CHAPTER 3. FORMAL PROCEEDINGS
IC 27-9-3
Chapter 3. Formal Proceedings
IC 27-9-3-1
Petition to rehabilitate insurer
Sec. 1. The commissioner may apply by petition to the MarionCounty circuit court for an order authorizing him to rehabilitate adomestic insurer or an alien insurer domiciled in Indiana on any one(1) of the following grounds:
(1) The insurer is in a condition that the further transaction ofbusiness would be hazardous, financially, to its policyholders,creditors, or the public.
(2) There is reasonable cause to believe that there has beenembezzlement from the insurer, wrongful sequestration ordiversion of the insurer's assets, forgery or fraud affecting theinsurer, or other illegal conduct in, by, or with respect to theinsurer that if established would endanger assets in an amountthreatening the solvency of the insurer.
(3) The insurer has failed to remove any person who in fact hasexecutive authority in the insurer, whether an officer, manager,general agent, employee, or other person, if the person has beenfound after notice and hearing by the commissioner underIC 4-21.5-3 to be dishonest or untrustworthy in a way affectingthe insurer's business.
(4) Control of the insurer, whether by stock ownership orotherwise, and whether direct or indirect, is in a person foundafter notice and hearing under IC 4-21.5-3 to be untrustworthy.
(5) Any person who in fact has executive authority in theinsurer, whether an officer, manager, general agent, director ortrustee, employee, or other person, has refused to be examinedunder oath by the commissioner concerning its affairs, whetherin Indiana or elsewhere, and after reasonable notice of the factthe insurer has failed promptly and effectively to terminate theemployment and status of the person and all his influence onmanagement.
(6) After demand by the commissioner under this article orIC 27-1-3, the insurer has failed to promptly make available forexamination any of its own property, books, accounts,documents, or other records, or those of any subsidiary orrelated company within the control of the insurer, or those ofany person having executive authority in the insurer so far asthey concern the insurer.
(7) Without first obtaining the written consent of thecommissioner, the insurer has transferred, or attempted totransfer, in a manner contrary to IC 27-1-23 or IC 27-6,substantially all of its entire property or business, or has enteredinto any transaction the effect of which is to merge, consolidate,or reinsure substantially its entire property or business in orwith the property or business of any other person.
(8) The insurer or its property has been or is the subject of an
application for the appointment of a receiver, trustee, custodian,conservator, or sequestrator or similar fiduciary of the insureror its property otherwise than as authorized under this title, andthe appointment has been made or is imminent, and theappointment might:
(A) remove the insurer from the jurisdiction of the Indianacourts; or
(B) prejudice orderly delinquency proceedings under thisarticle.
(9) Within the previous four (4) years the insurer has willfullyviolated its charter or articles of incorporation, its bylaws, thistitle, or any valid order of the commissioner under IC 27-9-2-1.
(10) The insurer has failed to pay within sixty (60) days afterthe due date any obligation to any state or any politicalsubdivision of any state or any judgment entered in any state, ifthe court in which the judgment was entered had jurisdictionover the subject matter. However, nonpayment shall not be aground until sixty (60) days after any good faith effort by theinsurer to contest the obligation has been terminated, whetherit is before the commissioner or in the courts, or the insurer hassystematically attempted to compromise or renegotiatepreviously agreed settlements with its creditors on the groundthat it is financially unable to pay its obligations in full.
(11) The insurer has failed to file its annual report or otherfinancial report required by law and, after written demand bythe commissioner, has failed to immediately give an adequateexplanation.
(12) The board of directors or the holders of a majority of theshares entitled to vote, or a majority of those individualsentitled to the control of those entities, request or consent torehabilitation under this article.
(13) The insurer is a mutual insurance holding company underIC 27-14 and a reorganized insurance company that is affiliatedwith the mutual insurance holding company and is or has beenthe subject of a petition for an order authorizing thecommissioner to rehabilitate the reorganized insurancecompany under this section or to liquidate the reorganizedinsurance company under section 6 of this chapter, regardlessof whether another basis exists for petitioning for rehabilitationof the mutual insurance holding company.
As added by Acts 1979, P.L.255, SEC.1. Amended by P.L.7-1987,SEC.156; P.L.5-2000, SEC.3.
IC 27-9-3-2
Order to rehabilitate insurer
Sec. 2. (a) An order to rehabilitate the business of a domesticinsurer, or an alien insurer domiciled in Indiana, must:
(1) Appoint the commissioner and his successors in office asthe rehabilitator.
(2) Direct the rehabilitator to take possession of the assets of the
insurer as soon as possible, and to administer them under thegeneral supervision of the Marion County circuit court.
(b) The filing or recording of the order with the clerk of theMarion County circuit court or recorder of deeds of the county inwhich the principal business of the company is conducted, or thecounty in which its principal office or place of business is located,shall impart the same notice as a deed, bill of sale, or other evidenceof title duly filed or recorded with that recorder of deeds would haveimparted. The order to rehabilitate the insurer shall by operation oflaw vest title to all assets of the insurer in the rehabilitator.
(c) An order issued under this section must require accounting bythe rehabilitator to the Marion County circuit court. Accountingsshall be at intervals as the Marion County circuit court specifies inits order.
(d) Entry of an order of rehabilitation does not constitute ananticipatory breach of any contracts of the insurer.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-3
Rehabilitator; personnel; term; compensation; powers; plan
Sec. 3. (a) The commissioner, as rehabilitator, may appoint one(1) or more special deputies, who shall have all the powers andresponsibilities of the rehabilitator granted under this section. Also,the commissioner may employ such counsel, clerks, and assistants ashe considers necessary.
(b) With the approval of the court, the compensation of the specialdeputy, counsel, clerks, and assistants and all expenses of takingpossession of the insurer and of conducting the proceedings shall be:
(1) fixed by the commissioner; and
(2) paid out of the funds or assets of the insurer.
(c) The persons appointed under this section shall serve at thepleasure of the commissioner.
(d) In the event that the property of the insurer does not containsufficient cash or liquid assets to defray the costs incurred, thecommissioner may advance the costs so incurred out of anyappropriation for the maintenance of the insurance department. Anyamounts so advanced for expenses of administration shall be repaidto the commissioner for the use of the insurance department out ofthe first available money of the insurer.
(e) The rehabilitator may take such action as he considersnecessary or appropriate to reform and revitalize the insurer. Thecommissioner:
(1) has all the powers of the directors, officers, and managers,whose authority shall be suspended, except as they areredelegated by the rehabilitator;
(2) may direct, manage, hire, and discharge employees subjectto any contract rights they may have; and
(3) may deal with the property and business of the insurer.
(f) The rehabilitator may prosecute any action that exists in behalfof the creditors, members, policyholders, or shareholders of the
insurer against any director or officer of the insurer or any otherperson or entity.
(g) If the rehabilitator determines that reorganization,consolidation, conversion, reinsurance, merger, or othertransformation of the insurer is appropriate, he shall prepare a planto effect those changes.
(h) Upon application of the rehabilitator for approval of the plan,and after such notice and hearings as the Marion County circuit courtmay prescribe, the court may either approve or disapprove the planproposed, or may modify it and approve it as modified. Any planapproved under this section must be, in the judgment of the court,fair and equitable to all parties concerned. If the plan is approved, therehabilitator shall carry out the plan.
(i) In the case of the life insurer, the plan proposed may includethe imposition of liens upon the policies of company, if all rights ofshareholders are first relinquished. A plan for a life insurer may alsopropose imposition of a moratorium upon loan and cash surrenderrights under policies, for such period and to such an extent as may benecessary.
As added by Acts 1979, P.L.255, SEC.1. Amended by P.L.167-1986,SEC.3.
IC 27-9-3-4
Pending actions; protection of insurer after rehabilitation order
Sec. 4. (a) Any court in Indiana before which any action orproceeding in which the insurer is a party or is obligated to defend aparty is pending when a rehabilitation order against the insurer isentered shall stay the action or proceeding for ninety (90) days andfor any additional time as is necessary for the rehabilitator to obtainproper representation and prepare for further proceedings. Therehabilitator shall take action respecting the pending litigation as heconsiders necessary in the interests of justice and for the protectionof creditors, policyholders, and the public. The rehabilitator shallimmediately consider all litigation pending outside Indiana and shallpetition the courts having jurisdiction over that litigation for stayswhenever necessary to protect the estate of the insurer.
(b) The statute of limitations or the defense of laches shall not runwith respect to any action by or against an insurer between the filingof a petition for appointment of a rehabilitator for that insurer and theorder granting or denying that petition. Any action by or against theinsurer that might have been commenced when the petition was filedmay be commenced for at least sixty (60) days after the order ofrehabilitation is entered or the petition is denied.
(c) Any guaranty association or foreign guaranty associationcovering life or health insurance or annuities has standing to appearin any court proceeding concerning the rehabilitation of a life orhealth insurer if that association is or may become liable to act as aresult of the rehabilitation.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-5
Petition for liquidation; termination of rehabilitation
Sec. 5. (a) Whenever the commissioner believes further attemptsto rehabilitate an insurer would substantially increase the risk of lossto creditors, policyholders, or the public, or would be futile, thecommissioner may petition the Marion County circuit court for anorder of liquidation. A petition under this subsection has the sameeffect as a petition under section 6 of this chapter. The MarionCounty circuit court shall permit the directors of the insurer to takeactions that are reasonably necessary to defend against the petitionand may order payment from the estate of the insurer of such costsand other expenses of defense as justice may require.
(b) The rehabilitator may at any time petition the Marion Countycircuit court for an order terminating rehabilitation of an insurer. TheMarion County circuit court shall also permit the directors of theinsurer to petition the court for an order terminating rehabilitation ofthe insurer and may order payment from the estate of the insurer ofsuch costs and other expenses of the petition as justice may require.If the Marion County circuit court finds that rehabilitation has beenaccomplished and that grounds for rehabilitation under section 1 ofthis chapter no longer exist, the court shall order that the insurer berestored to possession of its property and the control of its business.The Marion County circuit court may also make that finding andissue that order at any time upon its own motion.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-6
Basis for liquidation
Sec. 6. The commissioner may petition the Marion County circuitcourt for an order directing him to liquidate a domestic insurer or analien insurer domiciled in Indiana on the basis:
(1) of any ground for an order of rehabilitation as specified insection 1 of this chapter, whether or not there has been a priororder directing the rehabilitation of the insurer;
(2) that the insurer is insolvent; or
(3) that the insurer is in such a condition that the furthertransaction of business would be hazardous, financially orotherwise, to its policyholders, its creditors, or the public.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-7
Order to liquidate; content; effect; declaration of insolvency;accounting
Sec. 7. (a) An order to liquidate the business of a domestic insurermust:
(1) Appoint the commissioner and his successors in officeliquidator.
(2) Direct the liquidator as soon as possible to take possessionof the assets of the insurer and to administer them under thegeneral supervision of the Marion County circuit court. (b) The liquidator shall be vested by operation of law with the titleto all of the property, contracts, and rights of action and all of thebooks and records of the insurer ordered liquidated, whereverlocated, as of the entry of the final order of liquidation. The filing orrecording of the order with the clerk of the circuit court and therecorder of deeds of the county in which its principal office or placeor business is located, or in the case of real estate with the recorderof deeds of the county where the property is located, shall impart thesame notice as a deed, bill of sale, or other evidence of title duly filedor recorded with that recorder of deeds would have imparted.
(c) Upon issuance of the order, the rights and liabilities of anyinsurer and of its creditors, policyholders, shareholders, membersand all other persons interested in its estate become fixed as of thedate of entry of the order of liquidation, except as provided insections 8 and 35 of this chapter.
(d) An order to liquidate the business of an alien insurerdomiciled in Indiana must be in the same terms and have the samelegal effect as an order to liquidate a domestic insurer, except that theassets and the business in the United States shall be the only assetsand business included in the liquidation.
(e) At the time of petitioning for an order of liquidation, or at anytime after petitioning for an order of liquidation, the commissioner,after making appropriate findings of an insurer's insolvency, maypetition the Marion County circuit court for a judicial declaration ofthat insolvency. After providing for a notice and hearing as theMarion County circuit court considers proper, the court may makethe declaration.
(f) An order issued under this section shall require accounting bythe liquidator to the Marion County circuit court. Accountings shallbe at intervals as the court specifies in its order.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-8
Termination of insurance coverage
Sec. 8. (a) All policies, other than life or health insurance orannuities, in effect at the time of issuance of an order of liquidationshall continue in force only for the lesser of:
(1) a period of thirty (30) days from the date of entry of theliquidation order;
(2) the expiration of the policy coverage;
(3) the date when the insured has replaced the insurancecoverage with equivalent insurance in another insurer orotherwise terminated the policy; or
(4) the date when the liquidator has effected a transfer of thepolicy obligation under section 9(b)(8) of this chapter.
(b) An order of liquidation under section 7 of this chapter shallterminate coverages at the time specified in subsection (a) forpurposes of any other law.
(c) Policies of life or health insurance or annuities shall continuein force for periods and under terms as is provided for by any
applicable guaranty association or foreign guaranty association.
(d) Policies of life or health insurance or annuities or any periodor coverage of those policies not covered by a guaranty associationor foreign guaranty association terminate under subsections (a) and(b).
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-9
Dissolution of corporate existence; authorized acts of liquidator
Sec. 9. (a) The commissioner may petition for an order dissolvingthe corporate existence of a domestic insurer, or the United Statesbranch of an alien insurer domiciled in Indiana, at the time thecommissioner applies for a liquidation order. The Marion Countycircuit court shall order dissolution of the corporation upon petitionby the commissioner upon or after the granting of a liquidation order.If the dissolution has not previously been ordered, the dissolutionshall be effected by operation of law upon the discharge of theliquidator if the insurer is insolvent but may be ordered by the courtupon the discharge of the liquidator if the insurer is under aliquidation order for some other reason.
(b) The liquidator may do all acts necessary or appropriate for theaccomplishment of the liquidation, including the following:
(1) Appoint a special deputy to act for the liquidator under thisarticle, and determine a reasonable compensation for thatspecial deputy.
(2) Employ employees and insurance producers, legal counsel,actuaries, accountants, appraisers, consultants, and otherpersonnel as the liquidator considers necessary to assist in theliquidation.
(3) Fix the reasonable compensation of employees andinsurance producers, legal counsel, actuaries, accountants,appraisers, and consultants with the approval of the court.
(4) Pay reasonable compensation to persons appointed anddefray from the funds or assets of the insurer all expenses oftaking possession of, conserving, conducting, liquidating,disposing of, or otherwise dealing with the business andproperty of the insurer.
(5) Hold hearings, subpoena witnesses to compel theirattendance, administer oaths, examine any person under oath,and compel any person to subscribe to the person's testimonyafter it has been correctly reduced to writing, and in connectionwith hearings and the examination of witnesses require theproduction of any books, papers, records, or other documentswhich the liquidator deems relevant to the inquiry.
(6) Collect all debts and moneys due and claims belonging tothe insurer, wherever located, and for this purpose:
(A) institute timely action in other jurisdictions, in order toforestall garnishment and attachment proceedings againstthose debts;
(B) do other acts necessary or expedient to collect, conserve,
or protect its assets or property, including the power to sell,compound, compromise, or assign debts for purposes ofcollection upon terms and conditions as the liquidatorconsiders best; and
(C) pursue any creditor's remedies available to enforce theliquidator's claims.
(7) Conduct public and private sales of the property of theinsurer.
(8) Use assets of the estate of an insurer under a liquidationorder to transfer policy obligations to a solvent assuminginsurer, if the transfer can be arranged without prejudice toapplicable priorities under section 40 of this chapter.
(9) Acquire, hypothecate, encumber, lease, improve, sell,transfer, abandon, or otherwise dispose of or deal with, anyproperty of the insurer at its market value or upon such termsand conditions as are fair and reasonable.
(10) Borrow money on the security of the insurer's assets orwithout security and execute and deliver all documentsnecessary to that transaction for the purpose of facilitating theliquidation.
(11) Enter into contracts that are necessary to carry out theorder to liquidate, and affirm or disavow any contracts to whichthe insurer is a party.
(12) Continue to prosecute and to institute in the name of theinsurer, or in the liquidator's own name, all suits and other legalproceedings, in Indiana or elsewhere, and abandon theprosecution of claims the liquidator considers unprofitable topursue further.
(13) Prosecute any action that may exist in behalf of thecreditors, members, policyholders, or shareholders of theinsurer against any director or officer of the insurer, or anyother person.
(14) Remove all records and property of the insurer to theoffices of the commissioner or to some other place as may beconvenient for the purposes of efficient and orderly executionof the liquidation.
(15) Deposit in one (1) or more banks in Indiana sums requiredfor meeting current administration expenses and dividenddistributions.
(16) Invest all sums not currently needed, unless the courtorders otherwise.
(17) File any necessary documents for record in the office ofany recorder of deeds or record office in Indiana or elsewherewhere property of the insurer is located.
(18) Assert all defenses available to the insurer as against thirdpersons, including statutes of limitation, statutes of frauds, andthe defense of usury.
(19) Exercise and enforce all the rights, remedies, and powersof any creditor, shareholder, policyholder, or member, includingany power to avoid any transfer or lien that may be given by the
general law and that is not included in sections 14 through 16of this chapter.
(20) Intervene in any proceeding wherever instituted that mightlead to the appointment of a receiver or trustee, and act as thereceiver or trustee whenever the appointment is offered.
(21) Enter into agreements with any receiver or commissionerof any other state relating to the rehabilitation, liquidation,conservation, or dissolution of an insurer doing business in bothstates.
(22) Exercise all powers conferred upon receivers by the lawsof Indiana not inconsistent with this article.
As added by Acts 1979, P.L.255, SEC.1. Amended by P.L.167-1986,SEC.4; P.L.178-2003, SEC.75.
IC 27-9-3-10
Notice of liquidation by liquidator
Sec. 10. (a) Unless the Marion County circuit court otherwisedirects, the liquidator shall give notice of the liquidation order assoon as possible by:
(1) first-class mail and either by telegram or telephone to theinsurance commissioner of each jurisdiction in which theinsurer is doing business;
(2) first-class mail to any guaranty association or foreignguaranty association that is or may become obligated as a resultof the liquidation;
(3) first-class mail to all insurance producers of the insurer;
(4) first-class mail to all persons known or reasonably expectedto have claims against the insurer, including all policyholders,at their last known address as indicated by the records of theinsurer;
(5) first-class mail to the secretary of state's office; and
(6) publication in a newspaper of general circulation in thecounty in which the insurer has its principal place of businessand in all other locations the liquidator considers appropriate.
(b) Notice to potential claimants under subsection (a) must requireclaimants to file with the liquidator their claims, together with properproof of those claims under section 34 of this chapter, before a datethe liquidator specifies in the notice. The liquidator need not requirepersons claiming cash surrender values or other investment values inlife insurance and annuities to file a claim. All claimants must keepthe liquidator informed of any changes of address.
(c) If notice is given in accordance with this section, thedistribution of assets of the insurer under this chapter shall beconclusive with respect to all claimants, whether or not they receivednotice.
As added by Acts 1979, P.L.255, SEC.1. Amended by P.L.178-2003,SEC.76.
IC 27-9-3-11
Notice of liquidation by insurance producers to policyholders Sec. 11. (a) Every person who receives notice in the formprescribed in section 10 of this chapter that an insurer whom theperson represents as an insurance producer is the subject of aliquidation order must, within fifteen (15) days of that notice, givenotice of the liquidation order to each policyholder as provided bysubsection (b).
(b) The notice must be sent by first class mail to the last addresscontained in the insurance producer's records to each policyholder orother person named in any policy issued through that insuranceproducer by the insurer, if the insurance producer has a record of theaddress of the policyholder or other person.
(c) A policy shall be treated as though it were issued through aninsurance producer if the insurance producer has a property interestin the expiration of the policy, or if the insurance producer has hadin the insurance producer's possession a copy of the declarations ofthe policy at any time during the life of the policy, except where theownership of the expiration of the policy has been transferred toanother.
(d) The written notice must include:
(1) the name and address of the insurer;
(2) the name and address of the insurance producer; and
(3) identification of the policy impaired and the nature of theimpairment, including termination of coverage as described insection 8 of this chapter.
(e) Notice by a general agent satisfies the notice requirement forany insurance producers under contract to the general agent. Eachinsurance producer obligated to give notice under this section shallfile a report of compliance with the liquidator.
(f) After a hearing under IC 4-21.5-3, an insurance producerfailing to give notice or file a report of compliance as required bysubsection (e) may be subject to payment of a penalty of not morethan one thousand dollars ($1,000) and may have the insuranceproducer's license suspended.
(g) The liquidator may waive the duties imposed by this sectionif the liquidator determines that other notice to the policyholders ofthe insurer under liquidation is adequate.
As added by Acts 1979, P.L.255, SEC.1. Amended by P.L.7-1987,SEC.157; P.L.178-2003, SEC.77.
IC 27-9-3-12
Actions after liquidation orders
Sec. 12. (a) Upon issuance of an order appointing a liquidator ofa domestic insurer or of an alien insurer domiciled in Indiana, anaction at law or equity may not be brought against the insurer orliquidator, whether in Indiana or elsewhere, nor shall any existingactions be maintained or further presented after issuance of an order.
(b) The courts of Indiana shall give full faith and credit toinjunctions against the liquidator or the company or the continuationof existing actions against the liquidator or the company, when thoseinjunctions are included in an order to liquidate an insurer issued
under similar provisions in other states.
(c) Whenever in the liquidator's judgment, protection of the estateof the insurer necessitates intervention in an action against theinsurer that is pending outside Indiana, the liquidator may intervenein the action. The liquidator may defend any action in which heintervenes under this section at the expense of the estate of theinsurer.
(d) Within two (2) years after an order for liquidation (or a timein addition to two (2) years as applicable law may permit) theliquidator may institute an action or proceeding on behalf of theestate of the insurer upon any cause of action against which theperiod of limitation fixed by applicable law has not expired at thetime of the filing of the petition upon which the order is entered.
(e) Where, by any agreement, a period of limitation is fixed forinstituting a suit or proceeding upon any claim, or for filing anyclaim, proof of claim, proof of loss, demand, notice, or the like, orwhere in any proceeding, judicial or otherwise, a period of limitationis fixed, either in the proceeding or by applicable law, for taking anyaction, filing any claim or pleading, or doing any act, and where inany such case the period had not expired at the date of the filing ofthe petition. The liquidator may, for the benefit of the estate, take anysuch action or do any such act, required of or permitted to theinsurer, within a period of one hundred eighty (180) days after theentry of an order for liquidation, or within such further period as isshown to the satisfaction of the Marion County circuit court not to beunfairly prejudicial to the other party.
(f) A statute of limitations or defense of laches shall not run withrespect to any action against an insurer between the filing of apetition for liquidation against an insurer and the denial of thepetition. Any action against the insurer that might have beencommenced when the petition was filed may not be commenced forat least sixty (60) days after the petition is denied.
(g) Any guaranty association or foreign guaranty association hasstanding to appear in any court proceeding concerning the liquidationof an insurer if that association is or may become liable to act as aresult of the liquidation.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-13
Listing of assets
Sec. 13. (a) As soon as practicable after the liquidation order, butnot later than one hundred twenty (120) days after that order, theliquidator shall prepare in duplicate a list of the insurer's assets. Thelist shall be amended or supplemented as the liquidator determinesnecessary. One (1) copy shall be filed in the office of the clerk of theMarion County circuit court and one (1) copy shall be retained forthe liquidator's files. All amendments and supplements shall besimilarly filed.
(b) The liquidator shall reduce the assets to a degree of liquiditythat is consistent with the effective execution of the liquidation. (c) A submission to the Marion County circuit court fordisbursement of assets in accordance with section 32 of this chapterfulfills the requirements of subsection (a).
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-14
Transfers made or obligations incurred as fraudulent
Sec. 14. (a) Every transfer made, or suffered, and every obligationincurred by an insurer within one (1) year before the filing of asuccessful petition for rehabilitation or liquidation under IC 27-9 isfraudulent as to then existing and future creditors if made or incurredwithout fair consideration, or with actual intent to hinder, delay, ordefraud either existing or future creditors.
(b) A transfer made or an obligation incurred by an insurerordered to be rehabilitated or liquidated under IC 27-9, which isfraudulent under this section, may be avoided by the receiver, except:
(1) as to a person who in good faith is a purchaser, lienor, orobligee for a present fair equivalent value; and
(2) that any purchaser, lienor, or obligee, who in good faith hasgiven a consideration less than fair for such transfer, lien, orobligation, may retain the property, lien, or obligation assecurity for repayment.
The court may, on due notice, order any transfer or obligation to bepreserved for the benefit of the estate, and in that event, the receivershall succeed to and may enforce the rights of the purchaser, lienor,or obligee.
(c) A transfer of property, other than real property, is made orsuffered when it becomes so far perfected that no subsequent lienobtainable by legal or equitable proceedings on a simple contractcould become superior to the rights of the transferee under section 18of this chapter.
(d) A transfer of real property is made or suffered when itbecomes so far perfected that no subsequent bona fide purchaserfrom the insurer could obtain rights superior to the rights of thetransferee.
(e) A transfer that creates an equitable lien is not perfected if thereare available means by which a legal lien could be created.
(f) Any transfer not perfected before the filing of a petition forliquidation shall be treated as if it were made immediately before thefiling of the successful petition.
(g) The provisions of subsections (b) through (f) apply whether ornot there are or were creditors who might have obtained any liens orpersons who might have become bona fide purchasers.
(h) Any transaction of the insurer with a reinsurer is fraudulentand may be avoided by the receiver under section 13 of this chapterif:
(1) the transaction consists of the termination, adjustment, orsettlement of a reinsurance contract in which the reinsurer isreleased from any part of its duty to pay the originally specifiedshare of losses that had occurred before the time of the
transaction, unless the reinsurer gives a present fair equivalentvalue for the release; and
(2) any part of the transaction took place within one (1) yearbefore the date of filing of the petition through which thereceivership was commenced.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-15
Transfers after petition; validity
Sec. 15. (a) After a petition for rehabilitation or liquidation hasbeen filed, a transfer of any of the real property of the insurer madeto a person acting in good faith shall be valid against the receiver ifmade for a present fair equivalent value, or, if not made for a presentfair equivalent value, then to the extent of the present considerationactually paid for that real property, for which amount the transfereeshall have a lien on the property so transferred. The commencementof a proceeding in rehabilitation or liquidation shall be constructivenotice upon the recording of a copy of the petition for or order ofrehabilitation or liquidation with the recorder of deeds in the countywhere any real property in question is located. The exercise by acourt of the United States or any state with jurisdiction to authorizeor effect a judicial sale of real property of the insurer within anycounty in any state shall not be impaired by the pendency of aproceeding, unless the copy is recorded in the county before theconsummation of the judicial sale.
(b) After a petition for rehabilitation or liquidation has been filedand before either the receiver takes possession of the property of theinsurer or an order of rehabilitation or liquidation is granted:
(1) a transfer of any of the property of the insurer, other thanreal property, made to a person acting in good faith shall bevalid against the receiver if made for a present fair equivalentvalue, or, if not made for a present fair equivalent value, then tothe extent of the present consideration actually paid for that realproperty, for which amount the transferee shall have a lien onthe property so transferred;
(2) a person indebted to the insurer or holding property of theinsurer may, if acting in good faith, pay the indebtedness ordeliver the property, or any part of the property, to the insureror upon his order, with the same effect as if the petition werenot pending;
(3) a person having actual knowledge of the pendingrehabilitation or liquidation shall be considered not to act ingood faith; and
(4) a person asserting the validity of a transfer under thissection has the burden of proof.
Except as elsewhere provided in this section, a transfer by or onbehalf of the insurer after the date of the petition for liquidation byany person other than the liquidator is not valid against theliquidator.
(c) Nothing in IC 27-9 shall be considered to impair the
negotiability of currency or negotiable instruments.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-16
Preferences
Sec. 16. (a) A preference is a transfer of any of the property of aninsurer to or for the benefit of a creditor, for or on account of anantecedent debt, made or suffered by the insurer within one (1) yearbefore the filing of a successful petition for liquidation underIC 27-9, the effect of which transfer may be to enable the creditor toobtain a greater percentage of this debt than another creditor of thesame class would receive. If a liquidation order is entered while theinsurer is already subject to a rehabilitation order, then that transfershall be considered a preference if made or suffered within one (1)year before the filing of the successful petition for rehabilitation, orwithin two (2) years before the filing of the successful petition forliquidation, whichever time is shorter.
(b) A preference may be avoided by the liquidator if:
(1) the insurer was insolvent at the time of the transfer;
(2) the transfer was made within four (4) months before thefiling of the petition;
(3) the creditor receiving it or to be benefited by it or his agentacting with reference to it had, at the time when the transfer wasmade, reasonable cause to believe that the insurer was insolventor was about to become insolvent; or
(4) the creditor receiving it was an officer, or any employee orattorney or other person who was in fact in a position ofcomparable influence in the insurer to an officer whether or nothe held such a position, or any shareholder holding directly orindirectly more than five percent (5%) of any class of anyequity security issued by the insurer, or any other person, firm,limited liability company, corporation, association, oraggregation of persons with whom the insurer did not deal atarm's length.
(c) Where the preference is voidable, the liquidator may recoverthe property or, if it has been converted, its value from any personwho has received or converted the property, except where a bona fidepurchaser or lienor has given less than fair equivalent value, he shallhave a lien upon the property to the extent of the considerationactually given by him. Where a preference by way of lien or securitytitle is voidable, the court may on due notice order the lien or title tobe preserved for the benefit of the estate, in which event the lien ortitle shall pass to the liquidator.
As added by Acts 1979, P.L.255, SEC.1. Amended by P.L.8-1993,SEC.433.
IC 27-9-3-17
Transfers; time perfected
Sec. 17. (a) A transfer of property other than real property shallbe considered to be made or suffered when it becomes so far
perfected that no subsequent lien obtainable by legal or equitableproceedings on a simple contract could become superior to the rightsof the transferee.
(b) A transfer of real property shall be considered to be made orsuffered when it becomes so far perfected that no subsequent bonafide purchaser from the insurer could obtain rights superior to therights of the transferee.
(c) A transfer that creates an equitable lien shall not be consideredto be perfected if there are available means by which a legal liencould be created.
(d) A transfer not perfected before the filing of a petition forliquidation shall be considered to be made immediately before thefiling of the successful petition.
(e) This section applies whether or not there are or were creditorswho might have obtained liens or persons who might have becomebona fide purchasers.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-18
Liens
Sec. 18. (a) A lien obtainable by legal or equitable proceedingsupon a simple contract is one arising in the ordinary course of thoseproceedings upon the entry or docketing of a judgment or decree, orupon attachment, garnishment, execution, or like process, whetherbefore, upon, or after judgment or decree and whether before or uponlevy. It does not include liens that under applicable law are given aspecial priority over other liens that are prior in time.
(b) A lien obtainable by legal or equitable proceedings couldbecome superior to the rights of a transferee, or a purchaser couldobtain rights superior to the rights of a transferee within the meaningof section 17 of this chapter, if those consequences would followonly from the lien or purchase itself, or from the lien or purchasefollowed by any step wholly within the control of the respectivelienholder or purchaser, with or without the aid of ministerial actionby public officials. A lien could not, however, become superior anda purchase could not create superior rights for the purpose of section17 of this chapter through any acts after obtaining a lien or after apurchase that requires the agreement or concurrence of any thirdparty or which requires any further judicial action or ruling.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-19
Transfers on account of new and contemporaneous consideration
Sec. 19. A transfer of property for or on account of a new andcontemporaneous consideration that is considered under section 17of this chapter to be made or suffered after the transfer because ofdelay in perfecting it does not become a transfer for or on account ofan antecedent debt if any acts required by the applicable law to beperformed in order to perfect the transfer as against liens or bona fidepurchasers' rights are performed within twenty-one (21) days or any
period expressly allowed by the law, whichever is less. A transfer tosecure a future loan or a transfer that becomes security for a futureloan, has the same effect as a transfer for or on account of a new andcontemporaneous consideration.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-20
Liens dissolved by furnishing bond; effect of voidable lien
Sec. 20. If any lien that is voidable under section 16(b) of thischapter has been dissolved by the furnishing of a bond or otherobligation, the surety on which has been indemnified directly orindirectly by the transfer of or the creation of a lien upon anyproperty of an insurer before the filing of a petition under IC 27-9that results in a liquidation order, the indemnifying transfer or lienshall also be considered voidable.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-21
Discharge from voidable lien
Sec. 21. The property affected by any lien considered voidableunder sections 16 and 20 of this chapter shall be discharged from thatlien, and that property and any of the indemnifying propertytransferred to or for the benefit of a surety shall pass to theliquidator, except that the court may on due notice order any lien tobe preserved for the benefit of the estate and the court may direct thatthe conveyance be executed as may be proper or adequate toevidence the title of the liquidator.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-22
Jurisdiction of Marion County circuit court under this chapter
Sec. 22. The Marion County circuit court has summaryjurisdiction of any proceeding by the liquidator to hear and determinethe rights of any parties under this chapter. Reasonable notice of anyhearing in the proceeding shall be given to all parties in interest,including the obligee of a releasing bond or other like obligation.Where an order is entered for the recovery of indemnifying propertyin kind or for the avoidance of an indemnifying lien, the court, uponapplication of any party in interest, shall in the same proceedingascertain the value of the property or lien, and if the value is less thanthe amount for which the property is indemnity or than the amountof the lien, the transferee or lienholder may elect to retain theproperty or lien upon payment of its value, as ascertained by thecourt, to the liquidator, within reasonable times as the court shall fix.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-23
Discharge of surety under releasing bond
Sec. 23. The liability of a surety under a releasing bond or otherlike obligation shall be discharged to the extent of the value of the
indemnifying property recovered or the indemnifying lien nullifiedand avoided by the liquidator, or where the property is retained undersection 22 of this chapter to the extent of the amount paid to theliquidator.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-24
Extension of unsecured credit by preferred creditor
Sec. 24. If a creditor has been preferred, and afterward in goodfaith gives the insurer further credit without security of any kind forproperty that becomes a part of the insurer's estate, the amount of thenew credit remaining unpaid at the time of the petition may be set offagainst the preference that would otherwise be recoverable from him.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-25
Payment to attorney for services
Sec. 25. If an insurer shall, directly or indirectly:
(1) within four (4) months before the filing of a successfulpetition for liquidation under IC 27-9; or
(2) at any time in contemplation of a proceeding to liquidate it;
pay money or transfer property to an attorney for services, thetransaction may be examined by the court on its own motion or shallbe examined by the court on petition of the liquidator and shall beheld valid only to the extent of a reasonable amount to be determinedby the court. The excess may be recovered by the liquidator for thebenefit of the estate. However, where the attorney is in a position ofinfluence in the insurer or an affiliate of the insurer payment of anymoney or the transfer of any property to the attorney for services isgoverned by section 16(b)(4) of this chapter.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-26
Personal liability relating to improper preferences
Sec. 26. (a) Every officer, manager, employee, shareholder,member, subscriber, attorney, or any other person acting on behalfof the insurer who knowingly participates in giving any preferencewhen he has reasonable cause to believe the insurer is or is about tobecome insolvent at the time of the preference is personally liable tothe liquidator for the amount of the preference. If the transfer wasmade within four (4) months before the date of filing a successfulpetition for liquidation it may be presumed that the person knew ofthe pending insolvency.
(b) Every person receiving any property from the insurer (or thebenefit of any property) as a preference voidable under section 16(a)of this chapter is personally liable for that property and is bound toaccount to the liquidator.
(c) Nothing in this section shall prejudice any other claim by theliquidator against any person.
As added by Acts 1979, P.L.255, SEC.1. Amended by P.L.1-1991,
SEC.168.
IC 27-9-3-27
Claims by creditors holding voidable preferences
Sec. 27. (a) Claims of a creditor who has received or acquired apreference, lien, conveyance, transfer, assignment, or encumbrance,voidable under IC 27-9, shall not be allowed unless he surrenders thepreference, lien, conveyance, transfer, assignment, or encumbrance.If the avoidance is effected by a proceeding in which a finaljudgment has been entered, the claim shall not be allowed unless themoney is paid or the property is delivered to the liquidator withinthirty (30) days from the date of entering of the final judgment,except that the Marion County circuit court may allow further timeif there is an appeal or other continuation of the proceeding.
(b) A claim allowable under subsection (a) by reason of theavoidance, whether voluntary or involuntary, or a preference, lien,conveyance, transfer, assignment, or encumbrance, may be filed asan excused late filing under section 33 of this chapter if filed withinthirty (30) days from the date of the avoidance (or within the furthertime allowed by the court under subsection (a)).
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-28
Setoff of mutual debts or credits
Sec. 28. (a) Mutual debts or mutual credits between the insurerand another person in connection with any action or proceedingunder this article shall be set off and only the balance shall beallowed or paid, except as provided in section 31(a) of this chapter.
(b) A setoff or counterclaim shall not be allowed in favor of anyperson where:
(1) the obligation of the insurer to the person would not at thedate of the filing of a petition for liquidation entitle the personto share as a claimant in the assets of the insurer;
(2) the obligation of the insurer to the person was purchased byor transferred to the person with a view to its being used as asetoff; or
(3) the obligation of the person is to pay an assessment leviedagainst the members or subscribers of the insurer, or is to paya balance upon a subscription to the capital stock of the insurer,or is in any other way in the nature of a capital contribution.
As added by Acts 1979, P.L.255, SEC.1. Amended by P.L.29-1987,SEC.3; P.L.255-1995, SEC.10.
IC 27-9-3-29
Liquidator's report; assessment of members
Sec. 29. (a) As soon as practicable but not more than two (2) yearsfrom the date of an order of liquidation under section 7 of thischapter of an insurer issuing assessable policies, the liquidator shallmake a report to the Marion County circuit court stating:
(1) The reasonable value of the assets of the insurer. (2) The insurer's probable total liabilities.
(3) The probable aggregate amount of the assessment necessaryto pay all claims of creditors and expenses in full, includingexpenses of administration and costs of collecting theassessment.
(4) A recommendation as to whether or not an assessmentshould be made and in what amount.
(b) Upon the basis of the report required by subsection (a),including any supplements and amendments to that report, theMarion County circuit court may levy one (1) or more assessmentsagainst all members of the insurer who are subject to assessment.
(c) Subject to any applicable legal limits on assessability, theaggregate assessment must be the amount that:
(1) the sum of the probable liabilities;
(2) the expenses of administration; and
(3) the estimated cost of collection of the assessment;
exceed the value of existing assets, with due regard being given toassessments that cannot be collected economically.
(d) After the levy of assessment under subsections (b) and (c), theliquidator shall issue an order directing each member who has notpaid the assessment under the order to show cause why the liquidatorshould not pursue a judgment for that amount.
(e) The liquidator shall give notice of the order to show cause bypublication and by first-class mail to each member liable under theorder mailed to his last known address as it appears on the insurer'srecords, at least twenty (20) days before the return day of the orderto show cause.
(f) If a member does not appear and serve duly verified objectionsupon the liquidator on or before the return day of the order to showcause under subsection (d), the Marion County circuit court shallissue an order adjudging the member liable for the amount of theassessment against him, under subsection (d) together with costs. Theliquidator shall have a judgment against the member for that amount.
(g) If on or before the return day, the member appears and servesduly verified objections upon the liquidator, the commissioner mayhear and determine the matter or may appoint a referee to hear it andmake an order as the facts warrant. In the event that thecommissioner determines that the objections do not warrant relieffrom assessment, the member may request the Marion County circuitcourt to review the matter and vacate the order to show cause.
(h) The liquidator may enforce any order or collect any judgmentunder subsection (f) by any lawful means.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-30
Repealed
(Repealed by P.L.233-1999, SEC.16.)
IC 27-9-3-30.1
Reinsurance; method of payment upon liquidation Sec. 30.1. (a) Reinsurance must be payable under a contractreinsured by an assuming insurer on the basis of reported claimsallowed in the liquidation proceedings, subject to court approval,without diminution because of the insolvency of the ceding insurer.Payments must be made directly to the ceding insurer or to theceding insurer's domiciliary liquidator except when:
(1) the contract or other written agreement specifically providesanother payee of the reinsurance in the event of the insolvencyof the ceding insurer; or
(2) before the initiation of the insolvency proceedings, theassuming insurer, with the consent of the direct insured, hasassumed the policy obligations of the ceding insurer as directobligations of the assuming insurer to policy payees and insubstitution for the obligations of the ceding insurer to thepayees.
(b) During the pendency of a receivership proceeding, anassuming insurer, with the consent of the direct insured and thereceiver, subject to court approval, may assume policy obligations ofthe ceding insurer as direct obligations of the assuming insurer to thepolicy payees and in substitution for the obligations of the cedinginsurer to the payees.
As added by P.L.233-1999, SEC.12.
IC 27-9-3-31
Liability for payment of premiums by insured and person otherthan insured; penalties
Sec. 31. (a) An insurance producer, a broker, an agency, apremium finance company, an insured, or any other personresponsible for the payment of a premium shall be obligated to payany earned but unpaid premium for any policy that is due the insurerfor coverage provided before the declaration of insolvency. However,an insurance producer, a broker, an agency, a premium financecompany, an insured, or any other person responsible for thepayment of a premium shall not be responsible for any unpaidpremium unearned as of the time of the declaration of insolvency.
(b) In addition to the obligation owed under subsection (a), aninsurance producer, broker, agency, premium finance company, orany other person, other than the insured, responsible for the paymentof a premium to the insurance company or any holding companyshall pay any unearned premium collected from the insured beforethe declaration of insolvency. The commissioner may also recoverfrom that person any part of an unearned premium that represents acommission of that person.
(c) Credits or setoffs or both may not be allowed to an insuranceproducer, broker, or premium finance company for any amountsadvanced to the insurer by the insurance producer, broker, orpremium finance company on behalf of, but in the absence of apayment by, the insured.
(d) Upon satisfactory evidence of a violation of this section, thecommissioner may pursue the following courses of action against
those parties licensed by the department of insurance:
(1) Suspend, revoke, or refuse to renew the licenses of theoffending party.
(2) Impose a penalty of not more than one thousand dollars($1,000) for each and every act in violation of this article by theparty.
These penalties are in addition to and not in lieu of the obligationsowed under subsections (a) and (b).
(e) Before the commissioner may take any action as provided insubsection (d), the commissioner shall give written notice to theperson accused of violating the law, stating specifically the nature ofthe alleged violation, and fixing a time (at least ten (10) days afterthe notice is sent) and place when a hearing on the matter is to beheld. After the hearing, if the commissioner finds a violation, or uponfailure of the accused to appear at the hearing, the commissionershall impose whatever penalties allowed under subsection (d) as thecommissioner considers advisable.
(f) Subsection (a) does not relieve an insured of any obligationthat may exist to reimburse any agency, insurance producer, broker,premium finance company, or other person for amounts advanced tothe insurer on behalf of the insured.
As added by Acts 1979, P.L.255, SEC.1. Amended by P.L.29-1987,SEC.4; P.L.255-1995, SEC.11; P.L.178-2003, SEC.78.
IC 27-9-3-32
Proposal to disburse assets
Sec. 32. (a) Within one hundred twenty (120) days of a finaldetermination of insolvency of an insurer by the Marion Countycircuit court, the liquidator shall make application to that court forapproval of