304.33-430 Order of distribution.
The order of distribution of claims from the insurer's estate shall be as stated in this
section. The first fifty dollars () of the amount allowed on each claim in the classes
under subsections (3) to (7), inclusive, of this section, shall be deducted from the claim
and included in the class under subsection (9) of this section. Claims may not be
cumulated by assignment to avoid application of the fifty dollars () deductible
provision. Subject to the fifty dollars () deductible provision, every claim in each class
shall be paid in full or adequate funds retained for the 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.
(1) Administration costs. The costs and expenses of administration, including but not
limited to the following: the actual and necessary costs of preserving or recovering
the assets of the insurer; compensation for all services rendered in the liquidation;
any necessary filing fees; the fees and mileage payable to witnesses; and reasonable
attorney's fees.
(2) Health maintenance organization and limited health service organization out-ofnetwork claims. In a liquidation of a health maintenance organization or limited
health service organization, any claims for health plan benefits or for limited health
service contract benefits for out-of-network claims that would have otherwise been
covered.
(3) Loss and unearned premium claims. Claims by policyholders, beneficiaries, and
insureds arising from and within the coverage of and not in excess of the applicable
limits of insurance policies and insurance contracts issued by the company, and
liability claims against insureds which claims are within the coverage of and not in
excess of the applicable limits of insurance policies and insurance contracts issued
by the company, and claims of guaranty associations or foreign guaranty
associations. Notwithstanding the foregoing, the following claims shall be excluded
from Class 2 priority:
(a) Obligations of the insolvent insurer arising out of reinsurance contracts;
(b) Obligations incurred after the expiration date of the insurance policy or after
the policy has been replaced by the insured or canceled at the insured's request
or after the policy has been canceled as provided in this chapter.
Notwithstanding this subsection, earned premium claims on policies, other
than reinsurance agreements, shall not be excluded;
(c) Obligations to insurers, insurance pools, or underwriting associations and their
claims for contribution, indemnity, or subrogation, equitable or otherwise;
(d) Any claim which is in excess of any applicable limits provided in the
insurance policy issued by the insolvent insurer;
(e) Any amount accrued as punitive or exemplary damages unless expressly
covered under the terms of the policy; and
(f) Tort claims of any kind against the insurer, and claims against the insurer for
bad faith or wrongful settlement practices.
(4)
(5)
Claims of the federal government other than those claims included in Class 2.
Wages.
(a) Debts due to employees for services performed, not to exceed one thousand
dollars (,000) to each employee which have been earned within one (1) year
before the filing of the petition for liquidation. Officers shall not be entitled to
the benefit of this priority.
(b) This priority shall be in lieu of any other similar priority authorized by law as
to wages or compensation of employees.
(6) Residual classification. All other claims including claims of the federal or any state
or local government, not falling within other classes under this section. Claims,
including those of any governmental body, for a penalty or forfeiture, shall be
allowed in 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 subsection (9) of this section.
(7) Judgments. Claims based solely on judgments. If a claimant files a claim and bases
it both on the judgment and on the underlying facts, the claim shall be considered by
the liquidator who shall give the judgment such weight as he deems appropriate.
The claim as allowed shall receive the priority it would receive in the absence of the
judgment. If the judgment is larger than the allowance on the underlying claim, the
remaining portion of the judgment shall be treated as if it were a claim based solely
on a judgment.
(8) Interest on claims already paid. Interest at the legal rate compounded annually on all
claims in the classes under subsections (1) to (7) of this section, inclusive, from the
date of the petition for liquidation or the date on which the claim becomes due,
whichever is later, until the date on which the dividend is declared. The liquidator,
with the approval of the court, may make reasonable classifications of claims for
purposes of computing interest, may make approximate computations, and may
ignore certain classifications and time periods as de minimis.
(9) Miscellaneous subordinated claims. The remaining claims or portions of claims not
already paid, with interest as in subsection (8) of this section:
(a) The first fifty dollars () of each claim in the classes under subsections (3)
to (7), inclusive, of this section, subordinated under this section;
(b) Claims under subsection (2) of KRS 304.33-380;
(c) Claims subordinated by KRS 304.33-600;
(d) Claims filed late;
(e) Portions of claims subordinated under subsection (6) of this section; and
(f) Claims or portions of claims, payment of which is provided by other benefits
or advantages recovered or recoverable by the claimant.
(10) Preferred ownership claims. Surplus or contribution notes, or similar obligations,
and premium refunds on assessable policies. Interest at the legal rate shall be added
to each claim, as in subsections (8) and (9) of this section.
(11) Proprietary claims. The claims of shareholders or other owners.
Effective: July 15, 2010
History: Amended 2010 Ky. Acts ch. 166, sec. 10, effective July 15, 2010. -- Amended
2002 Ky. Acts ch. 105, sec. 21, effective July 15, 2002. -- Amended 2000 Ky. Acts
ch. 255, sec. 4, effective July 14, 2000. -- Amended 1996 Ky. Acts ch. 287, sec. 1,
effective July 15, 1996. -- Amended 1990 Ky. Acts ch. 422, sec. 23, effective July
13, 1990. -- Amended 1978 Ky. Acts ch. 325, sec. 1, effective June 17, 1978. -Created 1970 Ky. Acts ch. 301, subtit. 33, sec. 43, effective June 18, 1970.
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