5

(1) be obligated to the extent of the covered claims existing prior to the determination of insolvency and arising within thirty days after the determination of insolvency, or before the policy expiration date if less

than thirty days after the determination, or before the insured replaces the policy or causes its cancellation, if he does so within thirty days of the determination, but such obligation shall include only that amount of each covered claim which is in excess of $100 and is less than $300,000, except that the Association shall pay the full amount of any covered claim arising out of a workmen's compensation policy. In no event shall the Association be obligated to a policyholder or claimant in an amount in excess of the obligation of the insolvent

insurer under the policy from which the claim arises;

(2) be deemed the insurer to the extent of its obligation on the covered claims and to such extent shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent;

(3) allocate claims paid and expenses incurred among the three accounts separately, and assess member insurers separately for each account amounts necessary to pay the obligations of the Association under subsection (a) of this section subsequent to an insol

vency, the expenses of handling covered claims subse

6

quent to an insolvency, the cost of examinations under

section 112 and other expenses authorized by this title. The assessments of each member insurer shall be in the

proportion that the net direct written premiums of the

member insurer for the preceding calendar year on the kinds of insurance in the account bears to the net direct

written premiums of all member insurers for the pre

ceding calendar year on the kinds of insurance in the

account. Each member insurer shall be notified of the

assessment not later than thirty days before it is due. No member insurer may be assessed in any year on any account an amount greater than 2 per centum of that member insurer's net direct written premiums for the preceding calendar year on the kinds of insurance in the account. If the maximum assessment, together with the other assets of the Association in any account, does not

provide in any one year in any account an amount sufficient to make all necessary payments from that account,

the funds available shall be prorated and the unpaid

portion shall be paid as soon thereafter as funds become available. The Association may exempt or defer, in

whole or in part, the assessment of any member insurer, if the assessment would cause the member insurer's

financial statement to reflect amounts of capital or sur

plus less than the minimum amounts required for a

7

certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance. Each

member insurer may set off against any asssessment,

authorized payments made on covered claims and ex

penses incurred in the payment of such claims by the

member insurer if they are chargeable to the account for which the assessment is made;

(4) investigate claims brought against the Association and adjust, compromise, settle, and pay covered claims to the extent of the Association's obligation and

deny all other claims and may review settlements, re

leases and judgments to which the insolvent insurer or its insureds were parties to determine the extent to which such settlements, releases and judgments may be properly contested;

(5) notify such persons as the Commissioner di

rects under section 109 (b) (1);

(6) handle claims through its employees or through one or more insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the approval of the Commissioner, but such desig

nation may be declined by a member insurer; and

(7) reimburse each servicing facility for obligations of the Association paid by the facility and for expenses incurred by the facility while handling claims on behalf

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234

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of the Association and shall pay the other expenses of the Association authorized by this title.

(1) employ or retain such persons as are necessary to handle claims and perform other duties of the Association;

(2) borrow funds necessary to effect the purposes of this title in accord with the plan of operation; (3) sue or be sued;

(4) negotiate and become a party to such contracts as are necessary to carry out the purpose of this

title;

(5) perform such other acts as are necessary or proper to effectuate the purpose of this title; and

(6) refund to the member insurers in proportion to the contribution of each member insurer to that ac

count that amount by which the assets of the account exceed the liabilities, if, at the end of any calendar year, the Board of Directors finds that the assets of the Association in any account exceed the liabilities of that account as estimated by the Board of Directors for the coming year.

SEC. 108. (a) (1) The Association shall submit to the

23 Commissioner a plan of operation and any amendments 24 thereto necessary or suitable to assure the fair, reasonable,

25 and equitable administration of the Association. The plan of

71-472 O-72-4

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1 operation and any amendments thereto shall become effective

2

3

upon approval in writing by the Commissioner.

(2) If the Association fails to submit a suitable plan of 4 operation within ninety days following the effective date of 5 this title or if at any time thereafter the Association fails to 6 submit suitable amendments to the plan, the Commissioner 7 shall, after notice and hearing, adopt and promulgate such 8 reasonable rules as are necessary or advisable to effectuate 9 the provisions of this title. Such rules shall continue in 10 force until modified by the Commissioner or superseded by a plan submitted by the Association and approved by the 12 Commissioner.

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(b) All member insurers shall comply with the plan of

14 operation.

(c) The plan of operation shall

(1) establish the procedures whereby all the pow

ers and duties of the Association under section 107 will

be performed;

(2) establish procedures for handling assets of the Association;

(3) establish the amount and method of reimburs

ing members of the Board of Directors under section

106;

(4) establish procedures by which claims may be