HB401 Alabama 2018 Session

Updated Feb 26, 2026

Notable

Summary

Primary Sponsor: Kerry Rich
Republican
Session: Regular Session 2018
Title: Insurance companies, unsolvenices, Alabama Insurance Guaranty Association Act, provisions conformed to most recent model act, obligation of assoc. to pay covered claims before order of liquidation of insolvent insurer, statutory cap for benefits and aggregate cap provided, Secs. 27-42-3, 27-42-5, 27-42-8, 27-42-11, 27-42-12 am'd.
Summary: HB 401 updates the Alabama Insurance Guaranty Association Act to conform to the latest model act, requires payment of covered claims before liquidation, and raises the cap on benefits to $300,000 with an aggregate cap.
What This Bill Does
The bill aligns state law with the most recent model act and adds new definitions. It requires the Alabama Insurance Guaranty Association to pay covered claims before a court order of liquidation, within a specified timeframe and up to set limits. It increases the maximum benefit for a single covered claim from $150,000 to $300,000 and creates an aggregate cap, while establishing a funding and administration framework across three account types and related assessment rules.

Who It Affects
Policyholders and claimants with claims against insolvent insurers in Alabama who could receive payment from the guaranty association under the new limits and timing.
Member insurers licensed in Alabama, who fund the association through assessments, face new allocation rules, potential deferrals to protect capital, and expanded rights and duties in handling, defending, and recovering funds related to claims.

Key Provisions
Conforms Alabama Guaranty Association provisions to the latest model act and adds new definitions.
Requires the association to pay covered claims before an insolvent insurer's liquidation order, within 30 days after insolvency determination or sooner if the policy expires quickly, with payments capped by specified amounts.
Raises the cap for benefits on a covered claim from $150,000 to $300,000 and introduces an aggregate cap on payments.
Defines which types of direct insurance are covered and clarifies key terms such as covered claim and high net worth insured.
Creates three funding accounts funded by member insurers, with assessments limited to 1% of net direct written premiums per account per year and possible proration or deferment to protect capital; dividends are restricted during deferment.
Gives the association claim-handling and recovery powers, including priority in liquidation, cooperation requirements, and the ability to recover from high net worth insureds and affiliates; establishes interactions with liquidators and other policies to avoid duplicative payments.

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.
Subjects: Insurance