(a) A transfer of property of an insurer to or for the benefit of a creditor, for or on account of an antecedent debt, made by the insurer within one year before the filing of a successful petition for liquidation under this chapter, the effect of which might be to enable the creditor to obtain a greater percentage of the debt than another creditor of the same class would receive is considered a preference. If a liquidation order is entered while the insurer is already subject to a rehabilitation order, then a transfer is considered a preference if it is made within one year before the filing of the successful petition for rehabilitation, or within two years before the filing of the successful petition for liquidation, whichever time is shorter.
(b) A preference may be avoided by the receiver if
(1) the insurer was insolvent at the time of the transfer;
(2) the transfer was made within the four months before the filing of the petition;
(3) the creditor receiving it or to be benefited by it or the creditor's agent had, at the time the transfer was made, reasonable cause to believe that the insurer was insolvent or was about to become insolvent; or
(4) the creditor receiving it was an officer, or was an employee, attorney, or other person who acted in that capacity whether or not the creditor held such a position, or was a shareholder holding directly or indirectly more than five percent of a class of an equity security issued by the insurer, or was another person, firm, corporation, association, or group of persons with whom the insurer did not deal at arm's length.
(c) If a preference is voidable, the receiver may recover the property or, if it has been converted, the value of the property, from a person who has received or converted the property, except that if a bona fide purchaser or lienor has given less than fair equivalent value, the person has a lien upon the property to the extent of the consideration actually given by the person. If a preference by way of lien or security title is voidable, the court may, after notice, order the lien or title to be preserved for the benefit of the estate, in event the lien or title passes to the receiver.
(d) 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. A transfer
(1) of property other than real property is considered to be made when it becomes so far perfected that no subsequent lien obtainable by legal or equitable proceedings on a contract could become superior to the rights of the transferee;
(2) of real property is considered to be made when it becomes so far perfected that no subsequent bona fide purchaser from the insurer could obtain rights superior to the rights of the transferee;
(3) that creates an equitable lien is not considered to be perfected if there are available means by which a legal lien could be created; or
(4) not perfected before the filing of a petition for liquidation is considered to be made immediately before the filing of the successful petition.
(e) A lien obtainable by legal or equitable proceedings
(1) upon a contract is one arising in the ordinary course of a proceeding 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 a lien that, under applicable law, is given a special priority over other liens that are prior in time; or
(2) 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 (d) of this section, if the consequences would follow only from the lien or purchase itself, or from the lien or purchase followed by a step completely within the control of the respective lienholder or purchaser, with or without the aid of ministerial action by public officials; a lien could not, however, become superior and a person could not create superior rights for the purpose of (d) of this section through acts subsequent to the obtaining of a lien or subsequent to a purchase that requires the agreement or concurrence of a third party or that requires further judicial action or ruling.
(f) A transfer of property for or on account of a new and contemporaneous consideration that is considered under (d) of this section to be made after the transfer because of delay in perfecting it, does not become a transfer for or on account of an antecedent debt if acts required by the applicable law to be performed in order to perfect the transfer against a lien or bona fide purchaser's rights are performed within 21 days, or a 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, has the same effect as a transfer for or on account of a new and contemporaneous consideration.
(g) If a lien that is considered voidable under (b) of this section has been dissolved by the furnishing of a bond or other obligation, and the bond or other obligation has been indemnified directly or indirectly by the transfer or creation of a lien upon property of an insurer before the filing of a petition under this chapter that results in a liquidation order, the indemnifying transfer or lien is also considered voidable.
(h) The property affected by a lien that is considered voidable under (b) and (g) of this section shall be discharged from the lien, and that property and the indemnifying property transferred to or for the benefit of a surety shall be transferred to the receiver, except that the court may order a lien to be preserved for the benefit of the estate, and the court may direct that a conveyance be executed as is proper or adequate to evidence the title of the receiver.
(i) The court has jurisdiction of a proceeding by the receiver to hear and determine the rights of parties under this section. Reasonable notice of a hearing in the proceeding shall be given to all parties in interest, including the obligee of a releasing bond or other like obligation. If an order is entered for the recovery of indemnifying property in kind or for the avoidance of an indemnifying lien, the court, upon application of a party in interest, shall in the same proceeding determine the value of the property or lien, and if the value of the property is less than the amount of the indemnity or the amount of the lien, the transferee or lienholder may elect to retain the property or lien upon payment of its value, as determined by the court, to the receiver, within the time that the court fixes.
(j) The liability of a surety under a releasing bond or other obligation shall be discharged to the extent of the value of the indemnifying property recovered or the indemnifying lien avoided by the receiver, or, if the property is retained under (i) of this section, to the extent of the amount paid to the receiver.
(k) If a creditor has been preferred, and afterward in good faith gives the insurer further credit without security of any kind, for property that becomes a part of the insurer's estate, the amount of the new credit remaining unpaid at the time of the petition may be set off against the preference that would otherwise be recoverable from the creditor.
(l) If an insurer, directly or indirectly, within four months before the filing of a successful petition for liquidation under this chapter or at any time in contemplation of a proceeding to liquidate it, pays money or transfers property to an attorney for services rendered or to be rendered, the transaction may be examined by the court on its own motion or shall be examined by the court on petition of the receiver. The transaction may be held valid only to the extent of a reasonable amount to be determined by the court, and the excess may be recovered by the receiver for the benefit of the estate, except that if the attorney is in a position of influence in the insurer or an affiliate, payment of money or the transfer of property to the attorney for services rendered or to be rendered is governed by (b)(4) of this section.
(m) An officer, manager, employee, shareholder, member subscriber, attorney, or other person acting on behalf of an insurer, who knowingly participates in giving a preference even though the person has reasonable cause to believe that the insurer is, or is about to become, insolvent at the time of the preference, is personally liable to the receiver for the amount of the preference. It is a rebuttable presumption that a preference was given with reasonable cause to believe the insurer is or is about to become insolvent if the transfer was made within four months before the filing of a successful petition for liquidation.
(n) If a person receives property from the insurer, or the benefit of the property, and the preference for the property is found voidable under (b) of this section, the person is personally liable for the value of the property and shall account to the receiver for it.
(o) Nothing in (m) or (n) of this section affects any other claim by the receiver against any person.Section: Previous 21.78.200 21.78.210 21.78.220 21.78.230 21.78.240 21.78.250 21.78.251 21.78.252 21.78.253 21.78.260 21.78.270 21.78.271 21.78.272 21.78.280 21.78.281 Next
Last modified: November 15, 2016