A. For the purposes of this section the persons entitled to protection under this section are:

1. The receiver, assistant receiver, and retained counsel responsible for the conduct of a delinquency proceeding under Article 19 of the Insurance Code, including present and former receivers; and

2. Their employees meaning all present and former assistant receivers and attorneys for the receiver appointed by the Insurance Commissioner and all persons whom the Commissioner, assistant receiver or retained counsel have employed to assist in a delinquency proceeding under Article 19 of the Insurance Code. Attorneys, accountants, auditors and other professional persons or firms, who are retained by the receiver as independent contractors and their employees shall not be considered employees of the receiver for purposes of this section.

B. If any legal action is commenced against the receiver or any employee, whether against him personally or in his official capacity, alleging property damage, property loss, personal injury or other civil liability caused by or resulting from any alleged act, error or omission of the receiver or any employee arising out of or by reason of their duties or employment, the receiver and any employee shall be indemnified from the assets of the insurer for all expenses, attorneys' fees, judgments, settlements, decrees or amounts due and owing or paid in satisfaction of or incurred in the defense of such legal action unless it is determined upon a final adjudication on the merits that the alleged act, error or omission of the receiver or employee giving rise to the claim did not arise out of or by reason of his duties or employment, or was caused by intentional or willful and wanton misconduct.

1. Attorneys' fees and any and all related expenses incurred in defending a legal action for which immunity or indemnity is available under this section shall be paid from the assets of the insurer, as they are incurred, in advance of the final disposition of such action upon receipt of an undertaking by or on behalf of the receiver or employee to repay the attorneys' fees and expenses if it shall ultimately be determined upon a final adjudication on the merits that the receiver or employee is not entitled to immunity or indemnity under this section.

2. Any indemnification for expense payments, judgments, settlements, decrees, attorneys' fees, surety bond premiums or other amounts paid or to be paid from the insurer's assets pursuant to this section shall be an administrative expense of the insurer.

3. In the event of any actual or threatened litigation against a receiver or any employee for which immunity or indemnity may be available under this section, a reasonable amount of funds which in the judgment of the Insurance Commissioner may be needed to provide immunity or indemnity shall be segregated and reserved from the assets of the insurer as security for the payment of indemnity until such time as all applicable statutes of limitation shall have run and all actual or threatened actions against the receiver or any employee have been completely and finally resolved, and all obligations of the insurer and the Commissioner under this section shall have been satisfied.

4. In lieu of segregation and reserving of funds, the Insurance Commissioner shall have the discretion to obtain a surety bond or make other arrangements which shall enable the Commissioner to fully secure the payment of all obligations under this section.

C. If any legal action against an employee for which indemnity may be available under this section is settled prior to final adjudication on the merits, the insurer must pay the settlement amount on behalf of the employee, or indemnify the employee for the settlement amount, unless the Insurance Commissioner determines:

1. That the claim did not arise out of or by reason of the employee's duties or employment; or

2. That the claim was caused by the intentional or willful and wanton misconduct of the employee.

D. In any legal action in which the receiver is a defendant, that portion of any settlement relating to the alleged act, error or omission of the receiver shall be subject to the approval of the court before which the delinquency proceeding is pending. The court shall not approve that portion of the settlement if it determines:

1. That the claim did not arise out of or by reason of the receiver's duties or employment; or

2. That the claim was caused by the intentional or willful and wanton misconduct of the receiver.

E. Nothing contained or implied in this section shall operate, or be construed or applied to deprive the receiver or any employee of any immunity, indemnity, benefits of law, rights or any defense otherwise available.

F. 1. No legal action shall lie against the receiver or any employee based in whole or in part on any alleged act, error or omission which took place prior to September 1, 1992, unless suit is filed and valid service of process is obtained prior to September 1, 1993.

2. Subsections B, C, and D of this section shall apply to any suit which is pending on or filed after September 1, 1992, without regard to when the alleged act, error or omission took place.

Added by Laws 1992, c. 178, § 20, eff. Sept. 1, 1992.