Okla. Stat. tit. 36, § 36-1927.1

estate.

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. Before the members of the next

class receive any payment, every claim in each class shall be:

1. Paid in full; or

2. Protected by adequate funds retained for such payment.

Once such funds are approved by the court and paid or retained by

the liquidator, the insurer's estate shall have no further liability

to members of that class except to the extent of the retained funds

and any other undistributed funds. Payment of retained funds

pursuant to court order under this section extinguishes the

potential liability of the receiver to the United States or any

other governmental entity. No subclasses shall be established

within any class except as otherwise provided by law. No claim by a

shareholder, policyholder or other creditor shall be permitted to

circumvent the priority classes through the use of equitable

remedies. The order of distribution of claims shall be as provided

in subsection B of this section.

B. 1. Class 1. The reasonable costs and expenses of

administration expressly approved by the receiver, including but not

limited to the following:

a. the actual and necessary costs of preserving or

recovering the assets of the insurer,

Oklahoma Statutes - Title 36. Insurance Page 555

b. compensation for all authorized services rendered in

the conservation, rehabilitation or liquidation,

c. any necessary filing or recordation fees,

d. the fees and mileage payable to witnesses, including

experts, and other litigation costs and expenses,

e. authorized reasonable attorney fees and other

professional services rendered in the conservation,

rehabilitation or liquidation, and

f. any reasonable expenses that were incurred in

furtherance of activities that provided a material

economic benefit to the estate.

2. Class 2. The administrative expenses of guaranty

associations. For purposes of this section these expenses shall be

the reasonable expenses incurred by guaranty associations where the

expenses are not payments or expenses which are required to be

incurred as direct policy benefits in fulfillment of the terms of

the insurance contract or policy, and that are of the type and

nature that, but for the activities of the guaranty association

otherwise would have been incurred by the receiver, including but

not limited to evaluations of policy coverage, activities involved

in the adjustment and settlement of claims under policies, including

those of in-house or outside adjusters, and the reasonable expenses

incurred in connection with the arrangements for ongoing coverage

through transfer to other insurers, policy exchanges or maintaining

policies in force. The receiver may in his or her sole discretion

approve as an administrative expense under this section any other

reasonable expenses of the guaranty association if the receiver

finds:

a. the expenses are not expenses required to be paid or

incurred as direct policy benefits by the terms of the

policy, and

b. the expenses were incurred in furtherance of

activities that provided a material economic benefit

to the estate as a whole, irrespective of whether the

activities resulted in additional benefits to covered

claimants.

The court shall approve such expenses unless it finds the receiver

abused his or her discretion in approving the expenses. If the

receiver determines that any administrative expenses of a guaranty

association were not reasonable expenses, but were nevertheless paid

out of a statutory deposit or the proceeds of any bond or other

asset located in another state or foreign country, then the court

shall adjudge the Class 3 claims of that association to have been

paid to the extent of the amount of unreasonable expenses thus paid

from those assets.

If the receiver determines that the assets of the estate will be
easonable expenses, but were nevertheless paid

out of a statutory deposit or the proceeds of any bond or other

asset located in another state or foreign country, then the court

shall adjudge the Class 3 claims of that association to have been

paid to the extent of the amount of unreasonable expenses thus paid

from those assets.

If the receiver determines that the assets of the estate will be

sufficient to pay all Class 1 claims in full, Class 2 claims shall

Oklahoma Statutes - Title 36. Insurance Page 556

be paid, provided that the liquidator shall secure from each of the

associations receiving disbursements pursuant to this section an

agreement to return to the liquidator such disbursements, together

with investment income actually earned on such disbursements, as may

be required to pay Class 1 claims. No bond shall be required of any

such association.

3. Class 3. All claims under policies including claims of the

federal or any state or local government for losses incurred ("loss

claims") including third-party claims, claims for unearned premiums,

all claims of a guaranty association for payment of covered claims

or covered obligations of the insurer and all claims of a guaranty

association for reasonable expenses other than those included in

Class 2. All claims under life and health insurance and annuity

policies, whether for death proceeds, health benefits, 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 employee shall be

treated as a gratuity.

Notwithstanding the foregoing, the following claims shall be

excluded from Class 3 priority:

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

act. Notwithstanding the provisions of 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 which is in excess of any applicable limits

provided in the insurance policy issued by the

insolvent insurer,

e. any amount accrued as punitive or exemplary damages

unless expressly covered under the terms of the

policy, and

f. tort claims of any kind against the insurer, and

claims against the insurer for bad faith or wrongful

settlement practices.

Oklahoma Statutes - Title 36. Insurance Page 557

4. Class 4. Claims of the federal government other than those

claims included in Class 3.

5. Class 5. Debts due employees for services, benefits,

contractual or otherwise due arising out of such 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 six (6) months

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 shall not be entitled to the benefit of this priority

except as otherwise approved by the liquidator and the court. This

priority shall be in lieu of any other similar priority which may be

authorized by law as to wages or compensation of employees.

6. Class 6. Claims of any person, including claims of state or
e 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. This

priority shall be in lieu of any other similar priority which may be

authorized by law as to wages or compensation of employees.

6. Class 6. Claims of any person, including claims of state or

local governments, except those specifically classified elsewhere in

this section.

7. Class 7. Claims for commissions and service fees, and

claims of attorneys for fees and expenses owed them by a person for

services rendered in opposing a formal delinquency proceeding. In

order to prove the claim, the claimant must show that the insurer

which is the subject of the delinquency proceeding incurred such

fees and expenses based on its best knowledge, information and

belief, formed after reasonable inquiry indicating opposition was in

the best interests of the person, was well grounded in fact and was

warranted by existing law or a good-faith argument for the

extension, modification or reversal of existing law, and that

opposition was not pursued for any improper purpose, such as to

harass or to cause unnecessary delay or needless increase in the

cost of the litigation.

8. Class 8. Claims of any state or local government for a

penalty or forfeiture, but 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 under paragraph 9 of this subsection.

9. Class 9. Surplus or contribution notes or similar

obligations, premium refunds on assessable policies, interest on

claims of Classes 1 through 8 and any other claims specifically

subordinated to this class.

10. Class 10.

a. Claims of shareholders or other owners arising out of

their capacity as shareholders or other owners, or

arising in any other capacity or facts except as they

may be qualified in Class 3 or 4 above; provided,

however, that no shareholder, member or other owner

shall be entitled to, or receive, any distribution

Oklahoma Statutes - Title 36. Insurance Page 558

from the insolvent insurer's estate under this

paragraph, if:

(1) the intentional wrongdoing, fraud, gross

negligence, negligence or other act, failure to

act, transaction or proceeding of such

shareholder, member or owner, alone or in concert

with others, or of a director or officer of the

insolvent insurer, is found by a court of

competent jurisdiction or by the receiver in his

or her reasonable discretion, to have caused, or

to have been a contributing factor to, the

insolvency of the insolvent insurer,

(2) funds were collected from the shareholder, member

or other owner, either directly or through an

insurance carrier, fidelity bond issuer or other

entity, as a consequence of, or related to, a

claim made or brought by the receiver of said

insurer, or
er in his

or her reasonable discretion, to have caused, or

to have been a contributing factor to, the

insolvency of the insolvent insurer,

(2) funds were collected from the shareholder, member

or other owner, either directly or through an

insurance carrier, fidelity bond issuer or other

entity, as a consequence of, or related to, a

claim made or brought by the receiver of said

insurer, or

(3) any of the funds available for distribution

consist of punitive damages recovered by the

receiver of said estate from any source based

upon any claim made or brought by the receiver.

In the event there is no eligible shareholder, member

or other owner entitled to distribution in accordance

with this paragraph, the remaining funds and other

property of the insolvent insurer's estate, if any,

shall be distributed to a fund established and held in

the name of, and for the use and benefit of, the

receiver, through the Oklahoma Receivership Office or

any similar entity established by the receiver, which

shall be used in the administration of other insurers

in rehabilitation or liquidation.

b. All funds distributed to the receiver under this

paragraph shall be utilized by the receiver's staff

engaged in the rehabilitation or liquidation of

insolvent insurance business companies for the

following purposes:

(1) the administration of liquidations of estates

which temporarily or permanently do not have the

financial capability to administer the

liquidation, including the prosecution of claims

of the receiver, or

(2) the prosecution of petitions to place insurers in

rehabilitation or liquidation.

In the event such funds are distributed to or for an

insolvent insurer, the receiver shall obtain from the

insurer a promissory note or other evidence of

Oklahoma Statutes - Title 36. Insurance Page 559

indebtedness, secured by collateral if possible, for

the amount distributed, which shall be treated as a

Class 1 expense under paragraph 1 of this subsection.

The receiver shall make good-faith efforts to collect

reimbursement of any such loans. No funds distributed

to the receiver under this paragraph shall be used to

pay claims other than Class 1 claims under paragraph 1

of this subsection. The funds are not funds of the

State of Oklahoma and are not funds of the Oklahoma

Insurance Department or any other agency of the State

of Oklahoma.

This paragraph shall apply to the administration of all receivership

estates open and ongoing as of November 1, 2014, and to all

receivership proceedings commenced after November 1, 2014.

C. If any claimant of this state, another state or foreign

country shall be entitled to or shall receive a dividend upon his or

her claim out of a statutory deposit or the proceeds of any bond or

other asset located in another state or foreign country, unless such

deposit or proceeds shall have been delivered to the domiciliary

liquidator, then the claimants shall not be entitled to any further

dividend from the receiver until and unless all other claimants of

the same class, irrespective of residence or place of the acts or

contracts upon which their claims are based, shall have received an

equal dividend upon their claims, and after such equalization, such

claimants shall be entitled to share in the distribution of further

dividends by the receiver, along with and like all other creditors

of the same class, wheresoever residing.

D. Upon the declaration of a dividend, the receiver shall apply

the amount of the dividend against any indebtedness owed to the

insurer by the person entitled to the dividend. There shall be no

claim allowed for any deductible charged by a guaranty association

or entity performing a similar function.

E. This section shall apply to pending and future claims in

existing delinquency proceedings as well as to claims in delinquency

proceedings arising after the effective date of this section.
any indebtedness owed to the

insurer by the person entitled to the dividend. There shall be no

claim allowed for any deductible charged by a guaranty association

or entity performing a similar function.

E. This section shall apply to pending and future claims in

existing delinquency proceedings as well as to claims in delinquency

proceedings arising after the effective date of this section.

F. If any provision of this section or the application thereof

to any person or circumstances is held invalid, such invalidity

shall not affect other provisions or application of this section to

the extent such other provisions or application can be given effect

without the invalid provision or application.