South Dakota Insurance Guaranty Association, provisions revised.
This Act applies to any kind of direct insurance, but does not apply to:
of the insured and any of its subsidiaries as calculated on a consolidated
The board of directors of the association shall consist of seven persons, each of
whom shall be appointed by the director for a term of three years and until a successor has been
appointed and qualified. The director shall consult with member insurers concerning their
recommendations for the board of directors. Any vacancy on the board shall be filled for the
remaining period of the term by a majority vote of the remaining board members subject to the
approval of the director.
Members of the board may be reimbursed from the assets of the association for
expenses incurred by them as members of the board of directors.
The association may:
To aid in the detection and prevention of insurer insolvencies, it is the duty of the
board of directors, upon majority vote, to notify the director of any information indicating any
member insurer may be insolvent or in a financial condition hazardous to the policyholders or the
To aid in the detection and prevention of insurer insolvencies, the board of directors
may, upon majority vote, request that the director order an examination of any member insurer
which the board in good faith believes may be in a financial condition hazardous to the
policyholders or the public. Within thirty days of the receipt of such request, the director shall begin
the examination. The examination may be conducted as a National Association of Insurance
Commissioners' examination or may be conducted by such persons as the director designates. The
cost of the examination shall be paid by the association and the examination report shall be treated
as are other examination reports. In no event may the examination report be released to the board
of directors prior to its release to the public, but this does not preclude the director from complying
with section 11 of this Act. The director shall notify the board of directors when the examination
is completed. The request for an examination shall be kept on file by the director but it may not be
open to public inspection prior to the release of the examination report to the public.
The director shall report to the board of directors when the director has reasonable
cause to believe that any member insurer examined or being examined at the request of the board
of directors may be insolvent or in a financial condition hazardous to the policyholders or the
The board of directors may, upon majority vote, make recommendations to the
director for the detection and prevention of insurer insolvencies.
The board of directors may, upon majority vote, make recommendations to the
director on matters generally related to improving or enhancing regulation for solvency.
The association shall be obligated to pay covered claims existing prior to the order
of liquidation arising within thirty days after the order of liquidation, or before the policy expiration
date if less than thirty days after the order of liquidation, or before the insured replaces the policy
or causes its cancellation, if the insured does so within thirty days of the order of liquidation. The
obligation shall be satisfied by paying to the claimant an amount as follows:
The association shall be deemed the insurer to the extent of its obligation on the
covered claims and to such extent, subject to the limitations provided in this Act, shall have all
rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent,
including the right to pursue and retain salvage and subrogation recoverable on paid covered claim
obligations. The association may not be deemed the insolvent insurer for any purpose relating to
the issue of whether the association is amenable to the personal jurisdiction of the courts of any
The association shall have the right to recover from the following persons the
amount of any covered claim paid on behalf of such person pursuant to this Act:
The association shall 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 of the association and shall pay the other expenses of the association authorized by this Act.
For purposes of administration and assessment, the association shall be divided into
three separate accounts:
In addition to any other assessments authorized by this Act, the association may
assess each member insurer an administrative assessment not to exceed one hundred fifty dollars
per annum. The administrative assessment shall be made for the purpose of paying operating
expenses of the association and its employees not directly attributable to any particular insolvency
or insolvent insurer, and the administrative assessment may not be on a pro rata basis. The
assessments are due not less than thirty days after prior written notice to the member insurer and
shall accrue interest at ten percent per annum on and after the due date.
Section 24. 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 preceding calendar year on the kinds of insurance in the account. The assessment is due not less
than thirty days after prior written notice to the member insurer and shall accrue interest at ten
percent per annum on and after the due date.
No member insurer may be assessed in any year on any account an amount greater
than two percent of that member insurer's net direct written premiums for the preceding calendar
year on the kinds of insurance in the account.
Each member insurer may set off against any assessment, authorized payments made
on covered claims and expenses incurred in the payment of such claims by the member insurer if
they are chargeable to the account for which the assessment is made.
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 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. However,
during the period of deferment, no dividends may be paid to shareholders or policyholders.
Deferred assessments shall be paid when such payment will not reduce capital or surplus below
required minimums. Such payments shall be refunded to those companies receiving larger
assessments by virtue of the deferment, or at the election of any such company, credited against
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 refund to the member insurers in proportion to the contribution
of each member insurer to that account 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.
The association shall submit to the director a plan of operation and any amendments
necessary or suitable to assure the fair, reasonable, and equitable administration of the association.
The plan of operation and any amendments is effective upon approval in writing by the director.
The plan of operation shall:
The plan of operation may provide that any or all powers and duties of the
association, except those under subdivision (2) of section 7 of this Act and those under sections
22 to 28, inclusive, of this Act are delegated to a corporation, association, or other organization
which performs or will perform functions similar to those of this association, or its equivalent, in
two or more states. Such a corporation, association, or organization shall be reimbursed as a
servicing facility would be reimbursed and shall be paid for its performance of any other functions
of the association. A delegation under this section shall take effect only with the approval of both
the board of directors and the director, and may be made only to a corporation, association, or
organization which extends protection not substantially less favorable and effective than that
provided by this Act.
If at any time the association fails to submit suitable amendments to the plan of
operation, the director shall, after notice and hearing, promulgate such reasonable rules as are
necessary or advisable to effectuate the provisions of this Act. The rules shall continue in force until
modified by the director or superseded by a plan submitted by the association and approved by the
The director shall notify the association of the existence of an insolvent insurer not
later than three days after the director receives notice of the determination of the insolvency. The
association is entitled to a copy of any complaint seeking an order of liquidation with a finding of
insolvency against a member company at the same time that the complaint is filed with a court of
The director shall, upon request of the board of directors, provide the association
with a statement of the net direct written premiums of each member insurer.
Any proceeding in which the insolvent insurer is a party or is obligated to defend
a party in any court in this state shall, subject to waiver by the association in specific cases involving
covered claims, be stayed until the last day fixed by the court for the filing of claims and such
additional time thereafter as may be determined by the court from the date the insolvency is
determined or an ancillary proceeding is instituted in the state, whichever is later, to permit proper
defense by the association of all pending causes of action. As to any covered claims arising from
a judgment under any decision, verdict, or finding based on the default of the insolvent insurer or
its failure to defend an insured, the association, either on its own behalf or on behalf of such
insured, may apply to have the judgment, order, decision, verdict, or finding set aside by the same
court or administrator that made the judgment, order, decision, verdict, or finding and shall be
permitted to defend against the claim on the merits.
Section 38. The director may suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this state of any member insurer that fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative, the director may levy a
fine on any member insurer which fails to pay an assessment when due. The fine may not exceed
five percent of the unpaid assessment per month, except that no fine may be less than one hundred
dollars per month.
The director may revoke the designation of any servicing facility if the director finds
claims are being handled unsatisfactorily.
Any person having a claim against an insurer, whether or not the insurer is a
member insurer, under any provision in an insurance policy other than a policy of an insolvent
insurer which is also a covered claim, shall be required to first exhaust any right under the policy.
Any amount payable on a covered claim under this Act shall be reduced by the amount of any
recovery under the insurance policy.
Any person having a claim which may be recovered under more than one insurance
guaranty association or its equivalent shall seek recovery first from the association of the place of
residence of the insured except that if it is a first-party claim for damage to property with a
permanent location, the person shall seek recovery first from the association of the location of the
property, and if it is a workers' compensation claim, the person shall seek recovery first from the
association of the residence of the claimant. Any recovery under this Act shall be reduced by the
amount of recovery from any other insurance guaranty association or its equivalent.
Any person recovering under this Act shall be deemed to have assigned that
person's rights under the policy to the association to the extent of any recovery from the
association. Every insured or claimant seeking the protection of this Act shall cooperate with the
association to the same extent as such person would have been required to cooperate with the
The association has no cause of action against the insured of the insolvent insurer
for any sums it has paid out, except such causes of action as the insolvent insurer would have had
if the sums had been paid by the insolvent insurer and except as provided in section 18 of this Act.
In the case of an insolvent insurer operating on a plan with assessment liability,
payments of claims of the association may not operate to reduce the liability of insureds to the
receiver, liquidator, or statutory successor for unpaid assessments.
The receiver, liquidator, or statutory successor of an insolvent insurer is bound by
determinations of covered claim eligibility under this Act and by settlements of claims made by the
association or a similar organization in another state. The court having jurisdiction shall grant such
claims priority equal to that which the claimant would have been entitled in the absence of this Act
against the assets of the insolvent insurer. The expenses of the association or similar organization
in handling claims shall be accorded the same priority as the liquidator's expenses.
The association shall periodically file with the receiver or liquidator of the insolvent
insurer statements of the covered claims paid by the association and estimates of anticipated claims
on the association which shall preserve the rights of the association against the assets of the
The association is subject to examination and regulation by the director. The board
of directors shall submit, not later than March thirtieth of each year, a financial report for the
preceding calendar year in a form approved by the director.
Section 48. There is no liability on the part of and no cause of action of any nature may arise against any member insurer, the association or its agents or employees, the board of directors, any person serving as a representative of any director, or the director or the director's representatives for any action taken or any failure to act by them in the performance of their powers and duties under this Act.
The rates and premiums charged for insurance policies to which this Act applies
shall include amounts sufficient to recoup a sum equal to the amounts paid to the association by the
member insurer less any amounts returned to the member insurer by the association and such rates
may not be deemed excessive because they contain an amount reasonably calculated to recoup
assessments paid by the member insurer.
It is unfair trade practice for any insurer or agent to in any manner make use of the
protection given policyholders by this Act as a reason for buying insurance from the insurer or
The association shall pay claims in any order which it deems reasonable, including
the payment of claims as such are received from the claimants or in groups or categories of claims.
The association and any similar organization in another state shall be recognized
as claimants in the liquidation of an insolvent insurer for any amounts paid by them on covered
claims obligations as determined under this Act or similar laws in other states and shall receive
dividends and any other distributions at the priority set forth in
The liquidator, receiver, or statutory successor of an insolvent insurer covered by
this Act shall permit access by the board or its authorized representative to any of the insolvent
insurer's records that are necessary for the board in carrying out its functions under this Act with
regard to covered claims. In addition, the liquidator, receiver, or statutory successor shall provide
the board or its representative with copies of such records upon request by the board and at the
expense of the board.
Except for actions by member insurers aggrieved by final actions or decisions of the
association pursuant to subdivision (7) of section 31 of this Act, any action relating to or arising
out of this Act against the association shall be brought in a court in this state. The courts in this
state have exclusive jurisdiction over all actions relating to or arising out of this Act against the
This Act shall be known as the South Dakota Insurance Guaranty Association Act.
58-29A-1 to 58-29A-53, inclusive, be repealed.
Signed March 11, 2000.