HB 720 — Insurance Guaranty Association Act Revisions.

H.B.GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 2025 H 1 HOUSE BILL 720 Short Title:

720 GENERAL ASSEMBLY OF NORTH CAROLINA Apr 2, 2025 SESSION 2025 HOUSE PRINCIPAL CLERK H D HOUSE BILL DRH10323-NE-100 Short Title:

RepresentativeRepresentatives Humphrey.Humphrey, Setzer, and Balkcom (Primary Sponsors).

For a complete list of sponsors, refer to the North Carolina General Assembly web site.

Insurance, if favorable, Finance, if favorable, Rules, Calendar, and Operations of the House April 3, 2025 A BILL TO BE ENTITLED AN ACT ENACTING REVISIONS TO THE INSURANCE GUARANTY ASSOCIATION ACT, AS RECOMMENDED BY THE DEPARTMENT OF INSURANCE.

"Covered claim" includes claim obligationsthatarosethroughtheissuanceofaninsurancepolicybyamember insurer, which are later allocated, transferred, merged into, novated, assumed by, or otherwise made the sole responsibility of a member or nonmember insurer if (i) the original member insurer has no remaining obligations on the policy after the transfer, (ii) a final order of liquidation with a finding of insolvency has been entered against the insurer that assumed the member's coverage obligations by a court of competent jurisdiction in the insurer's state of domicile, (iii) the claim would have been a covered claim, as defined in this subdivision, if the claim had remained the responsibility of the original member insurer and the order of liquidation had been entered against the original member insurer, with the same claim submission date and liquidation *H720-v-1* General Assembly Of North Carolina Session 2025 date, and (iv) in cases where the member's coverage obligations were assumed by a nonmember insurer, the transaction received prior regulatory or judicial *DRH10323-NE-100* General Assembly Of North Carolina Session 2025 approval.

However, the Association shall paypaythe the full amount of a covered claim for benefits under a workers' compensation insurance coverage, and shall pay an amount not exceeding ten thousand dollars ($10,000) per policy for a covered claim for thereturn ofunearnedpremium.

The Association has no obligation to pay a claimant's covered claim, except a claimant's workers'workers'compensation compensation claim, if:

… (4) Investigate claims brought against the Association and adjust, compromise, settle, and paypaycovered covered claims to the extent of the Association's obligation and deny all other claims and may review settlements, releases and judgments to which the insolvent insurer or its insureds were parties to determine the extent to which such settlements, releases and judgments may be properly contested.claims.

… Page 2 House Bill 720-First Edition General Assembly Of North Carolina Session 2025 (8) Have the right to review and contest settlements, releases, compromises, waivers, and judgments to which the insolvent insurer or its insureds were Page 2 DRH10323-NE-100 General Assembly Of North Carolina Session 2025 parties prior to the entry of the order of liquidation.

Executed bybyor or taken against an insured or the insurer based on default, fraud, collusion, or the insurer's failure to defend.

The settlement, release, compromise, waiver, or judgment maymaynot not be considered as evidence of liabilityliabilityor or damages in connection with any claim brought against the Association or any other party under this Article.

… (a1) TheAssociation shall havetheright to recover from thefollowing personstheamount ofany"covered claim"claim"paid paid and anyandall expenses incurred, including attorneys'fees andcosts of defense, in connection with any claim against the person or the person's affiliate pursuant to this Article:

(1) Any insured whose net worth on December 31 of the year next preceding the date the insurer becomes insolvent exceeds fiftyfiftymillion million dollars ($50,000,000) House Bill 720-First Edition Page 3 General Assembly Of North Carolina Session 2025 and whose liability obligations to other persons are satisfied in whole or in part by payments under this Article;

Article, provided that an insured's net DRH10323-NE-100 Page 3 General Assembly Of North Carolina Session 2025 worth on that date shall be deemed to include the aggregate net worth of the insured and all of its subsidiaries and affiliates as calculated on a consolidated basis;

All proceedings in which the insolvent insurer is a party or is obligated to defend a party in any court or before anyanyadministrative administrative agency or the North Carolina Industrial Commission shall be stayed automatically for 120 days and such additional time thereafter as may be determined by the court from the date the insolvency is determined or any ancillary proceedings are initiated in this State, whichever is later, to permit proper defense bybythe the Association of all pending causes of action.

Page 4 DRH10323-NE-100House Bill 720-First Edition