§ 7435. Distribution for life insurers. (a) The priority of
distribution of claims from the estate of a life insurance company in
any proceeding subject to this article shall be in accordance with the
order in which each class of claims is herein set forth. Every claim in
each class shall, subject to such limitations as may be prescribed by
law and do not directly conflict with the express provisions of this
section, 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. The order of distribution of
claims shall be:

(1) Class one. Claims with respect to the actual and necessary costs
and expenses of administration, incurred by the liquidator,
rehabilitator, conservator or ancillary rehabilitator under this
article, or by The Life Insurance Guaranty Corporation or The Life
Insurance Company Guaranty Corporation of New York, and claims described
in subsection (d) of section seven thousand seven hundred thirteen of
this chapter.

(2) Class two. Debts due to employees for services performed to the
extent that they do not exceed one thousand two hundred dollars and
represent payment for services performed within one year before the
commencement of a proceeding under this article. Such priority shall be
in lieu of any other similar priority which may be authorized by law as
to wages or compensation of employees.

(3) Class three. All claims for payment for goods furnished or
services rendered to the impaired or insolvent insurer in the ordinary
course of business within ninety days prior to the date on which the
insurer was determined to be impaired or insolvent, whichever is
applicable.

(4) Class four. All claims under insurance policies, annuity contracts
and funding agreements, and all claims of The Life Insurance Company
Guaranty Corporation of New York or any other guaranty corporation or
association of this state or another jurisdiction, other than (i) claims
provided for in paragraph one of this subsection, and (ii) claims for
interest.

(5) Class five. Claims of the federal or any state or local
government. Claims, including those of any governmental body for a
penalty or forfeiture, shall be allowed to this class only to the extent
of the pecuniary loss sustained from the act, transaction or proceeding
out of which the penalty or forfeiture arose, with reasonable and actual
costs occasioned thereby. The remainder of such claims shall be
postponed to the class of claims under paragraph eight of this
subsection.

(6) Class six. Claims of general creditors and any other claims other
than claims under paragraphs seven and eight of this subsection.

(7) Class seven. Surplus, capital or contribution notes, or similar
obligations.

(8) Class eight. The claims of (i) policyholders, other than claims
under paragraph four of this subsection, and (ii) shareholders or other
owners.

(b) Every claim under a separate account agreement providing, in
effect, that the assets in the separate account shall not be chargeable
with liabilities arising out of any other business of the insurer shall
be satisfied out of the assets in the separate account equal to the
reserves maintained in such account for such agreement and, to the
extent, if any, not fully discharged thereby, shall be treated as a
class four claim against the estate of the life insurance company.

(c) For purposes of this section:

(1) "The estate of the life insurance company" shall mean the general
assets of such company less any assets held in separate accounts that,
pursuant to section four thousand two hundred forty of this chapter, are
not chargeable with liabilities arising out of any other business of the
insurer.

(2) "Insurance policies, annuity contracts and funding agreements"
shall mean all policies and contracts of any of the kinds of insurance
specified in paragraph one, two or three of subsection (a) of section
one thousand one hundred thirteen of this chapter and all funding
agreements described in section three thousand two hundred twenty-two of
this chapter, including all separate account agreements, except that
separate account agreements referred to in subsection (b) of this
section shall be included only to the extent referred to therein.

(3) "Separate account agreement or agreements" shall mean any
agreement or agreements for separate accounts referred to in section
four thousand two hundred forty of this chapter.