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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 ($50) 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 ($50)
deductible provision. Subject to the fifty dollars ($50) 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-of-network 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after the policy has been replaced by the insured or canceled at the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) Claims of the federal government other than those claims included in Class 2.
(5)
Wages.
(a) Debts due to employees for services performed, not to exceed one
thousand dollars ($1,000) 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 ($50) 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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