Effective 28 Aug 2018

375.1218. Classes of claims — priority of distribution. — The priority of distribution of claims from the insurer's estate 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 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 class through the use of equitable remedies. The order of distribution of claims shall be:

(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, and costs necessary to store records required to be preserved pursuant to section 375.1228;

(b) Compensation for all authorized services rendered in the rehabilitation and liquidation;

(c) Any necessary filing fees;

(d) The fees and mileage payable to witnesses;

(e) Authorized reasonable attorney's fees and other professional services rendered in the rehabilitation and liquidation; and

(f) The reasonable expenses of the Missouri Property and Casualty Insurance Guaranty Association, the Missouri Life and Health Insurance Guaranty Association, and any similar organization in any other state, including overhead, salaries, and other general administrative expenses allocable to the receivership. These expenses shall be subordinate to all other costs and expenses of administration under paragraphs (a) to (e) of this subdivision. The provisions of this paragraph shall apply to the distribution of claims from an insurer's estate if such insurer was first placed under an order of rehabilitation or an order of liquidation if no order of rehabilitation was entered on or after August 28, 2018.

(2) Class 2. All claims under policies including such claims of the federal or any state or local government for losses incurred ("loss claims") including third party claims and all claims of a guaranty association or foreign guaranty association including reasonable allocated loss adjustment expenses and all claims of a life and health insurance guaranty association or foreign guaranty association which covers claims of life and health insurance policies, relating to the handling of such claims. All claims under life insurance and annuity policies and funding agreements, whether for death proceeds, annuity proceeds or investment values shall be treated as loss claims. That portion of any loss, indemnification for which is provided by other benefits or advantages recovered by the claimant, shall not be 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 as proceeds of life insurance, or as gratuities. No payment by an employer to his employee shall be treated as a gratuity. Early distributions to guaranty associations and foreign guaranty associations may be made in the manner provided in section 375.1205, provided that such guaranty associations and foreign guaranty associations agree to indemnify the liquidator if a shortage occurs in the insurer's estate of property necessary to settle claims as provided by this section. Any early distributions shall not increase the proportionate share of such guaranty associations and foreign guaranty associations, of distributions of the insurer's estate. The liquidator shall have authority to inquire into the reasonableness of any allocated loss adjustment expenses claimed by a guaranty association or foreign guaranty association and such claim shall not be allowed if it is found to be unreasonable.

(3) Class 3. Claims of the United States government other than those claims included in class 2.

(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. Principal officers and directors shall not be entitled to the benefit of this priority except as otherwise approved by the liquidator and the court. Such priority shall be in lieu of any other similar priority which may be authorized by law as to wages or compensation of employees.

(5) Class 5. Claims under nonassessable policies for unearned premiums or other premium refunds and 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 class 2 of this section. Claims, including those of any governmental body for a penalty or forfeiture, shall be 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 shall be postponed as class 9 claims.

(7) Class 7. Claims filed late or any other claims other than class 8 or 9 claims.

(8) Class 8. Surplus or contribution notes, or similar obligations, and premium refunds on assessable policies. Payments to members of domestic mutual insurance companies shall be limited in accordance with law.

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

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(L. 1991 H.B. 385, et al. § 91, A.L. 1992 H.B. 1574, A.L. 1993 H.B. 709, A.L. 1996 S.B. 896, A.L. 2018 H.B. 1690)