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 the payment before the members of the next class receive any payment. No subclasses shall be established within any class. The order of distribution of claims shall be:

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

Terms Used In Hawaii Revised Statutes 431:15-332

  • Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
  • Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
  • Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
  • Equitable: Pertaining to civil suits in "equity" rather than in "law." In English legal history, the courts of "law" could order the payment of damages and could afford no other remedy. See damages. A separate court of "equity" could order someone to do something or to cease to do something. See, e.g., injunction. In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in "law" cases but not in "equity" cases. Source: U.S. Courts
  • Guaranty association: means the Hawaii insurance guaranty association created by part I of article 16, the Hawaii life and disability insurance association created by part II of article 16, and any other similar entity now or hereafter created by the legislature of this State for the payment of claims of insolvent insurers. See Hawaii Revised Statutes 431:15-103
  • Indemnification: In general, a collateral contract or assurance under which one person agrees to secure another person against either anticipated financial losses or potential adverse legal consequences. Source: FDIC
  • insolvent: means :

    (1) For an insurer issuing only assessable fire insurance policies:
    (A) The inability to pay any obligation within thirty days after it becomes payable; or
    (B) If an assessment be made within thirty days after such date, the inability to pay such obligation thirty days following the date specified in the first assessment notice issued after the date of loss pursuant to this code;
    (2) For any other insurer, that it is unable to pay its obligations when they are due, or when its admitted assets do not exceed its liabilities plus the greater of:
    (A) Any capital and surplus required by law for its organization; or
    (B) The total par or stated value of its authorized and issued capital stock; and
    (3) As to any insurer licensed to do business in this State as of July 1, 1988, who does not meet the standard established under subparagraph (B), the term insolvency or insolvent shall mean, for a period not to exceed three years from July 1, 1988, that it is unable to pay its obligations when they are due or that its admitted assets do not exceed its liabilities plus any required capital contribution ordered by the commissioner under provisions of this code. See Hawaii Revised Statutes 431:15-103
  • Insurer: means any person who has done, purports to do, is doing or is licensed to do an insurance business, and is or has been subject to the authority of, or to liquidation, rehabilitation, reorganization, supervision, or conservation by any insurance commissioner. See Hawaii Revised Statutes 431:15-103
  • Remainder: An interest in property that takes effect in the future at a specified time or after the occurrence of some event, such as the death of a life tenant.
  • State: means any state, district, or territory of the United States and the Panama Canal Zone. See Hawaii Revised Statutes 431:15-103
(A) The actual and necessary costs of preserving or recovering the assets of the insurer;
(B) Compensation for all services rendered in the liquidation;
(C) Any necessary filing fees;
(D) The fees and mileage payable to witnesses;
(E) Reasonable attorney’s fees; and
(F) The reasonable expenses of a guaranty fund or association, or foreign guaranty association in handling claims.
(2) Class 2. All claims under policies for losses incurred, including third party claims, all claims against the insurer for liability for bodily injury or for injury to or destruction of tangible property which are not under policies, claims under nonassessable policies for unearned premium or other premium refunds, and all claims of a guaranty fund or association or foreign guaranty association. All claims under life insurance and annuity policies, 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 obligations of support or by way of succession at death or as proceeds of life insurance, or as gratuities. No payment by an employer to its employee shall be treated as a gratuity.

Notwithstanding the foregoing, the following claims shall be excluded from class 2:

(A) Obligations of the insolvent insurer arising out of reinsurance contracts;
(B) Obligations incurred after the expiration date of the insurance policy or after the policy has been replaced by the insured or canceled at the insured’s request or after the policy has been canceled as provided in this section. Notwithstanding this paragraph, earned premium claims on policies, (other than reinsurance agreements) shall not be excluded;
(C) Obligations to insurers, insurance pools, or underwriting associations, and their claims for contribution, indemnity, or subrogation, equitable or otherwise;
(D) Any claim that is in excess of any applicable limits provided in the insurance policy issued by the insolvent insurer; and
(E) Any amount accrued as punitive or exemplary damages unless expressly covered under the terms of the policy.
(3) Class 3. Claims of the federal government.
(4) Class 4. Debts due to employees for services performed to the extent that they do not exceed $1,000 and represent payment for services performed within one year before the filing of the petition for liquidation. Officers and directors shall not be entitled to the benefit of this priority. The 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 of general creditors.
(6) Class 6. Claims of any state or local government. 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 the claims shall be postponed to the class of claims under paragraph (8).
(7) Class 7. Claims filed late or any other claims other than claims under paragraphs (8) and (9).
(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 the law.
(9) Class 9. The claims of shareholders or other owners.

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