CHAPTER 400

FORMERLY

SENATE BILL NO. 352

AN ACT TO AMEND TITLE 18 OF THE DELAWARE CODE RELATING TO THE REHABILITATION AND LIQUIDATION OF INSURERS.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE :

Section 1. Amend Title 18 Del. C. Chapter 59, Section 5918, subsection (e) by striking subsection (e) in its entirety and substituting in lieu thereof:

“(e) The priority of distribution of claims from the insurer’s general assets shall be in accordance with the order in which each class of claims is herein set forth. Every claim in each class shall be paid in full or adequate funds retained for such payment before the members of the next class shall 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 shall be:

(1) Class I. The costs and expenses of administration expressly approved by the receiver, including but not limited to the following:

(a) The receiver’s actual and necessary costs of taking possession of the insurer, preserving or recovering the assets of the insurer, and otherwise complying with this chapter;

(b) Reasonable compensation for all services rendered at the request of and on behalf of the receiver, or his or her appointed deputy receiver(s), in the liquidation by the receivership’s employees and its retained attorneys, accountants, actuaries, claims adjusters, expert witnesses, and other consultants; and

(c) All expenses incurred by the Department in supervising the receivership proceedings of the insurer;

(2) Class II. The reasonable and necessary administrative expenses of the Delaware Insurance Guaranty Association, the Delaware Life and Health Insurance Guaranty Association, as the case may be, and any similar organization in another state. If the receiver determines that the assets of the estate will be sufficient to pay all Class I claims in full, Class II claims shall be paid currently, provided that the receiver shall secure from each of the associations receiving disbursements pursuant to this section an agreement to return to the receiver such disbursement, together with investment income actually earned on such disbursement, as may be required to pay Class I claims.

(3) Class III. Claims by policyholders, beneficiaries and insureds, including the federal or any state or local government if such government is a named policyholder, beneficiary or insured under the policy, 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; liability claims, including liability claims of the federal or any state or local government, 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, including claims for reasonable attorney’s fees incurred by the policyholder to defend against the liability claim if such attorney’s fees are covered under the policy, but only to the extent covered; policyholder’s claims for refunds of unearned premium; and claims of the Delaware Insurance Guaranty Association, the Delaware Life and Health Insurance Guaranty Association, as the case may be, and any similar organization in another state for coverage of policy benefits as required by statute; provided, however, that this paragraph (3) shall not apply to the following claims:

(a) claims arising under reinsurance contracts, including any claims for reinsurance premium due;

(b) claims of insurers, insurance pools or underwriting associations for contribution, indemnity or subrogation, equitable or otherwise.

Interest shall not be allowed or paid on Class III claims, except that the value assigned to Class III claims arising from valid pre-liquidation judgments, other than judgments by default or collusion, may include pre-judgment and post-judgment interest up to the date of liquidation if such interest is required by law or contract.

(4) Class IV. Taxes owed to the United States and other debts owed to the United States, which by the laws of the United States are entitled to priority over the claims in Classes V through IX below, and which claims of the United States are not already included in Class III above.

(5) Class V. Claims of employees, other than officers or directors, of the insurer for compensation actually owing to such employees for services rendered to the insurer within 3 months prior to the commencement of a proceeding against the insurer under this chapter but not exceeding $1,000 for each employee. Such priority shall be in lieu of any other similar priority which may be authorized by law as to wages or compensation of such employees.

(6) Class VI. Claims of general creditors including, but not limited to, claims of ceding and assuming insurers in their capacity as such, and claims of insurers, insurance pools or underwriting associations for contribution, indemnity or subrogation, equitable or otherwise. This class shall include any claims of the guaranty associations, federal or any state or local government to the extent such claims are not otherwise included in Class II, Class III, Class IV, or Class V in paragraphs (2) through (5) above.

(7) Class VII. Claims which would otherwise qualify for classification under the classes enumerated above, but which are not filed with the receiver on or before the bar date and which are not excused from such bar date by the liquidation court.

(8) Class VIII. Surplus or contribution notes, or similar obligations.

(9) Class IX. The claims of shareholders or other owners arising out of such capacity.”

Section 2. Amend Title 18 Del. C. Chapter 59, Section 5926, by striking section 5926 in its entirety.

Section 3. Amend Title 18 Del. C. Chapter 42, Section 4211, subsection (b) by striking subsection (b) in its entirety and substituting in lieu thereof:

“ (b) The receiver, liquidator or statutory successor of an insolvent insurer shall be bound by settlements of covered claims by the Association or a similar organization in another state. The court having jurisdiction shall grant such claims priority equal to that to which the claimant would have been entitled in the absence of this chapter against the assets of the insolvent insurer.”

Section 4. The amendments in this act shall apply to and govern all pending and future claims in any proceeding to liquidate an insurer that is pending on the effective date of this act, and to all claims filed in any proceeding to liquidate an insurer that is commenced on or after the effective date of this act, notwithstanding any other provision of the Delaware Code. The liquidator shall make a determination with respect to all claims which remain pending on the effective date of this act and all claims filed on or after the effective date of this act in accordance with section 5918 of Title 18 of the Delaware Code as amended by this act.

Approved July 06, 2000