3901-1-25 Ohio insurance guaranty association.

(A) Name and status. The name of this organization is the Ohio insurance guaranty association, herein referred to as “association.” It is a nonprofit unincorporated association organized pursuant to section 3955.06 of the Revised Code and implementing sections 3955.01 to 3955.20 of the Revised Code concerning the association and its plan of operation.

(B) Purpose. The association is organized to pursue the following purpose:

To do all things which the association is required or empowered to do by the Ohio Insurance Guaranty Association Act, sections 3955.01 to 3955.20 of the Revised Code.

(C) Membership.

(1) Members

Every insurer licensed to transact insurance in this state and writing one or more kinds of insurance included within section 3955.05 of the Revised Code shall be a member of the association.

(2) Annual meeting

The annual meeting of member insurers shall be held at ten-thirty a.m. on the second Wednesday of October of each year at the offices of the association unless the board shall designate a different time, date or place in Ohio for the holding of such meeting.

(3) Special meeting

Special meetings of member insurers may be held at such time and place within Ohio as shall be designated by the board.

(4) Notice of meetings

Written notice of any meeting of member insurers stating the time, place, and purpose or purposes thereof shall be mailed to each member insurer at the address shown in the books of the association not more than forty nor less than twenty days prior to the meeting.

(5) Quorum

Member insurers represented at any duly called meeting of member insurers shall constitute a quorum for the transaction of business and the actions of a majority of the member insurers present at the meeting shall be the actions of the association, but any action required by law or this plan of operation to be authorized or taken by a designated portion of member insurers, may not be authorized or taken by a lesser portion thereof.

(6) Representation and voting

Each member insurer represented at any meeting of member insurers is entitled to cast one vote for each matter properly submitted to member insurers for their vote, consent, waiver, release, or other action. Each member insurer may be represented at any meeting of member insurers by any officer of such member insurer, or any other person the member insurer may designate in writing signed by an officer. Any officer of a member insurer shall conclusively be deemed to have authority to cast the vote of such member insurer, to appoint proxies, and to execute consents, waivers, and releases on behalf of such member insurer, unless, before a vote is taken or a consent, waiver, or release is acted upon, it appears by a certified copy of its regulations, bylaws, or by resolution of its board or executive committee that such authority does not exist or is vested in some other officer or person. Member insurers may consider and act upon any subject they deem advisable at any annual or special meeting, as long as notice of such meeting given to member insurers describes the subject to be considered and acted upon.

(D) Board of directors.

(1) Membership and duties

(a) The association shall be governed by a board of directors (herein referred to as “board”) which shall, in the name of the association, exercise all of the powers and carry out all of the duties of the association, except as otherwise provided herein. At a meeting of members at which directors are to elected, only members nominated as candidates shall be eligible for election as directors. Nomination for election as a director is limited to: (i) nomination by the board of directors, or (ii) nomination by a member insurer and the seconding of that nomination by a minimum of three member insurers. In the event that nominations are made by member insurers pursuant to paragraph (D)(1)(a)(ii) of this rule, said member insurer(s) shall notify the chairman of the board of said nomination no later than sixty days prior to the annual meeting date. At all elections of directors, the candidates receiving the greatest number of votes shall be elected, subject to the approval of the superintendent of insurance. A majority of member insurers of the board shall be domestic insurers. Not more than one member insurer in a group under the same management or ownership shall serve on the board at the same time.

(b) The board shall consist of not less than five nor more than nine member insurers, the number of board members to be determined by the member insurers at any meeting at which directors are to be elected. The directors shall serve for staggered terms of three years each, except that in the first election following the term of the initial board, three member insurers shall be elected for a three-year term, two member insurers for a two-year term, and two member insurers for a one-year term, all of whom shall serve until their successors are elected. If the number of board members is changed, reductions or increases shall be made from or to the three classes of directors so that an equal number, or as nearly equal a number as possible, of directors is elected each year. Upon the election of member insurers to the board, the association shall notify the superintendent of insurance and request his written approval of the selection. After such approval, each member insurer elected to the board shall designate its authorized representative to serve as director on the board.

(c) The designated representatives of member insurers elected to the board shall elect a chairman and such other officers from among themselves as they deem necessary, each of whom shall serve until his successor is elected.

(d) The chairman, or a board member appointed by him, shall preside at all meetings of the board and of the association. The chairman shall have the authority to sign all documents on behalf of the association except as may be otherwise provided by the board. The board, from time to time and upon such terms as it specifies, may appoint committees whose membership shall be composed of member insurers. The board may adopt regulations and bylaws. Board members shall serve without pay but may be reimbursed for necessary expenses incurred as members of the board.

(2) Board meetings

The board shall meet at least annually immediately following the annual meeting of the association. The board may at any time adopt, change, or discontinue a schedule of regular meetings. In addition, the chairman may, on his own motion, and shall, at the request of two or more board members, convene special meetings of the board at the place and time set forth in the notice of said meeting. A majority of the board shall constitute a quorum for all purposes. A majority of such quorum shall decide any question that may come before the meeting, except that a two-thirds vote is required to request the superintendent of insurance to examine a member insurer, to delegate powers and duties pursuant to paragraph (E)(3) of this rule, to contract with a service facility, or to borrow money. The board may take up and act upon any subject it deems advisable at any meeting. A telephonic conference call of a quorum of the board shall be deemed a “meeting” within the provisions of this paragraph, subject to the notice provisions of paragraph (D)(3) of this rule.

(3) Notice

Written notice of board meetings shall be given to all board members at least five days prior to each meeting. Notice of any meeting may be waived by written consent of any or all members of the board. Any action which may be taken by the vote of the board at a meeting may also be taken without a meeting if authorized in writing or writings signed by all members of the board.

(4) Offices

The principal office of the association shall be located where the board, from time to time, may designate.

(E) The association.

(1) Assessments

(a) After notification of the existence of an insolvent insurer in accordance with division (A)(2) of section 3955.10 of the Revised Code, or by notification received directly from an out-of-state liquidator, the board shall notify all members of the amount of each of their respective assessments therefor not less than thirty days before payment is due.

(b) The association, pursuant to division (A)(3) of section 3955.08 of the Revised Code, may exempt or defer, in whole or part, the assessment of any member insurer if it would cause such 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 such insurer is authorized to transact insurance. In the event the association has deferred an assessment and subsequent determination by the board reveals that such deferment is no longer necessary, the deferment granted such insurer shall be revoked and such deferred assessment shall immediately become due and payable.

(c) Each member insurer may set off, against any assessment, payments authorized in writing by the board made on covered claims and expenses incurred in the payment of such claims if they are chargeable to the account for which the assessment is made.

(d) Periodic assessments may be made for administrative purposes in amounts determined to be adequate to cover foreseeable administrative expenses. If any member insurer’s assessment for administrative purposes is less than ten dollars, its assessment shall be ten dollars.

(e) The association may refund to member insurers, in proportion to the contributions of each member insurer to that insolvency account, that amount by which the assets of the particular insolvency account exceed the liabilities if, at the end of any calendar year, the board finds that the assets of the association in any insolvency account exceed the liabilities of that account as estimated by the board for the coming year.

(f) The association shall waive any refund or assessment of less than ten dollars, except an assessment for administrative purposes.

(g) The “net direct written premiums” used for the calculation of assessments pursuant to division (A)(3) of section 3955.08 of the Revised Code shall be the reported net direct written premiums from the most currently available page fourteen exhibit of premiums and losses to the annual statements filed with the superintendent pursuant to sections 3927.08 and 3929.30 of the Revised Code.

(2) Depositories and assets

The board may open one or more bank accounts for use in association business. The treasurer shall invest any assets not immediately necessary for payment of claims and expenses. The treasurer shall report to the board periodically on said investments, and the board shall review such reports and may direct the treasurer to alter the investments of the association.

(3) Delegation of powers

Any or all powers and duties of the association, except those powers not delegable under the Ohio Insurance Guaranty Association Act, may be delegated to a corporation, association, or other organization which performs or will perform functions similar to those of the association, or its equivalent, in two or more states, pursuant to division (D) of section 3955.09 of the Revised Code.

(4) Service facility

(a) The board may contract with a service facility as provided in the Ohio Insurance Guaranty Association Act subject to the approval of the superintendent of insurance. The terms of such contract may include but are not limited to:

(i) Terms of payment for the performance of the servicing facility.

(ii) Extent of authority delegated to the servicing facility.

(iii) Procedures for giving the receiver, liquidator, or statutory successor timely notice, sufficient to protect the association’s right of subrogation against the receiver, liquidator, or statutory successor, of each and every covered claim not otherwise reported to the receiver, liquidator, or statutory successor.

(iv) Procedures for the handling of covered claims. These procedures may include the right to request from or offer to any person the option to arbitrate his covered claim.

(v) Procedures for the printing or preparation of forms necessary for the proper handling of covered claims.

(vi) Requirement of bond for faithful performance.

(vii) Any other provisions deemed necessary and desirable by the board.

(b) Any service facility shall be reimbursed by the association for all reasonable expenses it incurs and for all payments it makes on behalf of the association.

(5) Claims

The board shall determine the method and place where claims may be filed, hearing and appeals had, and payments made. The board may review claims as it may determine, and may establish and modify monetary limits of claims settlement authority for various employees of the association or any service facility. Any claimant who is dissatisfied with a final decision on his or her claim by an association employee or service facility may appeal that decision to the board. Such appeal shall be in writing, addressed to the board, and shall specify the final decision appealed from and the reason(s) why the claimant disagrees with the final decision. The board may prescribe forms for proof of claim and such other forms as it may deem desirable. Notice of claims to the receiver, liquidator, or statutory successor appointed in this state shall be deemed notice to the association or its agent, such as a service facility or such other organization as defined in paragraph (E)(4) of this rule. Any notice of claim filed with a receiver, liquidator, or statutory successor appointed in another state, if such receiver, liquidator, or statutory successor forwards a certified copy thereof to the association or to an ancillary receiver in this state within such time as is designated for filing claims with the association, shall be deemed notice to the association. The association may appear in, defend, and appeal any action on a claim brought against the association.

(6) Subrogation

The association shall be subrogated pursuant to division (A) of section 3955.12 of the Revised Code to the rights of any person recovering under the Ohio Insurance Guaranty Association Act, to the extent of such person’s recovery from the association.

(7) Prevention and detection of insolvencies

The board shall establish procedures and practices as it deems necessary and desirable to comply with section 3955.14 of the Revised Code.

(8) Other powers

The association may perform such other acts as are necessary or proper to effectuate the purposes of the Ohio Insurance Guaranty Association Act.

(F) Reports and records.

(1) Record

A written record of the proceedings of each meeting of member insurers and of the board shall be made. The original of this record shall be retained by the association with copies being furnished to each board member and, upon written request, to any member insurer.

(2) Annual reports

The board shall make an annual report to member insurers. Such report shall include a review of the association’s activities and an accounting of its income and disbursements for the past year. The board shall make a financial report of the preceding year to the superintendent of insurance not later than the thirtieth day of March of each year.

(3) Other reports

The board may periodically report other activities, procedures, recommendations, and actions for the information of the members.

(4) Audit

The board shall, once every year prior to March thirtieth of each year, request and obtain an audit of the books and records of the association by a certified public accounting firm. In the event there are no insolvencies under the jurisdiction of the association, the board may waive the audit and in lieu thereof, provide a financial statement to member insurers.

(5) Method of account

The association shall maintain its accounts and financial records to comply with this plan of operation and the Ohio Insurance Guaranty Association Act.

(G) Appeal. Any member insurer aggrieved by an action of the association shall appeal to the board before appealing to the superintendent of insurance. If such member insurer is aggrieved by the final action or decision of the board or if the board fails to act within thirty days of such appeal, such member insurer may appeal within thirty days thereafter to the superintendent of insurance. Any final action or order of the superintendent of insurance shall be subject to division (C) of section 3955.10 of the Revised Code.

(H) Amendment. This plan of operation may be amended from time to time to assure the fair, reasonable, and equitable administration of the association. Amendments may be adopted at the annual or special meetings of member insurers provided a copy of such amendments is submitted to each member insurer with the mailed notice of the meeting. Amendments may also be adopted if the board submits such amendments by mailed ballot to each member insurer provided such amendments are approved in writing by a majority of member insurers within thirty days from the date of mailing. All amendments so adopted shall be submitted to the superintendent of insurance and shall become effective upon his adoption pursuant to Chapter 119. of the Revised Code.

(I) Indemnification.

(1) Indemnification

The association shall indemnify any officer, director or employee of the association who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative (including, without limitation, any action threatened or instituted by or in the right of the association) by reason of the fact that he is or was a director, officer, employee, or agent of the association, is or was serving at the request of a member company of the association as a director, or is serving at the request of the association as a trustee, officer, employee or agent of another association, corporation, partnership, joint venture, trust, or other enterprise, against expenses (including, without limitation, attorneys’ fees, filing fees, court reporters’ fees and transcript costs), judgements, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the association, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. A person claiming indemnifaction under this paragraph shall be presumed, in respect of any act or omission giving rise to such claim for indemnification, to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the association, and with respect to any criminal matter, to have had no reasonable cause to believe his conduct was unlawful, and the termination of any action, suit, or proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, rebut such presumption.

(2) Court-approved indemnification

Anything contained in this rule to the contrary notwithstanding: (a) the association shall not indemnify any officer or director of the association who was a party to any completed action or suit instituted by or in the right of the association to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the association, or is or was serving at the request of the association as a director, trustee, officer, employee or agent of another association, corporation, partnership, joint venture, trust, or other enterprise, in respect of any claim, issue or matter asserted in such action or suit as to which he shall have been adjudged to be liable for gross negligence or misconduct (other than negligence) in the performance of his duty to the association unless and only to the extent that the court of common pleas of Franklin county, Ohio or the court in which such action or suit was brought shall determine upon application that, despite such adjudication of liability, and in view of all the circumstances of the case, he is fairly and reasonably entitled to such indemnity as such court of common pleas or such other court shall deem proper; and (b) the association shall promptly make any such unpaid indemnification as is determined by a court to be proper as contemplated in this paragraph.

(3) Indemnification for expenses

Anything contained in this rule to the contrary notwithstanding, to the extent that a director, officer, or employee of the association has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in paragraph (I)(1) of this rule, or in defense of any claim, issue, or matter therein, he shall be indemnified against expenses (including, without limitation, attorneys’ fees, filing fees, court reporters’ fees and transcript costs) actually and reasonably incurred by him in connection therewith.

(4) Determination required

Any indemnification under paragraph (I)(1) of this rule and not precluded under paragraph (I)(2) of this rule shall be made by the association only upon a determination that the indemnification of the director, officer, or employee is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraph (I)(1) of this rule. Such determination shall be made only: (a) by the board of directors by a majority vote of a quorum consisting of directors who were not and are not parties to, or threatened with, any such action, suit or proceeding, or (b) if such a quorum is not obtainable or if a majority of a quorum of disinterested directors so directs, in a written opinion by independent legal counsel other than an attorney, or a firm having associated with it an attorney who has been retained by or who has performed services for the association, or any person to be indemnified, within the past five years, or (c) by the member insurers, or (d) by the court of common pleas of Franklin county, Ohio or (if the association is a party thereto) the court in which such action, suit or proceeding was brought, if any. Any determination made by the disinterested directors or by independent legal counsel under this paragraph to provide indemnity in respect of any claim, issue or matter asserted in an action or suit threatened or brought by or in the right of the association shall be promptly communicated to the person who threatened or brought the action or suit, and such person shall have the right, within ten days after receipt of such notification, to petition the court of common pleas of Franklin county, Ohio or the court in which action or suit was brought to review the reasonableness of such determination.

(5) Advances for expenses

Expenses (including, without limitation, attorneys’ fees, filing fees, court reporters’ fees and transcript costs) incurred in defending any action, suit or proceeding referred to in paragraph (I)(1) of this rule shall be paid by the association in advance of the final disposition of such action, suit or proceeding to or on behalf of the officer, director or employee promptly as such expenses are incurred by him, but only if such officer, director or employee shall first agree, in writing, to repay all amounts so paid in respect of any claim, issue or other matter asserted in such action, suit or proceeding in defense of which he shall not have been successful on the merits or otherwise: (a) unless it shall ultimately be determined as provided in paragraph (I)(4) of this rule that he is entitled to be indemnified by the association as provided under paragraph (I)(1) of this rule; or (b) if, in respect of any claim, issue or other matter asserted by or in the right of the association in such action or suit, he shall have been adjudged to be liable for gross negligence or misconduct (other than negligence) in the performance of his duty to the association, unless and only to the extent that the court of common pleas of Franklin county, Ohio or the court in which such action or suit was brought shall determine upon application that, despite such adjudication of liability, and in view of all the circumstances, he is fairly and reasonably entitled to all or part of such indemnification.

(6) Paragraph (I) of this rule not exclusive

The indemnification provided by paragraph (I) of this rule shall not be deemed exclusive of any rights to which those seeking indemnification may be entitled under Ohio law, this plan of operation, another association, corporation, or other organization, any agreement, vote of member insurers or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer or employee of the association and shall inure to the benefit of the heirs, executors, and administrators of such a person.

(7) Insurance

The association may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the association, or is or was serving at the request of the association as a director, trustee, officer, employee, or agent of another association, corporation, partnership, joint venture, trust, or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the association would have the power to indemnify him against such liability under the provisions of paragraph (I) of this rule.

(8) Expenses

The expenses of any indemnification shall be an administrative expense of the association.

(9) Certain definitions

For purposes of paragraph (I) of this rule, and as an example and not by way of limitation: A person claiming indemnification under paragraph (I) of this rule shall be deemed to have been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in paragraph (I)(1) of this rule, or in defense of any claim, issue or other matter therein, if such action, suit or proceeding shall be terminated as to such person, with or without prejudice, without the entry of a judgment or order against him, without a conviction of him, without the imposition of a fine upon him and without his payment or agreement to pay any amount in settlement thereof (whether or not such termination is based upon a judicial or other determination of the lack of merit of the claims made against him or otherwise results in a vindication of him).

(10) Venue

Any action, suit or proceeding to determine a claim for indemnification under paragraph (I) of this rule may be maintained by the person claiming such indemnification, or by the association, in the court of common pleas of Franklin county, Ohio. The association and (by claiming such indemnification) each such person shall consent to the exercise of jurisdiction over its or his person by the court of common pleas of Franklin county, Ohio in any such action, suit or proceeding.

(J) Severability. If any provision of this rule or the application thereof to any person or situation is held invalid, such invalidity shall not affect any other provision or application of this rule which can be given effect without the invalid provision or application, and to this end the provisions of this rule are declared to be severable.

(K) Effective date, compliance, and construction. All member insurers shall comply with this plan of operation. The Ohio Insurance Guaranty Association Act as written, and as it may hereafter be amended, is incorporated as part of this plan of operation. This plan of operation shall be liberally construed to effect the purposes set forth in paragraph (B) of this rule.

R.C. 119.032 review dates: 12/27/2007 and 12/27/2012

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: Chapter 3955

Prior Effective Dates: 1/1/1977, 10/17/1988