40-3641. Claims; priority of distribution; classes established.

40-3641

Chapter 40.--INSURANCE
Article 36.--IMPAIRED OR INSOLVENT INSURERS

      40-3641.   Claims; priority of distribution; classesestablished.The priority of distribution of claims from the insurer'sestateshall be in accordance with the order in which each class of claims is hereinset forth. Every claim in each class shall be paid in full or adequate fundsretained for such payment before the members of the next class receive anypayment. No subclasses shall be established within any class. The order ofdistribution of claims shall be:

      (a)   Class 1. The costs and expenses of administration during rehabilitationand liquidation including, but not limited to the following;

      (1)   The actual and necessary costs of preserving or recovering the assets ofthe insurer;

      (2)   compensation for all authorized services rendered in the rehabilitationand liquidation;

      (3)   any necessary filing fees;

      (4)   the fees and mileage payable to witnesses;

      (5)   authorized reasonable attorney fees and other professional servicesrendered in the rehabilitation and liquidation;

      (6)   the reasonable expenses of a guaranty association or foreign guarantyassociation in handlingclaims.

      (b)   Class 2.All claims under policies including claims for unearnedpremium or other premium refunds and such claims of the federal or any state orlocal government for losses incurred, ("loss claims") including third-partyclaims and all claims of a guaranty association or foreign guarantyassociation other than those claims included in Class 1. All claimsunder life insurance policies, funding agreements, guaranteed investmentcontracts, synthetic guaranteed investment contracts and annuity policies,whether fordeath proceeds, annuity proceeds or investment values shall be treated as lossclaims. That portion of any loss, indemnification for which is provided byother benefits or advantages recovered by the claimant, shall not be includedin this class, other than benefits or advantages recovered or recoverable indischarge of familial obligation of support or by way of succession at death oras proceeds of life insurance, or as gratuities. No payment by an employer toan employee shall be treated as a gratuity.

      (c)   Class 3. Claims of the federal government not included in Class 2.

      (d)   Class 4. Reasonable compensation to employees for services performed tothe extent they do not exceed two months of monetary compensation andrepresent payment for services performed within one year before the filing ofthe petition for liquidation or, if rehabilitation preceded liquidation, withinone year before the filing of the petition for rehabilitation. Principalofficers and directors shall not be entitled to the benefits of this priorityexcept as otherwise approved by the liquidator and the court. Such priorityshall be in lieu of any other similar priority which may be authorized by lawas to wages or compensation of employees. Where there are no claims and nopotential claims of the federal government in the estate, claims in this classwill have priority over claims in Class 2 and below.

      (e)   Class 5. Claimsof general creditors including claims ofceding and assuming companies in their capacity as such.

      (f)   Class 6. Claims of anystate or local government exceptthose under Class 2. Claims, including those of anygovernmental body fora penalty or forfeiture, shall be allowed in this class only to the extent ofthe pecuniary loss sustained from the act, transaction or proceeding out ofwhich the penalty or forfeiture arose, with reasonable and actual costsoccasioned thereby. The remainder of such claims shall be postponed to be equalto the class of claims under subsection (i).

      (g)   Class 7. Claims filed late or any otherclaims other than claims undersubsections (h) and (i).

      (h)   Class 8. Surplus or contribution notes, orsimilar obligations, andpremium refunds on assessable policies. Payments to members of domestic mutualinsurance companies shall be limited in accordance with law.

      (i)   Class 9. The claims of shareholders orother owners in their capacityas shareholders.

      The provisions of this section, as amended, shall apply to all claims whichhave not been paid prior to the effective date of this act.

      History:   L. 1991, ch. 125, § 37;L. 2005, ch. 92, § 5;L. 2005, ch. 186, § 11; July 1.