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Regular Session, 2012
SENATE BILL NO. 394
BY SENATOR GARY SMITH
INSURERS. Changes the rehabilitation, liquidation, and conservation provisions. (8/1/12)
AN ACT1
To amend and reenact the heading of R.S. 22:2005 and R.S. 22:2008(B), 2009(E)(3),2
2028(D)(3), and 2036(A) and to enact R.S. 22:2005.1 and 2043.1, relative to3
rehabilitation and liquidation of insurers; to comply with the federal Dodd-Frank4
Act; to provide for notice by mail when the receiver allows or disallows a claim; to5
provide for actions by and against a receiver; and to provide for related matters.6
Be it enacted by the Legislature of Louisiana:7
Section 1. The heading of R.S. 22:2005 and R.S. 22:2008(B), 2009(E)(3),8
2028(D)(3), and 2036(A) are hereby amended and reenacted and R.S. 22:2005.1 and 2043.19
are hereby enacted to read as follows:10
§2005. Grounds for rehabilitation and liquidation11
* * *12
§ 2005.1. Compliance with certain federal provisions13
A. The provisions of this Section apply in accordance with Title II of the14
federal Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub.L.15
111-203 with respect to each insurance company that is a covered financial16
company, or a subsidiary or affiliate of a covered financial company, as defined17 SB NO. 394
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under 12 U.S.C. 5381.1
B. The commissioner of insurance may file a petition for an order of2
rehabilitation or liquidation pursuant to this Section on any of the following3
grounds:4
(1) Upon determination and notification given by the Secretary of the5
Treasury of the United States in consultation with the president of the United6
States that the insurance company is a financial company satisfying the7
requirements of 12 U.S.C. 5383(b), and the board of directors, or any body8
performing similar functions, of the insurance company acquiesces or consents9
to the appointment of a receiver pursuant to 12 U.S.C. 5382(a)(1)(A)(i), with10
such consent to be considered as consent to an order of rehabilitation or11
liquidation.12
(2) Upon an order of the United States District Court for the District of13
Columbia under 12 U.S.C. 5382(a)(1)(A)(iv)(I) granting the petition of the14
Secretary of the Treasury of the United States concerning the insurance15
company under 12 U.S.C. 5382(a)(1)(A)(i).16
(3) A petition by the Secretary of the Treasury of the United States17
concerning the insurance company is granted by operation of law under 1218
U.S.C. 5382(a)(1)(A)(v).19
C. Notwithstanding any other provision of law to the contrary, after20
notice to the insurance company, the receivership court may grant an order on21
the petition of the commissioner for rehabilitation or liquidation within twenty-22
four hours after the filing of the petition pursuant to this Section.23
D. If the receivership court does not make a determination on a petition24
for rehabilitation or liquidation filed by the commissioner pursuant to this25
Section within twenty-four hours after its filing, then the petition shall be26
deemed granted by operation of law upon the expiration of the twenty-four27
hour period. At the time that an order is deemed granted pursuant to this28
Section, the provisions of this Chapter shall be deemed to be in effect, and the29 SB NO. 394
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commissioner or his designee shall be deemed to be affirmed as receiver and1
have all of the applicable powers provided by this Code, regardless of whether2
an order has been entered. The receivership court shall, within ten days, enter3
an order of rehabilitation or liquidation that does both of the following:4
(1) Becomes effective as of the date that it is deemed granted by5
operation of law.6
(2) Conforms to provisions for rehabilitation or liquidation contained7
in this Chapter, as applicable.8
E. The court may hold a hearing within ten days after granting of such9
an order of liquidation or rehabilitation pursuant to this Section at which10
hearing the court may sustain or revoke the order of rehabilitation or11
liquidation or grant such other relief as the nature of the case and the interest12
of the insurer's policyholders, creditors, or the public may require.13
F. Any order of rehabilitation or liquidation granted pursuant to this14
Section or any part thereof shall not be subject to any stay or injunction15
pending appeal.16
G. Nothing in this Section shall be construed to supersede or impair any17
other power or authority of the commissioner or the court under this Code.18
H. There shall be no liability on the part of, and no cause of action of19
any nature shall arise against, the department or its employees, or the20
commissioner or his designee in his capacity as receiver, rehabilitator,21
liquidator, or conservator, or otherwise, or a special deputy, or the receiver's22
assistants or the receiver's contractors for any action taken by them in the23
performance of their powers and duties pursuant to this Section or their duties24
under this Chapter.25
* * *26
§2008. Order of rehabilitation or liquidation27
* * *28
B. Notwithstanding any law to the contrary, the filing of a suit by the29 SB NO. 394
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commissioner of insurance seeking an order of conservation or rehabilitation shall1
suspend the running of prescription and peremption as to all claims in favor of the2
subject insurer during the pendency of such proceeding. The filing of a suit by the3
commissioner of insurance seeking an order of liquidation shall interrupt the running4
of prescription and peremption as to such claims from the date of the filing of such5
proceeding for a period of two years, if an order of liquidation is granted.6
* * *7
§2009. Duties of commissioner of insurance as rehabilitator; termination8
* * *9
E. The rehabilitator, in addition to other powers, shall have the following10
powers:11
* * *12
(3) To use assets of the estate of an insurer under a liquidation or13
rehabilitation order to transfer policy obligations to a solvent assuming insurer.14
* * *15
§2028. Proof and allowance of claims16
* * *17
D.(1) * * *18
(3) When the receiver allows or disallows a claim in a lesser amount than19
claimed, he shall notify the person making the claim by petition in the receivership20
proceedings letter addressed to the last known address of the claimant, allowing21
ten days after receipt of said notice in which to file objections to the action of the22
receiver. The objections shall be filed with the receiver and in the receivership23
court and shall be heard in the receivership proceedings in a summary manner.24
* * *25
§2036. Provisions for conservation of assets of domestic company26
A. Upon the filing by the commissioner of insurance of a verified petition27
alleging that with respect to a domestic company, a condition exists that would28
justify a court order for proceedings under R.S. 22:2006 this Chapter, and that the29 SB NO. 394
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interests of creditors, policyholders, or the public will probably be endangered by1
delay, then the court of Nineteenth Judicial District Court for the parish Parish2
of East Baton Rouge or the court of the parish in which such company has or last had3
its principal office, shall issue forthwith without a hearing its order directing the4
commissioner of insurance to take possession and control of the property, business,5
books, records, and accounts of the company and of the premises occupied by it for6
the transaction of its business, or such part of each as the petition shall specify, and7
enjoining the company and its officers, directors, agents, servants, and employees8
from disposition of its property and from transaction of its business except with the9
concurrence of the commissioner of insurance until the further order of the court.10
* * *11
§2043.1. Actions by and against the receiver12
A. No prior wrongful or negligent actions of any present or former13
officer, manager, director, trustee, owner, employee, or agent of the insurer may14
be asserted as a defense to a claim by the receiver under a theory of estoppel,15
comparative fault, intervening cause, proximate cause, reliance, mitigation of16
damages, or otherwise; provided however that the affirmative defense of fraud17
in the inducement may be asserted against the receiver in a claim based on a18
contract, and a principal under a surety bond or a surety undertaking shall be19
entitled to credit against any reimbursement obligation to the receiver for the20
value of any property pledged to secure the reimbursement obligation to the21
extent that the receiver has possession or control of the property or the insurer22
or its agents misappropriated or commingled such property. Evidence of fraud23
in the inducement shall be admissible only if it is contained in the records of the24
insurer.25
B. No action or inaction by the insurance regulatory authorities may be26
asserted as a defense to a claim by the receiver.27
C. There shall be no liability on the part of, and no cause of action of any28
nature shall arise against, the department or its employees, or the commissioner29 SB NO. 394
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or his designee in his capacity as receiver, liquidator, rehabilitator or1
conservator, or otherwise, or any special deputy, the receiver's assistants or2
contractors, or the attorney general's office for any action taken by them in3
performance of their powers and duties under this Code.4
The original instrument was prepared by Laura Gail Sullivan. The following
digest, which does not constitute a part of the legislative instrument, was
prepared by Sherri H. Breaux.
DIGEST
Gary Smith (SB 394)
Proposed law provides for compliance with present federal law. Provides that the
commissioner of insurance may place in rehabilitation or liquidation an insurance company
pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Effective August 1, 2012.
(Amends R.S. 22:2005(heading), 2008(B), 2009(E)(3), 2028(D)(3), and 2036(A); adds R.S.
22:2005.1 and 2043.1)
Summary of Amendments Adopted by Senate
Senate Floor Amendments to engrossed bill.
1. Makes technical corrections.