§425-178 Insurance and financial responsibility of registered limited liability partnerships.
(a) At the time of registration pursuant to section 425-153 in the case of a limited liability partnership, and section 425-155, in the case of a foreign limited liability partnership, and at all times during which those partnerships shall transact intrastate business, every limited liability partnership and foreign limited liability partnership, as the case may be, shall be required to provide security for claims based upon negligent or wrongful acts or omissions that arise out of the conduct of the business of the partnership, by complying with one, or pursuant to subsection (b), some combination, of the following:(1) Maintaining a policy or policies of insurance against liability imposed on or against it by law for damages arising out of all claims of the type described in this subsection in an amount of at least $100,000 multiplied by the number of licensed persons rendering professional services on behalf of the partnership, or at least $100,000 multiplied by the number of partners in the case of a nonprofessional limited liability partnership; however, the maximum amount of insurance shall not be required to exceed $5,000,000.
(2) Maintaining in trust or bank escrow, cash, bank certificates of deposit, United States Treasury obligations, bank letters of credit, or bonds of insurance companies as security for payment of liabilities imposed by law for damages arising out of all claims of the type described in [this subsection] in an amount of at least $100,000 multiplied by the number of licensed persons rendering professional services, or at least $100,000 multiplied by the number of partners in the case of a nonprofessional limited liability partnership; however, the maximum amount of security shall not be required to exceed $5,000,000.
(3) A limited liability partnership or foreign limited liability partnership may satisfy the requirements of this section by confirming that, as of the last day of its most recently completed fiscal year, it had a net worth equal to or exceeding $10,000,000. In order to comply with this alternative method of meeting the requirements established in this section, a limited liability partnership or foreign limited liability partnership shall file an annual confirmation with the director, signed by an authorized member partner of the limited liability partnership or foreign limited liability partnership, accompanied by such forms as prescribed by the director. In order to be current in a given year, the partnership form of confirming compliance with this optional security requirement shall be on file within four months of the completion of the fiscal year and, upon being filed, shall constitute full compliance with the financial security requirements for purposes of this section as of the beginning of the fiscal year. A confirmation filed during any particular fiscal year shall continue to be effective for the first four months of the next succeeding fiscal year.
(b) For purposes of satisfying the security requirements of this section, a limited liability partnership or foreign limited liability partnership may aggregate the security provided by it pursuant to subsection (a)(1), (2), and (3). Any limited liability partnership or foreign limited liability partnership intending to comply with the alternative security provisions set forth in subsection (a)(3) shall file all information that may be required by the director on such forms and in such manner as the director may prescribe.
(c) For purposes of subsection (a), a limited liability partnership is a professional partnership if it is engaged in the delivery of professional services under chapters 442, 448, 453, 455, 457, 459, 460, 461, 463E, 465, 466, and 471.
(d) Neither the existence of the requirements of subsection (a) nor the extent of the limited liability partnership's or foreign limited liability partnership's compliance with the alternative requirements in this section shall be admissible in court or in any way be made known to a jury or other trier of fact in determining an issue of liability for, or to the extent of, the damages in question.
(e) Notwithstanding any other provision of this section, if a limited liability partnership is otherwise in compliance with the terms of this section at the time that a bankruptcy or other insolvency proceeding is commenced with respect to the limited liability partnership, it shall be deemed to be in compliance with this section during the pendency of the proceeding. A limited liability partnership that has been the subject of such a proceeding and that conducts business after the proceeding ends shall thereafter comply with subsection (a), in order to obtain the limitations on liability afforded by this chapter.
(f) If a partnership falsely represents in its certificate or amended certificate of limited liability, or in its registration or amended registration as a foreign limited liability partnership, that it has obtained the minimum amount of insurance required by this section, all partners of the limited liability partnership or foreign limited liability partnership shall be liable jointly for all of the debts and liabilities of the partnership.
(g) The director is not responsible for determining if a partnership is in compliance with the requirements of this section. [L 1996, c 93, pt of §1; am L 1997, c 19, §2; am L 1999, c 249,§27]