NEW MEXICO PROPERTY & CASUALTY INSURANCE GUARANTY ASSOCIATION PO BOX 27815, ALBUQUERQUE, NM 87125

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1 NEW MEXICO PROPERTY & CASUALTY INSURANCE GUARANTY ASSOCIATION PO BOX 27815, ALBUQUERQUE, NM Ballot for NMPCIGA Plan of Operation Dear Sir or Madam, The Board of Directors for the NM Property & Casualty Insurance Guaranty Association, with the approval of the Superintendant of Insurance, has amended the Plan of Operation. Please review these changes and vote either for or against the proposed changes. Should you have any questions or concerns, please call (505) Accept the proposed changes to the Plan of Operation for the New Mexico Property & Casualty Insurance Guaranty Association Or Decline the proposed changes to the Plan of Operation for the New Mexico Property & Casualty Insurance Guaranty Association Company Name: NAIC Code: Authorized Signature: Title: Please return the ballot on or before January 12, 2015 via e mail to: vanessar@integriongroup.com, fax to: (505) , or mail to: Integrion Group, Inc., Attn: NMPCIGA, PO Box 27811, Albuquerque, NM Sincerely, Board of Directors for the New Mexico Property & Casualty Insurance Guaranty Association

2 NEW MEXICO PROPERTY AND CASUALTY INSURANCE GUARANTY ASSOCIATION PLAN OF OPERATION Article 1. Name. This Association shall be known as the New Mexico Property and Casualty Insurance Guaranty Association, ( Association ) an unincorporated, non-profit Association organized pursuant to Section et seq. NMSA, of the Property and Casualty Insurance Guaranty Act, hereinafter referred to as the Act ( Act ). Article 2. Plan of Operation. This plan of operation,( Plan ) and any amendments thereto shall become effective after written acceptance by the presidents or authorized officers of member insurers transacting at least 60 percent of the total net direct premiums written for the kinds of insurance covered by the Act, and upon written approval of the Superintendent pursuant to Section 59A-43-8(A) of the Act. Article 3. Board of Directors. A. There shall be a Board of Directors Section 59A-43-6 NMSA of the Act. 1. The Board of Directors shall consist of not less than five nor more than nine member insurer representatives. The initial board of directors shall consist of two persons serving for a term of one year, two persons serving for a term of two years and one person serving for a term of three years. All directors elected thereafter shall serve for a term of three years and shall be eligible for re-election. 1

3 2. Board members shall be elected by member insurers prior to the annual meeting of the Board. Nomination shall be made by the American Insurance Association (AIA), the National Association of Mutual Insurance Companies (NAMIC) and the Property Casualty Insurers Association (PCI) to fill the vacancy created by expiration of the term of their respective representative on the Board. The Board shall also have up to five six at-large positions. Nomination for a Board member to represent non-affiliated member insurers may consist of member and or nonaffiliated member insurers. shall be made by the Board. Such Board nominations shall be made by the board and submitted to the Superintendent of Insurance for approval. Nominees will be sent to members insurers for a vote. mboard members shall be elected by a majority vote of the member insurers responding voting with each member insurer having one vote. Upon the election of a Board member, the Association shall notify the Superintendent and request his written approval of the Board members. If, within ten (10) days following such notification and request, the Superintendent does not reject the nominations, the nominations order a new election, the Board members shall be deemed approved pursuant to the plan. 3. Vacancies on the Board shall be filled for the remaining period of the term by a majority vote of the remaining Board members, subject to the approval of the Superintendent. Vacancies less than ninety (90) days before the next annual meeting will be filled at the upcoming meeting by 2

4 the remaining Board members, subject to the approval of the Superintendent. The Superintendent will have ten (10) days to approve or disapprove the nominations. If the Superintendent does not reject the nominations, the nominations shall be deemed approved pursuant to the plan. Each vacancy created by a representative of a trade association shall be filled by a representative of the same trade association. Each vacancy created by a representative of the non-affiliated member insurers shall be filled by a representative of the non-affiliated member insurers. 4.3.Member insurers belonging to affiliated groups or under common ownership or control shall not hold more than one membership on the Board of Directors. 5.4.The members of the Board shall elect a chairman and such other officers as may be necessary from among its members, each to serve for a period of one year, and shall be eligible for re-election. B. At any meeting of the Board, each member of the Board shall have one vote. A majority of the Board shall constitute a quorum for the transaction of business and the acts of a majority of the Board members present at a meeting at which a quorum is present shall be the acts of the Board; except that an affirmative vote of a majority of the full Board is required to: 1. Approve a contract with a servicing facility; or 2. Levy an assessment in accordance with Section 59A-43-7(A)(3) of the Act; or 3. Provide for a refund; or 3

5 4. Borrow money; or 5. Invest money. C. An annual meeting of the Board shall be held at the office of the Superintendent of Insurance on the second Tuesday in June, or at the call of the chairman of the Board, upon proper notice designating some other date or place. At each annual meeting the Board shall: 1. Review the Plan of Operation and submit proposed amendments, if any, to member insurers and the Superintendent for written approval or rejection in accordance with Article 2 of the Plan. 2. Review each outstanding contract with servicing facilities and, to the extent possible, make any necessary amendments. 3. Review operating expenses and covered claims costs and determine if an assessment or a refund of a prior assessment, and the amount of either is necessary for the proper administration of the Association. If such assessment or refund is determined to be necessary, the Board shall levy such assessment or make such refund in accordance with Section 59A-43-7A(3), and Section 59A-43-7 (B)(6) of the Act. The Board may waive the collection from or refund to a member insurer when the amount produces an assessment or refund of less than $ Elect officers for the ensuing year. 5. Review, consider and act on other matters deemed by it to be necessary and proper for the administration of the Association consistent with the Act. 4

6 D. The Board may hold an emergency meeting promptly after receiving notice of the insolvency of any member insurer. At least 48 hours oral or written notice shall be given each Board member. Any Board member not present may consent in writing to any specific action taken by the Board. Any action approved by the required number of Board members at such emergency meeting, including those consenting in writing, shall be as valid a Board action as though authorized at a regular meeting of the Board. Such meetings may be held by conference call or other means of transmission. At such meeting or a subsequent meeting the Board shall: 1. Consider and decide whether or not an insurer has, in fact, become an insolvent insurer within the meaning of the Act. 2. Consider and decide what method or methods, as permitted under Section 59A-43-7 (A) (6), of the Act shall be adopted to pay and discharge covered claims of the insolvent insurer for each of the three categories of kinds of insurance as identified in Section 59A-43-5 (A), (B) and (C) of the Act, but in no event shall an insolvent insurer be appointed as a servicing facility. Every effort should be made to secure the receiver, liquidator or statutory successor s participation in such contract to assist the Association in the performance of its legally imposed duties. Every effort should also be made to permit the Association to directly pursue all reinsurance recoveries permitted to the insolvent insurer. 3. Consider and decide what immediate action, if any, should be taken to assure the proper retention of the records of the insolvent insurer 5

7 necessary to the prompt, economical handling by the Association of covered claims. In this effort, the Board or a designated servicing facility shall work closely with the receiver, liquidator or statutory successor and seek the receiver s, liquidator s, or statutory successor s approval of having the Board, or a designated servicing facility, take direct physical control of that portion of the insolvent insurer s records deemed by the Board to be necessary for the discharge of its duties imposed by law. 4. Consider and decide what persons, if any, should be hired by the Association to implement and carry out broad directives of the Board made pursuant to its statutorily imposed duties as provided by the Act. Such persons may include a managing secretary who should be knowledgeable about insurance matters, conversant with the law as it relates to covered claims, and administratively capable of implementing the Board s directives, and who would have such authority as is properly delegated to him by the Board. Such persons may also include attorneys at law, insurance actuaries, accountants, claims personnel and others whose advice or services is deemed by the Board to be necessary to the discharge of its duties. The Board may agree to compensate such persons as to best serve the interest of the Association. 5. Consider and decide to what extent and in what matter the Board shall review and contest such settlements and releases or judgments, orders, decisions, verdicts and findings to which the insolvent insurer or its 6

8 insureds were parties in accordance with section 59A-43-7, A(4), and Section 59A of the Act. 6. Consider and decide what assessment, if any, should be levied or whether any refund should be made to member insurers. If such assessment or refund is determined to be necessary, the Board shall levy such assessment or make such refund in accordance with section 59A-43-7, A(3), and Section 59A-43-7, B(6) of the Act. Notices of assessments shall be in sufficient detail to enable member insurers to understand the action taken by the Board. The Board may waive the collection from or refund to a member insurer when the amount produces an assessment or refund of less than one hundred dollars. In the event the Board determines that a refund should be made, such refund will first be allocated among those member insurers who were assessed in the most recent assessment by the Association, in proportion to each such insurers percentage assessment as provided by the Act. 7. Take all legal steps deemed necessary to protect the Association s rights against the estate of the insolvent insurer. 8. Consider and decide any other matter deemed by it to be necessary for the proper administration of the Association. E. The Board may determine a schedule of regular meetings as it may deem appropriate. F. Special meetings of the Board may be called by the Chairman and shall be called at the request of any two Board members and not less than 5 days written notice 7

9 shall be given to each Board member of the time and place and purpose or purposes of any special meeting. Special meetings may be held by conference call, or other means of transmission. Any Board member not present may consent in writing to any specific action taken by the Board. Any action approved by the required number of Board members at such special meeting, including those consenting in writing, shall be as valid a Board action as though authorized at a regular meeting of the Board. At such special meeting the Board may consider and decide any matter deemed by it to be necessary for the proper administration of the Association. G. Members of the Board shall serve without compensation, except they may be reimbursed for necessary travel expenses incurred in attendance at Board meetings. Such expenses shall be submitted to the Board for approval and subsequent payment. Article 4. Operations. A. The mailing address of the Association shall be the address of the Superintendent in care of the Chairman of the Board unless otherwise designated by the Board. B. The Board may employ such persons, firms or corporations to perform such administrative functions as are necessary for the Board s performance of the duties imposed on the Association. The Board may use the mailing address of such a person, firm or corporation as the official office address of the Association. Such persons, firms or corporations shall keep such records of its activities as may be required by the Board. 8

10 C. The Board may open one or more bank accounts for use in Association business. Reasonable delegation of deposit and withdrawal authority to such accounts for Association business may be made consistent with prudent fiscal policy. The Board may borrow money from any person or organization including a member insurer, or from an appointed servicing facility as the Board in its judgment deems advantageous for the Association and may authorize the investment of any available funds. D. The Board may contract with one or more persons, firms or corporations to serve as servicing facilities should the Board receive notice from the Superintendent of an insolvency of a member insurer. Such contract terms shall be subject to the approval of the Superintendent. Such contract terms shall include: 1. Terms of payment to the servicing facility. 2. Extent of authority delegated to the servicing facility. 3. Procedures for giving the receiver timely notice, sufficient to protect the Association s right or subrogation against the receiver, liquidator or statutory successor, of each and every covered claim not otherwise reported to the receiver, liquidator or statutory successor. 4. Any other provisions deemed necessary and desirable by the Board of Directors. Article 5. Records and Reports. A. A written record of the proceedings of each Board meeting shall be made. The original of this record shall be retained by the Chairman or the 9

11 Chairman s designee, with copies being furnished to each Board member and the Superintendent, and upon written request to any member insurer, provided such record or parts thereof, is not otherwise confidential or privileged. B. The Board shall make an annual report to the Superintendent, which shall be available upon written request to any member insurer. Such report shall include a review of the Association s activities and an accounting of its income and disbursements for the past year. C. After the appointment of a receiver, liquidator or statutory successor and the levy of an assessment by the Association, the Board shall, once every year, hire a certified public accountant, approved by the superintendent, to perform an audit of all the books and records of the Association. The audit report shall be made to the Board, the Superintendent, and upon written request to any member insurer. Article 6. Membership. A. Insurers which were admitted as of or subsequent to the effective date of the Act to transact the kinds of insurance covered by the Act in the State of New Mexico shall be members of this Association. An insurer which ceases to be admitted after the effective date of the Act shall automatically cease to be a member effective on the day following the termination or expiration of its license to transact the kinds of insurance covered by the Act; provided such insurer shall remain liable for any assessments based on insolvencies occurring prior to the termination of its license. 10

12 B. Any member insurer aggrieved by an action or decision of the Association shall appeal to the Board in writing before appealing to the Superintendent. Such appeal shall be made within 30 days of the date upon which any members is advised of any act or decision of the Board or if the Board does not act on such complaint within 30 days, the member insurer shall appeal to the Superintendent in writing within 30 days after the action or decision of the Board or the expiration of the 30 days failure to act. No action shall be taken by the Board until the appeal has been finally resolved. Article 7. Indemnification. A. All persons described in Section 16 of the Act, except the Superintendent and his representatives, shall be indemnified by the Association against all expenses incurred in the defense of any action, suit or proceeding brought against such person on account of any action taken by him in the performance of his powers and duties under the Plan of Operation of the Association, unless such person shall be finally adjudged to have committed a breach of duty involving gross negligence, bad faith, dishonesty, willful misfeasance and reckless disregard of the responsibilities of his office. In the event of settlement before final adjudication, such indemnity shall be provided only if the Association is advised by independent counsel that such person did not, in counsel s opinion, commit such a breach of duty. B. The expense of such indemnification shall be prorated and paid for by the member insurers in the proportion that the net direct written premiums of each 11

13 member insurer for the calendar year preceding commencement of such action, suit or proceeding bears to the net direct written premiums of all member insurers for the preceding calendar year. C. This Article is intended to operate as a supplement and additional safeguard to, and not in place of, the immunity granted by Section 59A of the Act. Article 8. Conformity to Statute. Section et. seq. NMSA, 1978, the Property and Casualty Insurance Guaranty Act, as written, and as may be amended, is incorporated as part of this plan. 12