33-2-1353. Voidable preferences and liens. (1) (a) A preference is a transfer of any of the property of an insurer to or for the benefit of a creditor, for or on account of an antecedent debt, made or suffered by the insurer within 1 year before the filing of a successful petition for liquidation under this part, the effect of which transfer may be to enable the creditor to obtain a greater percentage of this debt than another creditor of the same class would receive. If a liquidation order is entered while the insurer is already subject to a rehabilitation order, then the transfers must be considered preferences if made or allowed within 1 year before the filing of the successful petition for rehabilitation or within 2 years before the filing of the successful petition for liquidation, whichever time is shorter.
(b) Any preference may be avoided by the liquidator if:
(i) the insurer was insolvent at the time of the transfer;
(ii) the transfer was made within 4 months before the filing of the petition;
(iii) the creditor receiving it or to be benefited by it or the creditor's agent acting with reference to the transfer had, at the time when the transfer was made, reasonable cause to believe that the insurer was insolvent or was about to become insolvent; or
(iv) the creditor receiving it was an officer or any employee or attorney or other person who was in fact in a position of comparable influence in the insurer to an officer, whether or not the creditor held the position, or any shareholder holding directly or indirectly more than 5% of any class of any equity security issued by the insurer or any other person, firm, corporation, association, or aggregation of persons with whom the insurer did not deal at arm's length.
(c) When the preference is voidable, the liquidator may recover the property or, if it has been converted, its value from any person who has received or converted the property, except when a bona fide purchaser or lienor has given less than fair equivalent value, the purchaser or lienor has a lien upon the property to the extent of the consideration actually given by the purchaser or lienor. When a preference by way of lien or security title is voidable, the court may on due notice order the lien or title to be preserved for the benefit of the estate, in which event the lien or title passes to the liquidator.
(2) (a) A transfer of property other than real property is considered to be made or allowed when it becomes so far perfected that a subsequent lien is not obtainable by legal or equitable proceedings on a simple contract that could become superior to the rights of the transferee.
(b) A transfer of real property is considered to be made or allowed when it becomes so far perfected that a subsequent bona fide purchaser from the insurer could not obtain rights superior to the rights of the transferee.
(c) A transfer that creates an equitable lien is not considered to be perfected if there are available means by which a legal lien could be created.
(d) A transfer not perfected prior to the filing of a petition for liquidation is considered to be made immediately before the filing of the successful petition.
(e) The provisions of this subsection apply whether or not there are or were creditors who might have obtained liens or persons who might have become bona fide purchasers.
(3) (a) A lien obtainable by legal or equitable proceedings upon a simple contract is one arising in the ordinary course of the proceedings upon the entry or docketing of a judgment or decree or upon attachment, garnishment, execution, or like process, whether before, upon, or after judgment or decree and whether before or upon levy. It does not include liens that under applicable law are given a special priority over other liens that are prior in time.
(b) A lien obtainable by legal or equitable proceedings could become superior to the rights of a transferee or a purchaser could obtain rights superior to the rights of a transferee, within the meaning of subsection (2), if the consequences would follow only from the lien or purchase itself or from the lien or purchase followed by any step wholly within the control of the respective lienholder or purchaser, with or without the aid of ministerial action by public officials. However, a lien could not become superior and a purchase could not create superior rights for the purpose of subsection (2) through any acts subsequent to the obtaining of a lien or subsequent to a purchase that require the agreement or concurrence of any third party or that require any further judicial action or ruling.
(4) A transfer of property for or on account of a new and contemporaneous consideration that is considered under subsection (2) to be made or suffered after the transfer because of delay in perfecting it does not become a transfer for or on account of an antecedent debt if any acts required by the applicable law to be performed in order to perfect the transfer as against liens or bona fide purchasers' rights are performed within 21 days or any period expressly allowed by the law, whichever is less. A transfer to secure a future loan, if a loan is actually made, or a transfer that becomes security for a future loan must have the same effect as a transfer for or on account of a new and contemporaneous consideration.
(5) If any lien considered voidable under subsection (1)(b) has been dissolved by the furnishing of a bond or other obligation, the surety on which has been indemnified directly or indirectly by the transfer of or the creation of a lien upon any property of an insurer before the filing of a petition under this part that results in a liquidation order, the indemnifying transfer or lien must also be considered voidable.
(6) The property affected by any lien considered voidable under subsections (1) and (5) must be discharged from the lien, and that property and any of the indemnifying property transferred to or for the benefit of a surety must pass to the liquidator, except that the court may on due notice order any lien to be preserved for the benefit of the estate and the court may direct that the conveyance be executed as may be proper or adequate to evidence the title of the liquidator.
History: En. Sec. 28, Ch. 383, L. 1979; amd. Sec. 1109, Ch. 56, L. 2009.