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This entry was published on 2024-05-03
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SECTION 7434
Distribution of assets
Insurance (ISC) CHAPTER 28, ARTICLE 74
³ 7434. Distribution of assets. (a) (1) Upon the recommendation of the
superintendent, and under the direction of the court, distribution
payments shall be made in a manner that will assure the proper
recognition of priorities and a reasonable balance between the
expeditious completion of the liquidation and the protection of
unliquidated and undetermined claims. The priority of distribution of
claims from an insolvent insurer other than a life insurer in any
proceeding subject to this article shall be in accordance with the order
in which each class of claims is set forth in this paragraph and as
provided in this paragraph. Every claim in each class shall be paid in
full or adequate funds retained for such payment before the members of
the next class receive any payment. No subclasses shall be established
within any class. No claim by a shareholder, policyholder or other
creditor shall be permitted to circumvent the priority classes through
the use of equitable remedies. The order of distribution of claims shall
be:

(A) Class one. Claims with respect to the actual and necessary costs
and expenses of administration, incurred by the liquidator,
rehabilitator or conservator under this article.

(B) Class two. All claims under policies including such claims of the
federal or any state or local government for losses incurred, third
party claims, claims for unearned premiums, and all claims of a security
fund, guaranty association or the equivalent except claims arising under
reinsurance contracts.

(C) Class three. Claims of the federal government except those under
class two above.

(D) Class four. Claims for wages owing to employees of an insurer
against whom a proceeding under this article is commenced for services
rendered within one year before commencement of the proceeding, not
exceeding one thousand two hundred dollars to each employee, and claims
for unemployment insurance contributions required by article eighteen of
the labor law. Such priority shall be in lieu of any other similar
priority which may be authorized by law.

(E) Class five. Claims of state and local governments except those
under class two above.

(F) Class six. Claims of general creditors including, but not limited
to, claims arising under reinsurance contracts.

(G) Class seven. Claims filed late or any other claims other than
claims under class eight or class nine below.

(H) Class eight. Claims for advanced or borrowed funds made pursuant
to section one thousand three hundred seven of this chapter.

(I) Class nine. Claims of shareholders or other owners in their
capacity as shareholders.

(2) Severability. If any classification or priority provided for in
paragraph one of this subsection is held to be unconstitutional or
otherwise invalid, the remaining classifications and priorities shall
continue in effect.

(b) No creditor shall be entitled to interest on any dividend by
reason of delay in payment of such dividend.

(c) Any claimant of another state or foreign country who is entitled
to, or receives, a dividend upon his claim out of a statutory deposit or
the proceeds of any qualifying bond or other asset located in such other
state or foreign country shall not be entitled to any further dividend
from the superintendent until all other claimants of the same class
irrespective of residence or place of the acts or contracts upon which
their claims are based shall have received an equal dividend upon their
claims. After such equalization, such claimant shall be entitled to
share in the distribution of further dividends by the superintendent
like all other creditors of the same class wherever residing.

(d) If, after an adjudication of insolvency, a mutual insurer is found
clearly solvent upon re-examination, its surplus shall be distributed
among all persons, partnerships or corporations whose membership did not
cease earlier than five years prior to the date on which the insurer
ceased issuing policies. The distribution shall be in the proportion
which the total premium contributions of each such member during his or
its entire membership in the insurer bear to the total premium
contributions of all such members entitled under this subsection to any
distributive share of such surplus.

(e) The provisions of this section shall apply to distributions made
after the effective date of this subsection in any proceeding under this
article, regardless of the date such proceeding was commenced under this
article, provided that the foregoing provisions of this subsection shall
not apply to distributions made pursuant to a final court order of
distribution entered on or before the effective date of this subsection.