AN
ACT Relating to prioritizing and ordering the distribution of claims of an
insurer's estate; amending RCW 48.31.280 and 48.31.260; and creating a new section.
BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec.
1. RCW
48.31.280 and 1993 c 462 s 83 are each amended to read as follows:
The
priority of distribution of claims from the insurer's estate is as follows:
Every claim in a class must be paid in full or adequate funds retained for
payment before the members of the next class receive any payment; no subclasses
may be established within a class; and no claim by a shareholder, policyholder,
or other creditor may circumvent the priority classes through the use of
equitable remedies. The order of distribution of claims is:
(1)
Class 1. The costs and expenses of administration during rehabilitation and
liquidation, including but not limited to the following:
(a)
The actual and necessary costs of preserving or recovering the assets of the
insurer;
(b)
Compensation for all authorized services rendered in the rehabilitation and
liquidation;
(c)
Necessary filing fees;
(d)
The fees and mileage payable to witnesses;
(e)
Authorized reasonable attorneys' fees and other professional services rendered
in the rehabilitation and liquidation;
(f)
The reasonable expenses of a guaranty association or foreign guaranty
association for unallocated loss adjustment expenses.
(2)
Class 2. ((Reasonable compensation to employees for services performed to
the extent that they do not exceed two months of monetary compensation and
represent payment for services performed within one year before the filing of
the petition for liquidation or, if rehabilitation preceded liquidation, within
one year before the filing of the petition for rehabilitation. Principal
officers and directors are not entitled to the benefit of this priority except
as otherwise approved by the liquidator and the court. The priority is in lieu
of any other similar priority that may be authorized by law as to wages or
compensation of employees.
(3)
Class 3. Loss claims. For purposes of this section, "loss claims"
are all claims under policies, including claims of the federal or a state or
local government, for losses incurred, including third-party claims and all
claims of a guaranty association or foreign guaranty association. All claims
under life insurance and annuity policies, whether for death proceeds, annuity
proceeds, or investment values, are loss claims. That portion of any loss
indemnification that is provided for by other benefits or advantages recovered
by the claimant, is not included in this class, other than benefits or
advantages recovered or recoverable in discharge of familial obligation of
support or by way of succession at death or a proceeds of life insurance, or as
gratuities. No payment by an employer to his or her employee may be treated as
a gratuity.
(4)
Class 4. Claims under nonassessable policies for unearned premium or other
premium refunds and claims of general creditors including claims of ceding and
assuming companies in their capacity as such.
(5)
Class 5. Claims of the federal or any state or local government except those
under subsection (3) of this section. Claims, including those of any
governmental body for a penalty or forfeiture, are 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 are postponed to
the class of claims under subsection (8) of this section.
(6)
Class 6. Claims filed late or any other claims other than claims under
subsections (7) and (8) of this section.
(7)
Class 7. Surplus or contribution notes, or similar obligations, and premium
refunds on assessable policies. Payments to members of domestic mutual
insurance companies are limited in accordance with law.
(8)
Class 8. The claims of shareholders or other owners in their capacity as
shareholders.)) Loss claims. For purposes of this
section, loss claims are all claims under policies, including claims of the
federal or a state or local government, for losses incurred, including
third-party claims, and all claims of a guaranty association or foreign
guaranty association. All claims under life insurance and annuity policies,
whether for death proceeds, annuity proceeds, or investment values, are loss
claims. That portion of any loss indemnification that is provided for by other
benefits or advantages recovered by the claimant, is not included in this
class, other than benefits or advantages recovered or recoverable in discharge
of familial obligations of support or by way of succession at death or as
proceeds of life insurance, or as gratuities. No payment by an employer to an
employee may be treated as a gratuity. Loss claims also include claims under
nonassessable policies for unearned premium or other premium refunds.
(3)
Class 3. Claims of the federal government, other than claims which are
included as loss claims under subsection (2) of this section.
(4)
Class 4. Reasonable compensation to employees for services performed to the
extent that they do not exceed two months of monetary compensation and
represent payment for services performed within one year before the filing of
the petition for liquidation or, if rehabilitation preceded liquidation, within
one year before the filing of the petition for rehabilitation; except, where
there are no claims and no potential claims of the federal government in the
estate, in which case claims in this class shall have priority over claims in
class 2 and below. Principal officers and directors are not entitled to the
benefit of this priority except as otherwise approved by the liquidator and the
court. This priority is in lieu of any other similar priority that may be
authorized by law as to wages or compensation of employees.
(5)
Class 5. Claims of general creditors including claims of ceding and assuming
companies in their capacity as such.
(6)
Class 6. Claims of any state or local government, except those under
subsection (2) of this section. Claims, including those of any governmental
body for a penalty or forfeiture, are 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 are postponed to the class of
claims under subsection (9) of this section.
(7)
Class 7. Claims filed late or any other claims other than claims under
subsections (8) and (9) of this section.
(8)
Class 8. Surplus or contribution notes, or similar obligations, and premium
refunds on assessable policies. Payments to members of domestic mutual
insurance companies are limited in accordance with law.
(9)
Class 9. The claims of shareholders or other owners in their capacity as
shareholders.
Sec.
2. RCW
48.31.260 and 1947 c 79 s .31.26 are each amended to read as follows:
The
rights and liabilities of the insurer and of its creditors, policyholders,
stockholders, members, subscribers, and all other persons interested in its
estate shall, unless otherwise directed by the court, be fixed as of the date
on which the order directing the liquidation of the insurer is filed in the
office of the clerk of the court which made the order, subject to the
provisions of RCW 48.31.300 with respect to the rights of claimants holding
contingent claims and RCW 48.31.280 with respect to the priority and order
of distributions of claims.
NEW
SECTION. Sec. 3. This
act applies to and governs all claims filed in any proceeding to liquidate an
insurer that is initiated on or after January 1, 2001.
NEW
SECTION. Sec. 4. If
any provision of this act or its application to any person or circumstance is
held invalid, the remainder of the act or the application of the provision to
other persons or circumstances is not affected.
