Recovery by receiver of certain distributions on capital stock and payments to directors, officers and employees; scope of liability.
1. Except as otherwise provided in subsections 2 and 4, if an order for liquidation or rehabilitation of a domestic insurer has been issued, the receiver appointed under the order may recover on behalf of the insurer:
(a) From any parent corporation, holding company, affiliate or person who otherwise controlled the insurer, the amount of any distribution, other than a distribution of shares of the same class of stock, made by the insurer on its capital stock; and
(b) Any payment in the form of a bonus, settlement on termination, or extraordinary adjustment of salary in a lump sum made by the insurer or a subsidiary to a director, officer or employee,
Êmade during the year preceding the petition for liquidation, conservation or rehabilitation.
2. A distribution is not recoverable if the parent corporation, holding company or affiliate shows that when made the distribution was lawful and reasonable and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations.
3. A parent corporation, holding company or person who otherwise controlled the insurer or affiliate at the time the distribution or payment was made is liable up to the amount of the distribution or payment which he received. A person who otherwise controlled the insurer at the time a distribution was declared is liable up to the amount that would have been received if the distribution had been made immediately. If two or more persons are liable with respect to the same distribution, they are jointly and severally liable.
4. The greatest amount recoverable under this section is the amount needed in excess of all other available assets of the impaired or insolvent insurer to pay its contractual obligations and reimburse any guaranty fund.
5. To the extent that a person liable under subsection 3 is insolvent or otherwise fails to pay a claim due from it, a parent corporation, holding company or person who otherwise controlled it at the time the distribution was made is jointly and severally liable for any resulting deficiency in the amount recovered from the person so liable.
Last modified: February 27, 2006