(a) 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 set forth in this section. 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 is:
Terms Used In Tennessee Code 56-9-330
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.
Attorney: means the person designated and authorized by subscribers as the attorney-in-fact having authority to obligate them on reciprocal insurance contracts. See Tennessee Code 56-16-102
Code: includes the Tennessee Code and all amendments and revisions to the code and all additions and supplements to the code. See Tennessee Code 1-3-105
Contract: A legal written agreement that becomes binding when signed.
Foreign: when used without limitation, includes all companies formed by authority of any other state or government. See Tennessee Code 56-1-102
Foreign guaranty association: means any entities similar to a guaranty association now in existence in or hereafter created by the legislature of any other state. See Tennessee Code 56-9-103
Guaranty association: means the Tennessee insurance guaranty association created by chapter 12, part 1 of this title, the life and health insurance guaranty association created by chapter 12, part 2 of this title, and any other similar entity now or hereafter created by the general assembly of this state for the payment of claims of insolvent insurers. See Tennessee Code 56-9-103
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
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 Tennessee Code 56-9-103
Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
Person: means any association, aggregate of individuals, business, company, corporation, individual, joint-stock company, Lloyds-type organization, organization, partnership, receiver, reciprocal or interinsurance exchange, trustee or society. See Tennessee Code 56-16-102
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 Tennessee Code 56-9-103
(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;(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 a guaranty association or foreign guaranty association for unallocated loss adjustment expenses;(2)Class 2. All claims under policies, including the 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. All claims under life insurance and policies and annuities, which, for purposes of this section only, shall include guaranteed investment contracts 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 the 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 the employer’s employee shall be treated as a gratuity;(3)Class 3. Claims of the federal government, including those that otherwise would be within Class 5, but not including claims that are within Class 2;(4)Class 4. Reasonable compensation to employees for services performed to the extent that they do not exceed two (2) months of monetary compensation and represent payment for services performed within one (1) year before the filing of the petition for liquidation or, if rehabilitation preceded liquidation, within one (1) year before the filing of the petition for rehabilitation. Principal officers and directors are not entitled to the benefit of this priority except as otherwise approved by the liquidator and the court. The priority is in lieu of any other similar priority that may be authorized by law as to wages or compensation of employees;(5)Class 5. Claims under nonassessable policies for unearned premium or other premium refunds, claims of general creditors, including claims of ceding and assuming companies in their capacity as such, and every claim arising under an unallocated annuity contract, except unallocated annuity contracts and defined government contribution plans qualified under § 403(b) of the Internal Revenue Code ( 26 U.S.C. § 403(b) ), issued in connection with a separate account agreement providing, in effect, that the assets in the separate account shall not be chargeable with liabilities arising out of any other business of the insurer, to the extent that the claim is not satisfied and fully discharged out of the assets of the separate account equal to the reserves maintained in the account for the agreement;(6)Class 6. Claims of any state or local government except those under Class 2. Claims, including those of any state and local 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 subdivision (a)(9);(7)Class 7. Claims filed late or any other claims other than claims under subdivisions (a)(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 law; and(9)Class 9. The claims of shareholders or other owners in their capacity as shareholders.(b) If any classification or priority provided for in subsection (a), or the application of the classification or priority to any person or circumstances, is held to be unconstitutional or otherwise invalid, the invalidity shall not affect the remaining portions or applications of subsection (a) that can be given effect without the invalid portion or application.
