KRS 304.33-390: Special provision for third-party claims.

(1) Third-party's claim. Whenever any third party asserts a cause of action against an

insured of an insurer in liquidation, the third party may file a claim with the

liquidator. The filing of the claim shall release the insured's liability to the third

party on that cause of action in the amount of the applicable policy limit, but the

liquidator shall also insert in any form used for the filing of third -party claims

appropriate language to constitute such a release. The release shall be void if the

insurance coverage is avoided by the liquidator.

(2) Insured's claim. Whether or not the third party files a claim, the insured may file a

claim on his own behalf in the liquidation. If the insured fails to file a claim by the

date for filing claims specified in the order of liquidation or within sixty (60) days

after mailing of the notice required by paragraph (b) of subsection (1) of KRS

304.33-250, whichever is later, he is an unexcused late filer.

(3) Procedure for insured's claim. The liquidator shall make his recommendations to the

court under KRS 304.33 -440 for the allowance of an insured's claim under

subsection (2) of this section after consideration of the probable outcome of any

pending action against the insured on which the claim is based, the probable

damages recoverable in the action and the probable costs and expenses of defense.

After allowance by the court, the liquidator shall withhold any dividends payable on

the claim, pending the outcome of litigation and negotiation with the insured.

Whenever it seems appropriate, he shall reconsider the claim on the basis of

additional information and amend his recommendations to the court. The insured

shall be afforded the same notice and opportunity to be heard on all changes in the

recommendation as in its in itial determination. The court may amend its allowance

as it thinks appropriate. As claims against the insured are settled or barred, the

insured shall be paid from the amount withheld, the same percentage dividend as

was paid on the other claims of like p riority, based on the lesser of (a) the amount

actually recovered from the insured by action or paid by agreement plus the

reasonable costs and expenses of defense, or (b) the amount allowed on the claims

by the court. After all claims are settled or barre d, any sum remaining from the

amount withheld shall revert to the undistributed assets of the insurer. Delay in final

payment under this subsection shall not be a reason for unreasonable delay of final

distribution and discharge of the liquidator.

(4) Multiple claims. If several claims founded upon one (1) policy are filed, whether by

third parties or as claims by the insured under this section, and the aggregate

allowed amount of the claims to which the same limit of liability in the policy is

applicable exceeds that limit, each claim as allowed shall be reduced in the same

proportion so that the total equals the policy limit. Claims by the insured shall be

evaluated as in subsection (3) of this section. If any insured's claim is subsequently

reduced under subsection (3) of this section, the amount thus freed shall be

apportioned ratably among the claims which have been reduced under this

subsection.