Vermont § 7077 - Special provisions for third-party claims

§ 7077. Special provisions for third-party claims

• (a) Whenever any third party asserts a cause of action against an insured of an insurer
  in liquidation, the third party may file a claim with the liquidator. (b) Whether or not the third party files a claim, the insured may file a claim on his
  or her own behalf in the liquidation. If the insured fails to file a claim by the
  date for filing claims specified in the order of liquidation or within 60 days after
  mailing of the notice required by section 7061 of this title, whichever is later, the insured is an unexcused late filer. (c)(1) The liquidator shall make recommendations to the court under section 7082 of this title, for the allowance of an insured’s claim under subsection (b) of this section after
  consideration of the probable outcome of any pending action against the insured on
  which the claim is based, the probable damages recoverable in the action, and the
  probable costs and expenses of defense. After allowance by the court, the liquidator
  shall withhold any dividends payable on the claim, pending the outcome of litigation
  and negotiation with the insured. Whenever it seems appropriate, he or she shall reconsider
  the claim on the basis of additional information and amend his or her recommendations
  to the court. The insured shall be afforded the same notice and opportunity to be
  heard on all changes in the recommendation as in its initial determination. The court
  may amend its allowance as it thinks appropriate. As claims against the insured are
  settled or barred, the insured shall be paid from the amount withheld the same percentage
  dividend as was paid on other claims of like property, based on the lesser of: (A) the amount actually recovered from the insured by action or paid by agreement plus
  the reasonable costs and expense of defense; or (B) the amount allowed on the claims by the court. (2) After all claims are settled or barred, any sum remaining from the amount withheld
  shall revert to the undistributed assets of the insurer. Delay in final payment under
  this subsection shall not be a reason for unreasonable delay of final distribution
  and discharge of the liquidator. (d) If several claims founded upon one policy are filed, whether by third parties or as
  claims by the insured under this section, and the aggregate allowed amount of the
  claims to which the same limit of liability in the policy is applicable exceeds that
  limit, each claim as allowed shall be reduced in the same proportion so that the total
  equals the policy limit. Claims by the insured shall be evaluated as under subsection
  (c) of this section. If any insured’s claim is subsequently reduced under subsection
  (c) of this section, the amount thus freed shall be apportioned ratably among the
  claims that have been reduced under this subsection. (e) No claim may be presented under this section if it is or may be covered by any guaranty
  association or foreign guaranty association. (Added 1991, No. 45, § 2, eff. May 29, 1991.)