
(l) (1) Except as otherwise provided in this section, this section does not alter or modify the terms and conditions of any reinsurance contract.
(2) This section does not:
(i) abrogate or limit any rights of any reinsurer to claim that the reinsurer is entitled to rescind a reinsurance contract;
(ii) give a policyholder, contract owner, enrollee, certificate holder, or beneficiary an independent cause of action against a reinsurer that is not otherwise set forth in the reinsurance contract;
(iii) limit or affect the Corporation’s rights as a creditor of the estate against the assets of the estate; or
(iv) apply to reinsurance agreements covering property or casualty risks.
Md. Code, Insurance § 9-408
The Corporation may:
(1) enter into contracts that are necessary or proper to carry out the provisions and purposes of this subtitle;
(2) sue or be sued and take any other legal actions necessary or proper for the recovery of unpaid assessments under § 9–409 of this subtitle;
(3) borrow money to carry out the purposes of this subtitle, provided that any notes or other evidences of indebtedness of the Corporation not in default are legal investments for domestic insurers and may be carried as admitted assets;
(4) employ or retain persons as necessary to handle the financial transactions of the Corporation and perform other functions that are necessary or proper under this subtitle;
(5) negotiate and contract with liquidators, rehabilitators, conservators, or ancillary receivers to carry out the powers and duties of the Corporation;
(6) take any legal action necessary to avoid payment of improper claims;
(7) for the purposes of this subtitle and to the extent approved by the Commissioner, exercise the powers of a domestic life insurer, health insurer, or health maintenance organization, except that the Corporation may not issue policies or contracts other than those issued to perform the contractual obligation of an impaired insurer or insolvent insurer;
(8) in accordance with the terms and conditions of the policy or contract, file for actuarially justified rate or premium increases for any policy or contract for which the Corporation provides coverage under this subtitle; and
(9) perform any other act necessary or proper to carry out this subtitle.
Md. Code, Insurance § 9-409
(a) Members of the Corporation are subject to assessment as provided in this section.
(b) (1) To provide the funds necessary to carry out the powers and duties of the Corporation, the Board of Directors shall assess member insurers, separately for each account, at the times and for the amounts that the Board finds necessary.
(2) The Board shall give 30 days’ written notice to a member insurer before payment of an assessment is due.
(3) The Board shall collect the assessments when due.
(c) There are two classes of assessments to be made for the following purposes:
(1) Class A assessments, to be used to meet administrative costs and other general expenses not related to a particular impaired insurer or insolvent insurer; and
(2) Class B assessments, to be used to carry out the powers and duties of the Corporation with respect to an impaired insurer or insolvent insurer.
(d) (1) (i) The Board shall determine the amount of a Class A assessment.
(ii) The Board may make a Class A assessment on a pro rata or nonpro rata basis.
(iii) If made on a pro rata basis, the Board may provide that the assessment be credited against future Class B assessments.
(iv) Except for assessments related to long–term care insurance, the amount of a Class B assessment shall be allocated for assessment purposes among the accounts according to an allocation formula that is based on:
1. the premiums or reserves of the impaired insurer or insolvent insurer; or
2. on another standard that the Board considers in its sole discretion to be fair and reasonable under the circumstances.
(2) (i) The amount of a Class B assessment for long–term care insurance written by the impaired insurer or insolvent insurer shall be allocated according to a methodology included in the plan of operation and approved by the Commissioner.
(ii) The methodology used to allocate the amount under subparagraph (i) of this paragraph shall provide for 50% of the assessment to be allocated to accident and health member insurers and 50% to be allocated to life and annuity member insurers.
(3) The Board shall make Class B assessments against member insurers for each account in the proportion that the amount of premiums received on business in the State by each assessed member insurer on policies or contracts covered by each account for the most recent calendar year for which information is available preceding the year in which the member insurer became impaired or insolvent, bears to the amount of premiums received on business in the State for those calendar years by all assessed member insurers.
(4) The Board may assess member insurers on a nonpro rata basis without regard to paragraph (3) of this subsection if the amount of a Class B assessment representing the aggregate liability of the Corporation for a single impairment or insolvency is not greater than the Class A assessment in the same calendar year against authorized insurers in the same line of business as the liability for the impaired insurer or insolvent insurer.
(5) (i) The Board may not make assessments for funds to meet the requirements of the Corporation with respect to an impaired insurer or insolvent insurer until necessary to carry out the purposes of this subtitle.
(ii) Because exact determinations may not always be possible, the Board shall make classifications of assessments and computation of assessments under this subsection with a reasonable degree of accuracy.
(e) (1) If, in the opinion of the Board, payment of an assessment would endanger the ability of a member insurer to meet its contractual obligations, the Corporation may abate or defer, wholly or partly, the assessment of the member insurer.
(2) If an assessment against a member insurer is wholly or partly abated or deferred, the amount by which the assessment is abated or deferred shall be assessed against the other member insurers in a manner consistent with the basis for assessments set forth in this section.
(f) (1) In a calendar year, the total of all assessments against a member insurer for each account may not exceed 2% of the member insurer’s premiums in the State on policies covered by the account.
(2) If an assessment against a member insurer is reduced because of paragraph (1) of this subsection, the Board shall assess the amount of the reduction against the other member insurers in a manner consistent with the basis for assessments set forth in this section.
(3) If the maximum assessments in a calendar year against all member insurers plus the other assets of the Corporation in any account are insufficient to provide in the account the amount necessary to carry out the responsibilities of the Corporation, the Board shall make additional assessments as necessary against member insurers as soon as allowed by this subtitle.
(g) (1) If approved by the Commissioner, the Board may refund to member insurers, by an equitable method set by the plan of operation, in proportion to the contribution of each member insurer to that account, the amount by which the assets of the account exceed the amount that the Board finds necessary to carry out the obligations of the Corporation during the coming year.
(2) For the purpose of this subsection, assets include assets accruing from net realized gains and income from investments.
(3) If refunds are impracticable, the Board may retain a reasonable amount in an account for the continuing expenses of the Corporation and for future losses.
(h) In determining premium rates and policy owner dividends for any kind of insurance or health maintenance organization business within the scope of this subtitle, a member insurer may consider the amount reasonably necessary to meet its assessment obligations under this subtitle.
(i) (1) The Corporation shall issue to each member insurer that pays an assessment under this subtitle a certificate of contribution for the amount of the assessment.
(2) The certificate of contribution shall be in the form that the Commissioner requires.
(3) All outstanding certificates of contribution are of equal dignity and priority without reference to amounts or dates of issue.
(4) The member insurer may show a certificate of contribution in the member insurer’s financial statement as an asset in the form and for the amount, if any, and the period of time that the Commissioner approves.
Md. Code, Insurance § 9-410
(a) (1) (i) The Corporation shall submit to the Commissioner a plan of operation and any amendments necessary or suitable to it to ensure the fair, reasonable, and equitable administration of the Corporation.
(ii) 1. The plan of operation and any amendments to it take effect when approved in writing by the Commissioner.
2. Unless disapproved by the Commissioner within 30 days after submission, a plan of operation and any amendments to the plan shall be deemed approved on the 31st day after the date on which the plan was submitted.
(2) (i) If the Corporation fails to submit suitable amendments to the plan of operation, the Commissioner, after notice and hearing, shall adopt reasonable regulations as necessary or advisable to carry out this subtitle.
(ii) Regulations adopted under this paragraph shall continue in effect until modified by the Commissioner or superseded by an amendment to the plan of operation submitted by the Corporation and approved by the Commissioner.
(b) Each member insurer shall comply with the plan of operation.
(c) The plan of operation shall:
(1) establish procedures for handling the assets of the Corporation;
(2) establish the amounts to be reimbursed and the method of reimbursing members of the Board of Directors under § 9–406 of this subtitle;
(3) establish regular places and times for meetings of the Board of Directors;
(4) establish procedures for keeping records of the financial transactions of the Corporation, its agents, and the Board of Directors;
(5) establish procedures for choosing the Board of Directors and submitting the choices to the Commissioner;
(6) establish any additional procedures for assessments under § 9–409 of this subtitle; and
(7) contain any additional provisions necessary or proper to perform the powers and duties of the Corporation.
(d) (1) The plan of operation may provide that any or all of the powers and duties of the Corporation, except those under §§ 9–408(3) and 9–409 of this subtitle, may be delegated to a person that performs or will perform functions similar to those of the Corporation or its equivalent in two or more states.
(2) A person to which powers and duties are delegated under the plan of operation shall be:
(i) reimbursed for any payments made on behalf of the Corporation; and
(ii) paid for its performance of the functions of the Corporation.
(3) A delegation under this subsection may:
(i) take effect only with the approval of the Board of Directors and Commissioner; and
(ii) be made only to a person that extends protection not substantially less favorable and effective than that provided by this subtitle.
Md. Code, Insurance § 9-411
(a) (1) The Commissioner:
(i) shall notify the Board of Directors of the existence of an impaired insurer not later than 3 days after a determination of impairment is made or the Commissioner receives notice of impairment;
(ii) on request of the Board of Directors, shall provide the Corporation with a statement of the premiums in the State and other appropriate states for each member insurer;
(iii) when an impairment is declared and the amount of the impairment is determined, shall serve a demand on the impaired insurer to make good the impairment within a reasonable time; and
(iv) shall be appointed as:
1. the liquidator or rehabilitator in a liquidation or rehabilitation proceeding involving a domestic member insurer; or
2. the conservator or ancillary receiver in a liquidation proceeding involving a member insurer that is a foreign insurer in its domiciliary jurisdiction or an alien insurer in its state of entry.
(2) (i) Notice to the impaired insurer under paragraph (1)(iii) of this subsection is deemed notice to its shareholders.
(ii) Failure of the impaired insurer to comply promptly with a demand to make good the impairment does not excuse the Corporation from the performance of its duties and powers under this subtitle.
(b) (1) The Commissioner:
(i) after notice and hearing, may suspend or revoke the license or certificate of authority to transact business in the State of any member insurer that fails to pay an assessment when due or fails to comply with the plan of operation; or
(ii) on behalf of the Corporation, may impose a penalty on a member insurer that fails to pay an assessment when due.
(2) A penalty imposed under paragraph (1)(ii) of this subsection may not exceed 5% of the unpaid assessment per month and may not be less than $100 per month.
(c) (1) Within 30 days after an action of the Board of Directors or Corporation, a member insurer may appeal the action to the Commissioner.
(2) A final action or order of the Commissioner under this subtitle is subject to judicial review.
(d) The liquidator, rehabilitator, or conservator of an impaired insurer may notify all interested persons of the effect of this subtitle.
Md. Code, Insurance § 9-412
(a) (1) The Commissioner and Board of Directors have the powers and duties described in this section to help in the detection and prevention of member insurer impairments or insolvencies.
(2) The Corporation may help the Commissioner in detecting and preventing member insurer impairments or insolvencies as provided in this section.
(b) (1) The Commissioner shall examine a member insurer if the Commissioner has reasonable cause to believe that the member insurer may be unable or potentially unable to fulfill its contractual obligations.
(2) On a majority vote, the Board of Directors shall notify the Commissioner of any information that indicates that a member insurer may be unable or potentially unable to fulfill its contractual obligations.
(c) (1) On a majority vote, the Board of Directors may request that the Commissioner order an examination of a member insurer that the Board in good faith believes may be unable or potentially unable to fulfill its contractual obligations.
(2) The Commissioner may conduct the examination.
(3) The examination may be conducted as a National Association of Insurance Commissioners examination or may be conducted by a person that the Commissioner designates.
(4) The cost of an examination shall be paid by the Corporation.
(5) The examination report shall be treated as are other examination reports.
(6) An examination report may not be released to the Board of Directors before its release to the public, but this does not excuse the Commissioner from the duty to comply with subsection (d) of this section.
(7) The Commissioner shall notify the Board of Directors when the examination is completed.
(8) (i) The request for an examination shall be kept on file by the Commissioner.
(ii) A request for examination may not be open to public inspection before the release of the examination report to the public, and shall be released at that time only if the examination discloses that the examined member insurer is unable or potentially unable to meet its contractual obligations.
(d) The Commissioner shall report to the Board of Directors when the Commissioner has reasonable cause to believe that a member insurer, examined at the request of the Board of Directors, may be unable or potentially unable to fulfill its contractual obligations.
(e) (1) On a majority vote, the Board of Directors may make reports and recommendations to the Commissioner on any matter germane to the solvency, liquidation, rehabilitation, or conservation of a member insurer.
(2) A report or recommendation made under this subsection is not a public document.
(f) On a majority vote, the Board of Directors may make recommendations to the Commissioner for the detection and prevention of member insurer impairments or insolvencies.
(g) At the conclusion of a member insurer impairment or insolvency in which the Corporation carried out its duties or exercised its powers under this subtitle, the Board of Directors shall prepare and submit to the Commissioner a report on the history and causes of the impairment or insolvency, based on the information available to the Corporation.
Md. Code, Insurance § 9-413
The Corporation may recommend an individual to serve as a special deputy to act for the Commissioner and under the Commissioner’s supervision in the liquidation, rehabilitation, or conservation of a member insurer.
Md. Code, Insurance § 9-414
(a) This subtitle may not be construed to reduce the liability for unpaid assessments of the insureds of an impaired insurer or insolvent insurer operating under a plan with assessment liability.
(b) Assessable premiums may not be reduced because of § 9–403(g)(2)(iii) of this subtitle relating to interest limitations and because of § 9–407(k) of this subtitle relating to limitations with respect to an individual policyholder.
(c) (1) The Corporation shall keep records of all negotiations and meetings in which the Corporation or its representatives are involved to discuss the activities of the Corporation in carrying out its powers and duties under §§ 9–407 and 9–408 of this subtitle.
(2) Records of the negotiations or meetings described in paragraph (1) of this subsection shall be made public only:
(i) after the termination of a liquidation, rehabilitation, or conservation proceeding involving an impaired insurer or insolvent insurer;
(ii) after the termination of the impairment or insolvency of a member insurer; or
(iii) by court order.
(3) This subsection does not limit the duty of the Corporation to submit a report of its activities under § 9–415 of this subtitle.
(d) (1) In this subsection, “assets attributable to covered policies” means that proportion of the impaired insurer’s or insolvent insurer’s assets that the amount of the reserves that should have been established for the covered policies bears to the amount of the reserves that should have been established for all policies written by the impaired insurer or insolvent insurer.
(2) For the purpose of carrying out its obligations under this subtitle, the Corporation is considered a creditor of the impaired insurer or insolvent insurer to the extent of the impaired insurer’s or insolvent insurer’s assets attributable to covered policies reduced by any amounts to which the Corporation is entitled as subrogee under § 9–407(i) of this subtitle.
(3) The assets attributable to covered policies of the impaired insurer or insolvent insurer shall be used to continue the covered policies and pay the contractual obligations of the impaired insurer or insolvent insurer as required by this subtitle.
(e) (1) (i) Before the termination of a liquidation, rehabilitation, or conservation proceeding, the court may consider the contributions of the respective parties, including the Corporation, the stockholders, contract owners, certificate holders, enrollees, and policy owners of the impaired insurer or insolvent insurer, and any other party with a bona fide interest, in making an equitable distribution of the ownership rights of the impaired insurer or insolvent insurer.
(ii) In making a determination under subparagraph (i) of this paragraph, the court shall consider the welfare of the policyholders, contract owners, certificate holders, and enrollees of the continuing or successor member insurer.
(2) A distribution to any stockholders of an impaired insurer or insolvent insurer may not be made until all of the assessments levied by the Corporation with respect to the impaired insurer or insolvent insurer have been fully recovered by the Corporation.
(f) It is a prohibited unfair method of competition, subject to Title 27 of this article (Unfair Trade Practices), for a person to make use in any manner of the protection afforded by this subtitle in the sale of insurance or health maintenance organization coverage.
(g) (1) Subject to the limitations of paragraphs (2) and (4) of this subsection, if an order for liquidation or rehabilitation of a member insurer domiciled in the State has been entered, the receiver appointed under the order shall have a right to recover on behalf of the member insurer, from any affiliate that controlled the member insurer, the amount of distribution, other than stock dividends paid by the member insurer on its capital stock, made at any time during the 5 years preceding the petition for liquidation or rehabilitation.
(2) A dividend described in paragraph (1) of this subsection is not recoverable if the member insurer shows that:
(i) the distribution was lawful and reasonable when paid; and
(ii) the member insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the member insurer to fulfill its contractual obligations.
(3) (i) A person that was an affiliate that controlled the member insurer when the distributions described in paragraph (1) of this subsection were paid is liable up to the amount of distributions the person received.
(ii) A person that was an affiliate that controlled the member insurer when the distributions described under paragraph (1) of this subsection were declared is liable up to the amount of distributions the person would have received if the distributions had been paid immediately.
(iii) Two or more persons that are liable with respect to the same distributions are jointly and severally liable.
(4) The maximum amount recoverable under this subsection is the amount needed in excess of all other available assets of the impaired insurer or insolvent insurer to pay the contractual obligations of the impaired insurer or insolvent insurer.
(5) If a person liable under paragraph (3) of this subsection is insolvent, all of its affiliates that controlled it when the dividend was paid are jointly and severally liable for any resulting deficiency in the amount recovered from the insolvent affiliate.
(h) (1) A member insurer or insurance producer may not deliver a policy or contract that at the time of delivery exceeds the limitations imposed by § 9–407(k)(3) of this subtitle, or that is not subject to coverage under § 9–403 of this subtitle, unless the member insurer or insurance producer, before or at the time of delivery, provides the policyholder, certificate holder, enrollee, or contract holder with a separate written notice as provided in paragraph (2) of this subsection.
(2) The notice required under this subsection shall disclose clearly and conspicuously that:
(i) the policy or contract is not covered by, or exceeds the limitations of liability applicable to, the Corporation; and
(ii) the Corporation is not a department or unit of the State, and the liabilities or debts of the Corporation are not liabilities or debts of the State.
(3) The Commissioner shall adopt regulations establishing a standard form to be used by insurance producers and member insurers to conform with the provisions of this subsection.
Md. Code, Insurance § 9-415
(a) The Corporation is subject to examination and regulation by the Commissioner.
(b) By May 1 of each year, the Board of Directors shall submit to the Commissioner:
(1) a financial report for the preceding calendar year in the form that the Commissioner approves; and
(2) a report of its activities during the preceding calendar year.
Md. Code, Insurance § 9-416
Except for taxes on real property, the Corporation is exempt from the payment of all fees and taxes levied by the State or a subdivision of the State.
Md. Code, Insurance § 9-417
(a) A member insurer or its agents or employees, the Corporation or its agents or employees, members of the Board of Directors, and the Commissioner or the Commissioner’s representatives shall have the immunity from liability described in § 5–413 of the Courts Article for any action or omission taken by them in the performance of their powers and duties under this subtitle.
(b) The immunity under subsection (a) of this section shall extend to:
(1) the Corporation as a participant in an organization of one or more other state associations of similar purposes to the Corporation; and
(2) the agents or employees of an organization in which the Corporation is a participant under item (1) of this subsection.
Md. Code, Insurance § 9-418
(a) To allow proper legal action by the Corporation on any matter germane to its powers or duties, each proceeding in which the impaired insurer is a party in a court in the State shall be stayed for 60 days after the date an order of liquidation, rehabilitation, or conservation is final.
(b) If a court enters a judgment under a decision, order, verdict, or finding based on default, the Corporation may:
(1) apply to have the judgment, decision, order, verdict, or finding set aside by the same court that made it; and
(2) defend against the suit on the merits.
Md. Code, Insurance § 9-419
This subtitle is the Life and Health Insurance Guaranty Corporation Act.
Source: Open US Law by Vaquill AI (CC BY 4.0)URL: https://mgaleg.maryland.gov/mgawebsite/Laws/StatutesFetched: 10/16/2026