(1) All proceedings in which the association is obligated to defend by reason of this part shall be stayed for six (6) months from the date the insolvency is determined or such additional time as shall be granted either by the court in which the action is pending or by the chancery court of Davidson County, upon petition by the association for good cause shown to permit proper defense of such causes of action.
(2) The association shall not be obligated to satisfy in part or in whole any decision, verdict, or finding based on the default of the insolvent insurer or its failure to defend an insured, but shall be permitted to defend such claim on its merits.