Z‑0635.1   _____________________________________________

HOUSE BILL 1634

           _____________________________________________

State of Washington      57th Legislature     2001 Regular Session

By Representatives Santos, DeBolt, Hatfield and Benson; by request of Insurance Commissioner

Read first time 01/31/2001.  Referred to Committee on Financial Institutions & Insurance.

_1      AN ACT Relating to prioritizing and ordering the distribution

_2  of claims of an insurer's estate; amending RCW 48.31.280 and

_3  48.31.260; and creating a new section.

_4  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

_5      Sec. 1.  RCW 48.31.280 and 1993 c 462 s 83 are each amended to read

_6  as follows:

_7      The priority of distribution of claims from the insurer's

_8  estate is as follows:  Every claim in a class must be paid in full

_9  or adequate funds retained for payment before the members of the

10  next class receive any payment; no subclasses may be established

11  within a class; and no claim by a shareholder, policyholder, or

12  other creditor may circumvent the priority classes through the use

13  of equitable remedies.  The order of distribution of claims is:

14      (1) Class 1.  The costs and expenses of administration during

15  rehabilitation and liquidation, including but not limited to the

16  following:

17      (a) The actual and necessary costs of preserving or recovering

18  the assets of the insurer;

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_1      (b) Compensation for all authorized services rendered in the

_2  rehabilitation and liquidation;

_3      (c) Necessary filing fees;

_4      (d) The fees and mileage payable to witnesses;

_5      (e) Authorized reasonable attorneys' fees and other

_6  professional services rendered in the rehabilitation and

_7  liquidation;

_8      (f) The reasonable expenses of a guaranty association or

_9  foreign guaranty association for unallocated loss adjustment

10  expenses.

11      (2) Class 2.  ((Reasonable compensation to employees for services

12  performed to the extent that they do not exceed two months of

13  monetary compensation and represent payment for services performed

14  within one year before the filing of the petition for liquidation

15  or, if rehabilitation preceded liquidation, within one year before

16  the filing of the petition for rehabilitation.  Principal officers

17  and directors are not entitled to the benefit of this priority

18  except as otherwise approved by the liquidator and the court.  The

19  priority is in lieu of any other similar priority that may be

20  authorized by law as to wages or compensation of employees.

21      (3) Class 3.  Loss claims.  For purposes of this section, "loss

22  claims" are all claims under policies, including claims of the

23  federal or a state or local government, for losses incurred,

24  including third-party claims and all claims of a guaranty

25  association or foreign guaranty association.  All claims under life

26  insurance and annuity policies, whether for death proceeds,

27  annuity proceeds, or investment values, are loss claims.  That

28  portion of any loss indemnification that is provided for by other

29  benefits or advantages recovered by the claimant, is not included

30  in this class, other than benefits or advantages recovered or

31  recoverable in discharge of familial obligation of support or by

32  way of succession at death or a proceeds of life insurance, or as

33  gratuities.  No payment by an employer to his or her employee may be

34  treated as a gratuity.

35      (4) Class 4.  Claims under nonassessable policies for unearned

36  premium or other premium refunds and claims of general creditors

37  including claims of ceding and assuming companies in their

38  capacity as such.

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_1      (5) Class 5.  Claims of the federal or any state or local

_2  government except those under subsection (3) of this section.

_3  Claims, including those of any governmental body for a penalty or

_4  forfeiture, are allowed in this class only to the extent of the

_5  pecuniary loss sustained from the act, transaction, or proceeding

_6  out of which the penalty or forfeiture arose, with reasonable and

_7  actual costs occasioned thereby.  The remainder of such claims are

_8  postponed to the class of claims under subsection (8) of this

_9  section.

10      (6) Class 6.  Claims filed late or any other claims other than

11  claims under subsections (7) and (8) of this section.

12      (7) Class 7.  Surplus or contribution notes, or similar

13  obligations, and premium refunds on assessable policies.  Payments

14  to members of domestic mutual insurance companies are limited in

15  accordance with law.

16      (8) Class 8.  The claims of shareholders or other owners in their

17  capacity as shareholders.)) Loss claims.  For purposes of this

18  section, loss claims are all claims under policies, including

19  claims of the federal or a state or local government, for losses

20  incurred, including third-party claims, and all claims of a

21  guaranty association or foreign guaranty association.  All claims

22  under life insurance and annuity policies, whether for death

23  proceeds, annuity proceeds, or investment values, are loss

24  claims.  That portion of any loss indemnification that is provided

25  for by other benefits or advantages recovered by the claimant, is

26  not included in this class, other than benefits or advantages

27  recovered or recoverable in discharge of familial obligations of

28  support or by way of succession at death or as proceeds of life

29  insurance, or as gratuities.  No payment by an employer to an

30  employee may be treated as a gratuity.  Loss claims also include

31  claims under nonassessable policies for unearned premium or other

32  premium refunds.

33      (3) Class 3.  Claims of the federal government, other than claims

34  which are included as loss claims under subsection (2) of this

35  section.

36      (4) Class 4.  Reasonable compensation to employees for services

37  performed to the extent that they do not exceed two months of

38  monetary compensation and represent payment for services performed

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_1  within one year before the filing of the petition for liquidation

_2  or, if rehabilitation preceded liquidation, within one year before

_3  the filing of the petition for rehabilitation; except, where there

_4  are no claims and no potential claims of the federal government in

_5  the estate, in which case claims in this class shall have priority

_6  over claims in class 2 and below.  Principal officers and directors

_7  are not entitled to the benefit of this priority except as

_8  otherwise approved by the liquidator and the court.  This priority

_9  is in lieu of any other similar priority that may be authorized by

10  law as to wages or compensation of employees.

11      (5) Class 5.  Claims of general creditors including claims of

12  ceding and assuming companies in their capacity as such.

13      (6) Class 6.  Claims of any state or local government, except

14  those under subsection (2) of this section.  Claims, including those

15  of any governmental body for a penalty or forfeiture, are allowed

16  in this class only to the extent of the pecuniary loss sustained

17  from the act, transaction, or proceeding out of which the penalty

18  or forfeiture arose, with reasonable and actual costs occasioned

19  thereby.  The remainder of such claims are postponed to the class of

20  claims under subsection (9) of this section.

21      (7) Class 7.  Claims filed late or any other claims other than

22  claims under subsections (8) and (9) of this section.

23      (8) Class 8.  Surplus or contribution notes, or similar

24  obligations, and premium refunds on assessable policies.  Payments

25  to members of domestic mutual insurance companies are limited in

26  accordance with law.

27      (9) Class 9.  The claims of shareholders or other owners in their

28  capacity as shareholders.

29      Sec. 2.  RCW 48.31.260 and 1947 c 79 s .31.26 are each amended to

30  read as follows:

31      The rights and liabilities of the insurer and of its creditors,

32  policyholders, stockholders, members, subscribers, and all other

33  persons interested in its estate shall, unless otherwise directed

34  by the court, be fixed as of the date on which the order directing

35  the liquidation of the insurer is filed in the office of the clerk

36  of the court which made the order, subject to the provisions of

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_1  RCW 48.31.300 with respect to the rights of claimants holding

_2  contingent claims and RCW 48.31.280 with respect to the priority

_3  and order of distributions of claims.

_4     NEW SECTION. Sec. 3.  This act applies to and governs all claims

_5  filed in any proceeding to liquidate an insurer that is initiated

_6  on or after January 1, 2001.

_7      NEW SECTION. Sec. 4.  If any provision of this act or its

_8  application to any person or circumstance is held invalid, the

_9  remainder of the act or the application of the provision to other

10  persons or circumstances is not affected.

‑‑‑ END ‑‑‑

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