Priority of Distribution of Claims

  1. Law
  2. Georgia Code
  3. Insurance
  4. Insurers Rehabilitation and Liquidation
  5. Procedure for Rehabilitation
  6. Priority of Distribution of Claims

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For all claims in insolvencies, the priority of distribution of claims from the insurer's estate shall be in accordance with the order as set forth in this Code section.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.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:
    1. The actual and necessary costs of preserving or recovering the assets of the insurer;
    2. Compensation for all authorized services rendered in the rehabilitation and liquidation;
    3. Any necessary filing fees;
    4. The fees and mileage payable to witnesses;
    5. Authorized reasonable attorney's fees and other professional services rendered in the rehabilitation and liquidation; and
    6. The reasonable expenses of a guaranty association or foreign guaranty association for unallocated loss adjustment expenses;
  2. Class 2. All claims under policies, including third-party claims and all claims of a guaranty 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 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 or her employee shall be treated as a gratuity;
  3. Class 3. Claims of the federal government except those under Class 2;
  4. Class 4. Reasonable compensation to employees for services performed to the extent that such compensation does not exceed two months of monetary compensation and represents 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 premium 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.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 to the class of claims established under paragraph (9) of this Code section;
  7. Class 7. Claims filed late or any other claims other than claims under paragraphs (8) and (9) of this Code section;
  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.

(Code 1981, §33-37-41, enacted by Ga. L. 1991, p. 1424, § 7; Ga. L. 1997, p. 683, § 2; Ga. L. 1997, p. 1581, § 3; Ga. L. 2019, p. 386, § 140/SB 133.)

The 2019 amendment, effective July 1, 2019, substituted "For all claims in insolvencies" for "For all pending and future claims in insolvencies existing on July 1, 1997, and for all claims in future insolvencies" at the beginning of the introductory paragraph, and inserted "or her" in the last sentence of paragraph (2).

Code Commission notes.

- Pursuant to Code Section28-9-3, in 1997, the amendment of this Code section by Ga. L. 1997, p. 683, § 2, was treated as impliedly repealed and superseded by Ga. L. 1997, p. 1581, § 3, due to irreconcilable conflict. See County of Butts v. Strahan, 151 Ga. 417 (1921); Keener v. McDougall, 232 Ga. 273 (1974).

Editor's notes.

- Ga. L. 1997, p. 683, § 6, not codified by the General Assembly, provides that the 1997 amendment "shall apply to all claims filed in any proceeding to liquidate an insurer, which proceeding is pending on July 1, 1997, or which is commenced on or after July 1, 1997."

Ga. L. 1997, p. 1581, § 5, not codified by the General Assembly, provides that the 1997 amendment "shall apply to all claims filed in any proceeding to liquidate an insurer which proceeding is pending on July 1, 1997, or which is commenced on or after July 1, 1997".

JUDICIAL DECISIONS

Parties could not convert claims.

- Parties who would otherwise be general creditors of an insurance company with Class 4 priority claims could not convert those parties' claims to Class 1 priority claims by agreeing with the rehabilitator to compromise the parties' claims against the company during the rehabilitation process. Oxendine v. Commissioner of Ins., 229 Ga. App. 604, 494 S.E.2d 545 (1998).


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