N.Y. Insurance Law § 7434: Distribution of assets

§ 7434. Distribution of assets. (a) (1) Upon the recommendation of the

superintendent, and under the direction of the court, distribution

payments shall be made in a manner that will assure the proper

recognition of priorities and a reasonable balance between the

expeditious completion of the liquidation and the protection of

unliquidated and undetermined claims. The priority of distribution of

claims from an insolvent insurer other than a life insurer in any

proceeding subject to this article shall be in accordance with the order

in which each class of claims is set forth in this paragraph and as

provided in this paragraph. Every claim in each class shall be paid in

full or adequate funds retained for such 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. The order of distribution of claims shall

be:

(A) Class one. Claims with respect to the actual and necessary costs

and expenses of administration, incurred by the liquidator,

rehabilitator or conservator under this article.

(B) Class two. All claims under policies including such claims of the

federal or any state or local government for losses incurred, third

party claims, claims for unearned premiums, and all claims of a security

fund, guaranty association or the equivalent except claims arising under

reinsurance contracts.

(C) Class three. Claims of the federal government except those under

class two above.

(D) Class four. Claims for wages owing to employees of an insurer

against whom a proceeding under this article is commenced for services

rendered within one year before commencement of the proceeding, not

exceeding one thousand two hundred dollars to each employee, and claims

for unemployment insurance contributions required by article eighteen of

the labor law. Such priority shall be in lieu of any other similar

priority which may be authorized by law.

(E) Class five. Claims of state and local governments except those

under class two above.

(F) Class six. Claims of general creditors including, but not limited

to, claims arising under reinsurance contracts.

(G) Class seven. Claims filed late or any other claims other than

claims under class eight or class nine below.

(H) Class eight. Claims for advanced or borrowed funds made pursuant

to section one thousand three hundred seven of this chapter.

(I) Class nine. Claims of shareholders or other owners in their

capacity as shareholders.

(2) Severability. If any classification or priority provided for in

paragraph one of this subsection is held to be unconstitutional or

otherwise invalid, the remaining classifications and priorities shall

continue in effect.

(b) No creditor shall be entitled to interest on any dividend by

reason of delay in payment of such dividend.

(c) Any claimant of another state or foreign country who is entitled

to, or receives, a dividend upon his claim out of a statutory deposit or

the proceeds of any qualifying bond or other asset located in such other

state or foreign country shall not be entitled to any further dividend

from the superintendent until all other claimants of the same class

irrespective of residence or place of the acts or contracts upon which

their claims are based shall have received an equal dividend upon their

claims. After such equalization, such claimant shall be entitled to

share in the distribution of further dividends by the superintendent

like all other creditors of the same class wherever residing.

(d) If, after an adjudication of insolvency, a mutual insurer is found

clearly solvent upon re-examination, its surplus shall be distributed

among all persons, partnerships or corporations whose membership did not

cease earlier than five years prior to the date on which the insurer

ceased issuing policies. The distribution shall be in the proportion

which the total premium contributions of each such member during his or

its entire membership in the insurer bear to the total premium

contributions of all such members entitled under this subsection to any

distributive share of such surplus.

(e) The provisions of this section shall apply to distributions made

after the effective date of this subsection in any proceeding under this

article, regardless of the date such proceeding was commenced under this

article, provided that the foregoing provisions of this subsection shall

not apply to distributions made pursuant to a final court order of

distribution entered on or before the effective date of this subsection.