20-1808. Ratio of assets to liabilities; report; rehabilitation of provider

A. The provider shall possess assets in the first year of operation equal to at least seventy-five per cent of the unamortized endowment fees plus all other liabilities including long-term debt. The unamortized endowment fees shall be based on life expectancy of purchasers. Thereafter, the provider shall at all times possess assets in an amount sufficient to assure full performance of the obligations of the provider pursuant to life care contracts including any reserve fund escrow required by the director pursuant to section 20-1806.

B. If revenues or funds including reserves are inadequate or projected to be inadequate pursuant to the annual report or an actuarial report or if the provider does not meet the requirements of subsection A of this section, the director may employ an independent management consultant experienced in the operation of life care facilities, at the expense of the provider, who shall examine the financial structure and operations of the provider and make recommendations on remedial action to the director. The director shall not be bound by such recommendations.

C. At any time the director receives notice from the escrow agent that section 20-1806 has not been complied with, or at any other time when the director has reason to believe that the provider is in a financially unsound or unsafe condition, or that its condition is such that it may otherwise be unable to fully perform its obligations pursuant to life care contracts, or when the provider fails to implement the director's recommendations as a result of a management consultant's report or when it is obvious to the director that to obtain the services of a financial consultant under subsection B of this section would be futile, the director, through the attorney general, shall apply to the superior court in the county in which the provider's facility is located for an order directing him to assume management and possession of the provider's facility and to rehabilitate the provider to enable it to fully perform its obligation pursuant to life care contracts. The court shall act upon the application upon notice to the provider, and any objection to the petition shall be filed with the court within the time prescribed by such notice.

D. If the court upon hearing finds that the provider is in a financially unsound or unsafe condition or that its condition is such that it may otherwise be unable to fully perform its obligations pursuant to life care contracts, the court shall issue an order directing the director to take possession of the property of the provider and to conduct the business thereof, and to take such steps toward removal of the causes and conditions which have made rehabilitation necessary, as the court may direct. The order shall include a provision directing the issuance of a notice of the rehabilitation proceedings to the residents at such facility, to the provider's contract holders and to such other interested persons as the court shall direct.

E. Appointment of the director to rehabilitate a provider shall authorize the director to:

1. Take possession of and preserve, protect and recover any assets, books and records or property of the provider, including claims or causes of action belonging to or which may be asserted by the provider and to deal with such property in his own name in the capacity as director, and purchase at any sale any real estate or other asset upon which the provider may hold any lien or encumbrance or in which it may have an interest.

2. File, prosecute and defend or compromise any suit or suits which have been filed or which may thereafter be filed by or against such provider which are deemed by the director to be necessary to protect the provider or the residents or contract holders or any property affected thereby.

3. Take possession of and deposit and invest any of the provider's available funds.

4. Pay all expenses of the rehabilitation.

5. Exercise such other powers and duties as may be provided by order of the court.

6. Appoint managers, supervisors or employees necessary to properly manage and operate the provider and the provider's facility.

7. Take possession of and, with the prior approval of the court, sell, exchange, lease, mortgage or otherwise dispose of any property of the provider by public sale, bidding or otherwise.

8. With the prior approval of the court, borrow money with or without security for the purpose of facilitating the rehabilitation of the provider.

9. Perform all duties of the provider.

10. Reject any executory contract to which the provider is a party.

11. Withdraw any sums remaining in the escrow account established pursuant to section 20-1806 for the purpose of rehabilitating the provider's facility.

F. The court may at any time during a rehabilitation proceeding issue such other instructions or orders as are deemed necessary to aid the director in the rehabilitation proceeding.

G. The director, or any interested person upon due notice to the director, at any time may apply to the court for an order terminating the rehabilitation proceedings and permitting the provider to resume possession of its property and the conduct of its business, but no such order shall be granted except when, after a full hearing, the court has determined that the purposes of the proceeding have been fully accomplished and that the facility can be returned to the provider's management without further jeopardy to the residents of the facility, creditors, owners of the facility, and to the public. An order terminating the rehabilitation proceeding shall be based upon a full report and accounting by the director of the conduct of the provider's officers during the rehabilitation and of the provider's current financial condition.

H. If at any time the director deems that further efforts to rehabilitate the provider would be useless, he may report to the court and apply for an order of liquidation and dissolution pursuant to title 10, chapter 14, article 3, if a corporation, or may apply for other appropriate relief for dissolving the provider and winding up its affairs. An order directing the liquidation or dissolution of the provider shall act as a revocation of the provider's permit issued pursuant to section 20-1803.

I. In connection with the rehabilitation proceedings, the director may appoint one or more special deputy directors of insurance to act for him and may employ such counsel, clerks or assistants as he deems necessary. The compensation of the special deputies, counsel, clerks or assistants and any expenses of taking possession of the provider's facility and of conducting the proceedings shall be set by the director, subject to approval of the court, and shall be paid out of the funds or assets of the provider.