History: L. 1977, ch. 157, § 1; Repealed, L. 1991, ch. 125, § 56; July 1.
(b) The provisions of any contract between an insurance agent and an insolvent insurer shall apply for the duration of all policies in effect and until all accounts are settled with the insolvent insurer.
History: L. 1986, ch. 167, § 1; April 24.
(b) This act shall not be interpreted to limit the powers granted the commissioner by other provisions of law.
(c) This act shall be liberally construed.
History: L. 1991, ch. 125, § 1; July 1.
History: L. 1991, ch. 125, § 2; L. 1997, ch. 8, § 12; L. 2000, ch. 147, § 41; July 1.
(a) "Ancillary state" means any state other than a domiciliary state.
(b) "Commissioner" means the commissioner of insurance.
(c) "Creditor" means a person having any claim, whether matured or unmatured, liquidated or unliquidated, secured or unsecured, absolute, fixed or contingent.
(d) "Delinquency proceeding" means any proceeding instituted against an insurer for the purpose of liquidating, rehabilitating, reorganizing or conserving such insurer, and any summary proceeding under K.S.A. 40-3613 or 40-3614.
(e) "Doing business" includes, but is not necessarily limited to, any of the following acts, whether effected by mail or otherwise:
(1) The issuance or delivery of contracts of insurance to persons resident in this state;
(2) the solicitation of applications for such contracts, or other negotiations preliminary to the execution of such contracts;
(3) the quoting of premiums, membership fees, assessments or other consideration for such contracts;
(4) the transaction of matters subsequent to execution of such contracts and arising out of them; or
(5) operating under a license or certificate of authority, as an insurer, issued by the insurance department.
(f) "Domiciliary state" means the state in which an insurer is incorporated or organized; or, in the case of an alien insurer, its state of entry.
(g) "Fair consideration" is given for property or obligation:
(1) When in exchange for such property or obligation, as a fair equivalent therefor, and in good faith, property is conveyed or services are rendered or an obligation is incurred or an antecedent debt is satisfied; or
(2) when such property or obligation is received in good faith to secure a present advance or antecedent debt in amount not disproportionately small as compared to the value of the property or obligation obtained.
(h) "Foreign country" means any other jurisdiction not in any state.
(i) "General assets" means all property, real, personal or otherwise, not specifically mortgaged, pledged, deposited or otherwise encumbered for the security or benefit of specified persons or classes of persons. As to specifically encumbered property, "general assets" includes all such property or its proceeds in excess of the amount necessary to discharge the sum or sums secured hereby. Assets held in trust and on deposit for the security or benefit of all policyholders or all policyholders and creditors, in more than a single state, shall be treated as general assets.
(j) "Guaranty association" means the Kansas insurance guaranty association created by K.S.A. 40-2901 and amendments thereto, the Kansas life and health insurance guaranty association created by K.S.A. 40-3001 and amendments thereto, and any other similar entity now or hereafter created by the legislature of this state for the payment of claims of insolvent insurers. "Foreign guaranty association" means any similar entities now in existence in or hereafter created by the legislature of any other state.
(k) "Insolvency" or "insolvent" means:
(1) For an insurer issuing only assessable fire insurance policies:
(A) The inability to pay any obligation within 30 days after it becomes payable; or
(B) if an assessment is made, within 30 days after such date. The inability to pay such obligation 30 days following the date specified in the first assessment notice issued after the date of loss.
(2) For any other insurer, that it is unable to pay its obligations when they are due, or when its admitted assets do not exceed its liabilities plus the greater of:
(A) Any capital and surplus required by law for its organization; or
(B) the total par of stated value of its authorized and issued capital stock.
(C) For purposes of this subsection "liabilities" shall include, but not be limited to, reserves required by statute or by insurance department general regulations or specific requirements imposed by the commissioner upon a subject company at the time of admission or subsequent thereto.
(l) "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. For purposes of this act, any other persons included under K.S.A. 40-3606 shall be deemed to be insurers.
(m) "Person" means any individual, aggregation of individuals, trust, association, partnership, corporation or any affiliate thereof.
(n) "Preferred claim" means any claim with respect to which the terms of this act accord priority of payment from the general assets of the insurer.
(o) "Receiver" means receiver, liquidator, rehabilitator or conservator as the context requires.
(p) "Reciprocal state" means any state other than this state in which in substance and effect subsection (a) of K.S.A. 40-3622 and K.S.A. 40-3650, 40-3651 and 40-3653 through 40-3655 are in force, and in which provisions are in force requiring that the commissioner or equivalent official be the receiver of a delinquent insurer, and in which some provision exists for the avoidance of fraudulent conveyances and preferential transfers.
(q) "Secured claim" means any claim secured by mortgage, trust deed, pledge, deposit as security, escrow or otherwise; but not including, special deposit claims or claims against general assets. The term also includes claims which have become liens upon specific assets by reason of judicial process.
(r) "Special deposit claim" means any claim secured by a deposit made pursuant to statute for the security or benefit of a limited class or classes of persons, but not including any claim secured by general assets.
(s) "State" means any state, district, or territory of the United States and the Panama Canal Zone.
(t) "Transfer" shall include the sale and every other and different mode, direct or indirect, of disposing of or of parting with property or within an interest therein, or with the possession thereof or of fixing a lien upon property or upon an interest therein, absolutely or conditionally, voluntarily, by or without judicial proceedings. The retention of a security title to property delivered to a debtor shall be deemed a transfer suffered by the debtor.
History: L. 1991, ch. 125, § 3; July 1.
(b) No court shall have jurisdiction to entertain, hear or determine any complaint praying for the dissolution, liquidation, rehabilitation, sequestration, conservation or receivership of any insurer; or praying for an injunction or restraining order or other relief preliminary to, incidental to or relating to such proceedings other than in accordance with this act.
(c) In addition to other grounds for jurisdiction provided by law, a court having jurisdiction of the subject matter has jurisdiction over a person served pursuant to K.S.A. 60-101 et seq. and amendments thereto, Kansas rules of civil procedure, or other applicable provisions of law in an action brought by the receiver of a domestic insurer or an alien insurer domiciled in this state:
(1) If the person served is an agent, broker or other person who has at any time written policies of insurance for or has acted in any manner whatsoever on behalf of an insurer against which a delinquency proceeding has been instituted, in any action resulting from or incident to such a relationship with the insurer;
(2) if the person served is a reinsurer who has at any time entered into a contract of reinsurance with an insurer against which a delinquency proceeding has been instituted, or is an agent or broker of or for the reinsurer, in any action on or incident to the reinsurance contract;
(3) if the person served is or has been an officer, director, manager, trustee, organizer, promoter or other person in a position of comparable authority or influence over an insurer against which a delinquency proceeding has been instituted, in any action resulting from or incident to such a relationship with the insurer;
(4) if the person served is or was at the time of the institution of the delinquency proceeding against the insurer holding assets in which the receiver claims an interest on behalf of the insurer, in any action concerning the assets; or
(5) if the person served is obligated to the insurer in any way whatsoever, in any action on or incident to the obligation.
(d) If the court on motion of any party finds that any action should as a matter of substantial justice be tried in a forum outside this state, the court may enter an appropriate order to stay further proceedings on the action in this state.
(e) All actions herein authorized shall be brought in the district court of Shawnee county, Kansas.
History: L. 1991, ch. 125, § 4; July 1.
(1) The transaction of further business;
(2) the transfer of property;
(3) interference with the receiver or with a proceeding under this act;
(4) waste of the insurer's assets;
(5) dissipation and transfer of bank accounts;
(6) the institution or further prosecution of any actions or proceedings;
(7) the obtaining of preferences, judgments, attachments, garnishments or liens against the insurer, its assets or its policyholders;
(8) the levying of execution against the insurer, its assets or its policyholders;
(9) the making of any sale or deed for nonpayment of taxes or assessments that would lessen the value of the assets of the insurer;
(10) the withholding from the receiver of books, accounts, documents or other records relating to the business of the insurer; or
(11) any other threatened or contemplated action that might lessen the value of the insurer's assets or prejudice the rights of policyholders, creditors or shareholders, or the administration of any proceeding under this act.
(b) The receiver may apply to any court outside the state for the relief described in subsection (a).
History: L. 1991, ch. 125, § 5; July 1.
(1) To reply promptly in writing to any inquiry from the commissioner requesting such a reply; and
(2) to make available to the commissioner any books, accounts, documents or other records or information or property of or pertaining to the insurer and in the insurer's possession, custody or control.
(b) No person shall obstruct or interfere with the commissioner in the conduct of any delinquency proceeding or any investigation preliminary or incidental thereto.
(c) This section shall not be construed to abridge otherwise existing legal rights, including the right to resist a petition for liquidation or other delinquency proceedings, or other orders.
(d) Any person included within subsection (a) who fails to cooperate with the commissioner, or any person who obstructs or interferes with the commissioner in the conduct of any delinquency proceeding or any investigation preliminary or incidental thereto, or who violates any order the commissioner issued validly under this act may:
(1) Be sentenced to pay a fine not exceeding $10,000 or to imprisonment for a term of not more than one year, or both; or
(2) after a hearing held in accordance with the Kansas administrative procedure act, be subject to the imposition by the commissioner of a civil penalty not to exceed $10,000 and shall be subject further to the revocation or suspension of any insurance licenses issued by the commissioner.
History: L. 1991, ch. 125, § 6; July 1.
History: L. 1991, ch. 125, § 7; July 1.
(a) Be released from such proceeding, unless such proceeding is converted into a judicial rehabilitation or liquidation proceeding;
(b) be permitted to solicit or accept new business or request or accept the restoration of any suspended or revoked license or certificate of authority;
(c) be returned to the control of its shareholders or private management; or
(d) have any of its assets returned to the control of the shareholders or private management;
until all payments of or on account of the insurer's contractual obligations by all guaranty associations, along with all expenses thereof and interest on all such payments and expenses, shall have been repaid to the guaranty associations or a plan of repayment by the insurer shall have been approved by the guaranty association.
History: L. 1991, ch. 125, § 8; July 1.
(b) If upon examination or at any other time the commissioner has reasonable cause to believe that any domestic insurer is in such condition as to render the continuance of such domestic insurer's business hazardous to the public or to holders of its policies or certificates of insurance, or if such domestic insurer gives its consent, then the commissioner shall upon such determination:
(1) Notify the insurer of such determination; and
(2) furnish to the insurer a written list of the commissioner's requirements to abate the determination.
(c) If the commissioner makes a determination to supervise an insurer subject to an order under subsections (a) or (b), the commissioner shall notify the insurer that such insurer is under the supervision of the commissioner. During the period of supervision, the commissioner may appoint a supervisor to supervise such insurer. The order appointing a supervisor shall direct the supervisor to enforce orders issued under subsections (a) and (b) and may also require that the insurer may not do any of the following things during the period of supervision, without the prior approval of the commissioner or the supervisor:
(1) Dispose of, convey or encumber any of its assets or its business in force;
(2) withdraw from any of its bank accounts;
(3) lend any of its funds;
(4) invest any of its funds;
(5) transfer any of its property;
(6) incur any debt, obligation or liability;
(7) merge or consolidate with another company; or
(8) enter into any new reinsurance contract or treaty.
(d) No provision of subsection (c) shall restrict the commissioner's authority to issue an order under K.S.A. 40-222 or 40-222b and amendments thereto.
(e) Any insurer subject to an order under this section shall comply with the lawful requirements of the commissioner and, if placed under supervision, shall have 60 days from the date the supervision order is served within which to comply with the requirements of the commissioner. In the event of such insurer's failure to comply with in such time, the commissioner may institute proceedings under K.S.A. 40-3615 or 40-3620 to have a rehabilitator or liquidator appointed, or extend the period of supervision.
(f) The notice of hearing under subsection (a) and any order issued pursuant to such subsection shall be served upon the insurer pursuant to the Kansas administrative procedure act.
(g) During the period of supervision the insurer may request the commissioner to review an action taken or proposed to be taken by the supervisor, specifying wherein the action complained of is believed not to be in the best interest of the insurer.
(h) Any person who has violated any supervision order issued under this section, which as to such person was still in effect, shall be liable to pay a civil penalty imposed by the district court of Shawnee county not to exceed $10,000.
(i) The commissioner may apply for, and any court of general jurisdiction may grant, such restraining orders, preliminary and permanent injunctions, and other orders as may be necessary and proper to enforce a supervision order.
(j) In the event that any person, subject to the provisions of this act, including those persons described in K.S.A. 40-3610(a), shall knowingly violate any valid order of the commissioner issued under the provisions of this section and, as a result of such violation, the net worth of the insurer shall be reduced or the insurer shall suffer loss it would not otherwise have suffered, such person shall become personally liable to the insurer for the amount of any such reduction or loss. The commissioner or supervisor is authorized to bring an action on behalf of the insurer in the district court of Shawnee county to recover the amount of the reduction or loss together with any costs.
History: L. 1991, ch. 125, § 9; July 1.
(1) That there exists any grounds that would justify a court order for a formal delinquency proceeding against an insurer under this act;
(2) that the interests of policyholders, creditors or the public will be endangered by delay; and
(3) the contents of an order deemed necessary by the commissioner.
(b) Upon a filing under subsection (a), the court may issue forthwith, ex parte and without a hearing, the requested order which shall direct the commissioner to take possession and control of all or a part of the property, books, accounts, documents, other records of an insurer and of the premises occupied by it for transaction of its business; and until further order of the court enjoin the insurer and its officers, managers, agents and employees from disposition of its property and from the transaction of the insurer's business except with the written consent of the commissioner.
(c) The court shall specify in the order what the order's duration shall be, which shall be such time as the court deems necessary for the commissioner to ascertain the condition of the insurer. On motion of either party or on the court's own motion, the court may from time to time hold such hearings as it deems desirable after such notice as it deems appropriate, and may extend, shorten, or modify the terms of the seizure order. The court shall vacate the seizure order if the commissioner fails to commence a formal proceeding under this act after having had a reasonable opportunity to do so. An order of the court pursuant to a formal proceeding under this act shall ipso facto vacate the seizure order.
(d) Entry of a seizure order under this section shall not constitute an anticipatory breach of any contract of the insurer.
(e) An insurer subject to an ex parte order under this section may petition the court at any time after the issuance of such order for a hearing and review of the order. The court shall hold such a hearing and review not more than 15 days after the request. A hearing under this subsection may be held privately in chambers and it shall be so held, if the insurer proceeded against so requests.
(f) If, at any time after the issuance of such an order, it appears to the court that any person whose interest is, or will be, substantially affected by the order did not appear at the hearing and has not been served, the court may order that notice be given. An order that notice be given shall not stay the effect of any order previously issued by the court.
History: L. 1991, ch. 125, § 10; July 1.
History: L. 1991, ch. 125, § 11; July 1.
(a) The insurer is in such condition that the further transaction of business would be hazardous financially to its policyholders, creditors or the public;
(b) there is reasonable cause to believe that there has been embezzlement from the insurer, wrongful sequestration or diversion of the insurer's assets, forgery or fraud affecting the insurer, or other illegal conduct in, by, or with respect to the insurer that if established would endanger assets in an amount threatening the solvency of the insurer;
(c) after demand by the commissioner under K.S.A. 40-222 and amendments thereto or under this act, the insurer has failed to promptly make available for examination any of such insurer's own property, books, accounts, documents, or other records, or those of any subsidiary or related company within the control of the insurer, or those of any person having executive authority in the insurer so far as they pertain to the insurer;
(d) control of the insurer, whether by stock ownership or otherwise, and whether direct or indirect, is in a person or persons found after notice and hearing to be untrustworthy;
(e) any person who in fact has executive authority in the insurer, whether an officer, manager, general agent, director or trustee, employee or other person, has refused to be examined under oath by the commissioner concerning its affairs, whether in this state or elsewhere; and after reasonable notice of the fact, the insurer has failed promptly and effectively to terminate the employment and status of the person and all such person's influence on management;
(f) without first obtaining the written consent of the commissioner, the insurer has transferred or attempted to transfer, in a manner contrary to K.S.A. 40-3301, 40-221a or 40-309 and amendments thereto, substantially its entire property or business, or has entered into any transaction the effect of which is to merge, consolidate, or reinsure substantially its entire property or business in or with the property or business of any other person;
(g) the insurer or its property has been or is the subject of an application for the appointment of a receiver, trustee, custodian, conservator or sequestrator or similar fiduciary of the insurer or its property otherwise than as authorized under the insurance laws of this state, and such appointment has been made or is imminent, and such appointment might oust the courts of this state of jurisdiction or might prejudice orderly delinquency proceedings under this act;
(h) the insurer has failed to pay within 60 days after due date any obligation to any state or any subdivision thereof or any judgment entered in any state, if the court in which such judgment was entered had jurisdiction over such subject matter except that such nonpayment shall not be a ground until 60 days after any good faith effort by the insurer to contest the obligation has been terminated, whether it is before the commissioner or in the courts, or the insurer has systematically attempted to compromise or renegotiate previously agreed settlements with its creditors on the ground that it is financially unable to pay its obligations in full; or
(i) the board of directors of the insurer requests or consents to rehabilitation under this act.
History: L. 1991, ch. 125, § 12; July 1.
(b) Any order issued under this section shall require accounting to the court by the rehabilitator. Accountings shall be at such intervals as the court specifies in this order.
(c) Entry of an order of rehabilitation shall not constitute an anticipatory breach of any contracts of the insurer nor shall it be grounds for retroactive revocation or retroactive cancellation of any contracts of the insurer, unless such revocation or cancellation is done by the rehabilitator pursuant to K.S.A. 40-3618.
History: L. 1991, ch. 125, § 13; July 1.
(b) The commissioner, as rehabilitator, may appoint an advisory committee of policyholders or other creditors including guaranty associations should such a committee be deemed necessary. Such committees shall serve at the pleasure of the commissioner and shall serve without compensation other than reimbursement for reasonable travel and per diem living expenses. No other committee of any nature shall be appointed by the commissioner or the court in rehabilitation proceedings conducted under this act.
(c) The rehabilitator may take such action as necessary or appropriate to reform and revitalize the insurer. The rehabilitator shall have all the powers of the directors, officers and managers, whose authority shall be suspended, except as they are redelegated by the rehabilitator. The rehabilitator shall have full power to direct and manage, to hire and discharge employees subject to any contract rights they may have, and to deal with the property and business of the insurer.
(d) If it appears to the rehabilitator that there has been criminal or tortious conduct, or breach of any contractual or fiduciary obligation detrimental to the insurer by any officer, manager, agent, broker, employee or other person, the rehabilitator may pursue all appropriate legal remedies on behalf of the insurer.
(e) If the rehabilitator determines that reorganization, consolidation, conversion, reinsurance, merger or other transformation of the insurer is appropriate, the rehabilitator shall prepare a plan to effect such changes. Upon application of the rehabilitator for approval of the plan, and after such notice and hearings as the court may prescribe, the court may either approve or disapprove the plan proposed, or may modify the plan and approve it as modified. Any plan approved under this section shall be, in the judgment of the court, fair and equitable to all parties concerned. If the plan is approved, the rehabilitator shall carry out the plan. In the case of a life insurer, the plan proposed may include the imposition of liens upon the policies of the company, if all rights of shareholders are first relinquished. A plan for a life insurer may also propose imposition of a moratorium upon loan and cash surrender rights under policies, for such period and to such an extent as may be necessary.
(f) The rehabilitator shall have the power under K.S.A. 40-3629 and 40-3630 to avoid fraudulent transfers.
History: L. 1991, ch. 125, § 14; July 1.
(b) No statute of limitation or defense of laches shall run with respect to any action by or against an insurer between the filing of a petition for appointment of a rehabilitator for that insurer and the order granting and denying that petition. Any action against the insurer that might have been commenced when the petition was filed may be commenced for at least 60 days after the order or rehabilitation is entered or the petition is denied. The rehabilitator, upon an order for rehabilitation, within one year or such other longer time as applicable law may permit, may institute an action or proceeding on behalf of the insurer upon any cause of action against which the period of limitation fixed by applicable law has not expired at the time of the filing of the petition upon which such order is entered.
(c) Any guaranty association or foreign guaranty association covering life or health insurance or annuities shall have standing to appear in any court proceeding concerning the rehabilitation of a life or health insurer if such association is or may become liable to act as a result of the rehabilitation.
History: L. 1991, ch. 125, § 15; July 1.
(b) The rehabilitator may at any time petition the court for an order terminating rehabilitation of an insurer. The court shall also permit the directors of the insurer to petition the court for an order terminating rehabilitation of the insurer and may order payment from the estate of the insurer of such costs and other expenses of such petition as justice may require. If the court finds that rehabilitation has been accomplished and that grounds for rehabilitation under K.S.A. 40-3616 no longer exist, the court shall order that the insurer be restored to possession of such insurer's property and the control of the business. The court may also make that finding and issue that order at any time upon such court's own motion.
History: L. 1991, ch. 125, § 16; July 1.
(a) Of any grounds for an order of rehabilitation as specified in K.S.A. 40-3616, whether or not there has been a prior order directing the rehabilitation of the insurer;
(b) that the insurer is insolvent; or
(c) that the insurer is in such condition that the further transaction of business would be hazardous, financially or otherwise, to its policyholders, its creditors or the public.
History: L. 1991, ch. 125, § 17; July 1.
(b) Upon issuance of the order, the rights and liabilities of any such insurer and of its creditors, policyholders, shareholders, members and all other persons interested in such insurer's estate shall become fixed as of the date of entry of the order of liquidation, except as provided in K.S.A. 40-3623 and 40-3638.
(c) At the time of petitioning for an order of liquidation, or at any time thereafter, the commissioner, after making appropriate findings of an insurer's insolvency, may petition the court for a judicial declaration of such insolvency. After providing such notice and hearing as it deems proper, the court may make the declaration.
(d) Any order issued under this section shall require accounting to the court by the liquidator. Accounts shall be at such intervals as the court specifies in its order.
(e) (1) If an order of liquidation is appealed, the commissioner may request the court to approve an appeal pendency plan for the continued performance of the defendant company's policy claims obligations including, but not limited to, the duty to defend insured's under liability policies, during the pendency of an appeal. No action shall be against the commissioner or any of the commissioner's deputies, agents, clerks, assistants or attorneys by any party based on preference in an appeal pendency plan approved by the court.
(2) The appeal pendency plan shall not supersede nor affect the obligations of any insurance guaranty decision.
(3) Any such plans shall provide for equitable adjustments to be made by the liquidator to any distributions of assets to guaranty associations, in the event that the liquidator pays claims from assets of the estate, which would otherwise be the obligations of any particular guaranty association but for the appeal of the order of liquidation, such that all guaranty associations equally benefit on a pro rata basis from the assets of the estate. Further, in the event an order of liquidation is set aside upon any appeal, the company shall not be released from delinquency proceedings unless and until all funds advanced by any guaranty association, including reasonable administrative expenses in connection therewith relating to obligations of the company, shall be repaid in full, together with interest at the judgment rate of interest or unless an arrangement for repayment thereof has been made with the consent of all applicable guaranty associations.
History: L. 1991, ch. 125, § 18; July 1.
(1) A period of 30 days from the date of entry of the liquidation orders;
(2) the expiration of the policy coverage;
(3) the date when the insured has replaced the insurance coverage with equivalent insurance in another insurer or otherwise terminated the policy; or
(4) the liquidator has effected a transfer of the policy obligation pursuant to K.S.A. 40-3625(a)(9).
(b) An order or liquidation under K.S.A. 40-3622 shall terminate coverages at the time specified in subsection (a) for purposes of any other statute.
(c) Policies of life or health insurance or annuities shall continue in force for such period and under such terms as is provided for by any applicable guaranty association or foreign guaranty association.
(d) Policies of life or health insurance or annuities or any period or coverage of such policies not covered by a guaranty association or foreign guaranty association shall terminate under subsections (a) and (b).
History: L. 1991, ch. 125, § 19; July 1.
(b) permitting the sale of the corporate existence of a domestic insurer, together with any of its licenses to do business, despite the entry of an order of liquidation. The court may permit the sale of such corporate existence upon or after the granting of a liquidation order. The proceeds from the sale of the corporation shall become a part of the general assets of the estate in liquidation. The corporation and its licenses shall thereafter be free and clear from the claims or interests of all claimants, creditors, policyholders and stockholders of the corporation under liquidation. If permission to sell the corporation is not granted, the court shall order dissolution of the corporation as provided in subsection (a).
History: L. 1991, ch. 125, § 20; L. 1993, ch. 6, § 1; July 1.
(1) To appoint a special deputy or deputies to act for the liquidator under this act, and to determine reasonable compensation for such deputies. The special deputy shall have all powers of the liquidator granted by this section. The special deputy shall serve at the pleasure of the liquidator;
(2) to employ employees and agents, legal counsel, actuaries, accountants, appraisers, consultants and other personnel necessary to assist in the liquidation;
(3) to appoint an advisory committee of policyholders, claimants or other creditors including guaranty associations should such a committee be deemed necessary. Such committee shall serve at the pleasure of the commissioner and shall serve without compensation other than reimbursement for personal travel and per diem living expenses. No other committee of any nature shall be appointed by the commissioner or the court in liquidation proceedings conducted under this act;
(4) to fix the reasonable compensation of employees and agents, legal counsel, actuaries, accountants, appraisers and consultants with the approval of the court;
(5) to pay reasonable compensation to persons appointed and to defray from the funds or assets of the insurer all expenses of taking possession of, conserving, conducting, liquidating, disposing of, or otherwise dealing with the business and property of the insurer;
(6) to hold hearings, to subpoena witnesses to compel their attendance, to administer oaths, to examine any person under oath, and to compel any person to subscribe to testimony of the person after the testimony has been correctly reduced to writing; and in connection therewith to require the production of any books, papers, records or other documents which are relevant to the inquiry. Such hearings shall be held in accordance with the Kansas administrative procedure act;
(7) to audit the books and records of all agents of the insurer insofar as those records relate to the business activities of the insurer;
(8) to collect all debts and moneys due and claims belonging to the insurer, wherever located, and for this purpose:
(A) To institute timely action in other jurisdictions, in order to forestall garnishment and attachment proceedings against such debts;
(B) to do such other acts as are necessary or expedient to collect, conserve or protect such insurer's assets or property, including the power to sell, compound, compromise or assign debts for purposes of collection upon reasonable terms and conditions; and
(C) to pursue any creditor's remedies available to enforce claims;
(9) to conduct public and private sales of the property of the insurer;
(10) to use assets of the estate of an insurer under a liquidation order to transfer policy obligations to a solvent assuming insurer, if the transfer can be arranged without prejudice to applicable priorities under K.S.A. 40-3641;
(11) to acquire, hypothecate, encumber, lease, improve, sell, transfer, abandon or otherwise dispose of or deal with, any property of the insurer at its market value or upon such terms and conditions as are fair and reasonable. The liquidator shall also have power to execute, acknowledge and deliver any and all deeds, assignments, releases and other instruments necessary or proper to effectuate any sale of property or other transaction in connection with the liquidation;
(12) to borrow money on the security of the insurer's assets or without security and to execute and deliver all documents necessary to that transaction for the purpose of facilitating the liquidation. Any such funds borrowed may be repaid as an administrative expense and have priority over any other claims in class 1 under the priority of distribution;
(13) to enter into such contracts as are necessary to carry out the order to liquidate, and to affirm or disavow any contracts to which the insurer is a party;
(14) to continue to prosecute and to institute in the name of the insurer or in the liquidator's name any and all suits and other legal proceedings, in this state or outside this state, and to abandon the prosecution of unprofitable claims. If the insurer is dissolved under K.S.A. 40-3624, the liquidator shall have the power to apply to any court in this state or elsewhere for leave to substitute such liquidator for the insurer as plaintiff;
(15) to prosecute any action which may exist on behalf of the creditors, members, policyholders or shareholders of the insurer against any officer of the insurer, or any other person;
(16) to remove any or all records and property of the insurer to the offices of the commissioner or to such other place as may be convenient for the purposes of efficient and orderly execution of the liquidation. Guaranty associations and foreign guaranty associations shall have such reasonable access to the records of the insurer as is necessary for them to carry out their statutory obligations;
(17) to deposit in one or more banks in this state such sums as are required for meeting current administration expenses and dividend distributions;
(18) to invest all sums not currently needed, unless the court orders otherwise;
(19) to file any necessary documents for record in the office of any register of deeds or record office in this state or elsewhere where property of the insurer is located;
(20) to assert all defenses available to the insurer as against third persons, including statutes of limitation, statutes of frauds and the defense of usury. A waiver of any defense by the insurer after a petition in liquidation has been filed shall not bind the liquidator. Whenever a guaranty association or foreign guaranty association has an obligation to defend any suit, the liquidator shall give precedence to such obligation and may defend only in the absence of a defense by such guaranty associations;
(21) to exercise and enforce all the rights, remedies and powers of any creditor, shareholder, policyholder or member; including any power to avoid any transfer or lien that may be given by the general law and that is not included with K.S.A. 40-3629 through 40-3631;
(22) to intervene in any proceeding wherever instituted that might lead to the appointment of a receiver or trustee, and to act as the receiver or trustee whenever the appointment is offered;
(23) to enter into agreements with any receiver or commissioner of any other state relating to the rehabilitation, liquidation, conservation or dissolution of an insurer doing business in both states; and
(24) to exercise all powers now held or hereafter conferred upon receivers by the laws of this state not inconsistent with the provisions of this act.
(b) The enumeration, in this section, of the powers and authority of the liquidator shall not be construed as limitation upon the liquidator, nor shall it exclude in any manner the right to do such other acts not specifically enumerated or otherwise provided for, as may be necessary or appropriate for the accomplishment of or in aid of the purpose of liquidation.
(c) Notwithstanding the powers of the liquidator as stated in subsections (a) and (b), the liquidator shall have no obligation to defend claims or to continue to defend claims subsequent to the entry of a liquidation order.
History: L. 1991, ch. 125, § 21; July 1.
(1) To the insurance commissioner of each jurisdiction in which the insurer is doing business;
(2) to any guaranty association or foreign guaranty association which is or may become obligated as a result of the liquidation;
(3) to all insurance agents of the insurer;
(4) to all persons known or reasonably expected to have claims against the insurer including all policyholders, at their last known address as indicated by the records of the insurer; and
(5) by publication in a newspaper of general circulation in the county in which the insurer has its principal place of business and in such other locations as the liquidator deems appropriate.
(b) Except as otherwise established by the liquidator with approval of the court, notice to potential claimants under subsection (a) shall require claimants to file with the liquidator their claims together with proper proofs thereof under K.S.A. 40-3637, on or before a date the liquidator shall specify in the notice. The liquidator need not require persons claiming cash surrender values or other investment values in life insurance and annuities to file a claim. All claimants shall have a duty to keep the liquidator informed of any changes of address.
(c) If notice is given in accordance with this section, the distribution of assets of the insurer under this act shall be conclusive with respect to all claimants, whether or not they receive notice.
History: L. 1991, ch. 125, § 22; July 1.
(b) The liquidator, upon or after an order for liquidation, within two years or such other longer time as applicable law may permit, may institute an action or proceeding on behalf of the estate of the insurer upon any cause of action against which the period of limitation fixed by applicable law has not expired at the time of the filing of the petition upon which such order is entered. Where, by any agreement, a period of limitation is fixed for instituting a suit or proceeding upon any claim, or for filing any claim, proof of claim, proof of loss, demand, notice, or the like, or where in any proceeding, judicial or otherwise, a period of limitation is fixed, either in the proceeding or by applicable law, for taking any action, filing any claim or pleading, or doing any act, and where in any such case the period had not expired at the date of the filing of the petition, the liquidator, for the benefit of the estate, may take any such action or do any such act, required of or permitted to the insurer, within a period of 180 days subsequent to the entry of an order for liquidation, or within such further period as is shown to the satisfaction of the court not to be unfairly prejudicial to the other party.
(c) No statute of limitation or defense of laches shall run with respect to any action against an insurer between the filing of a petition for liquidation against an insurer and the denial of the petition. Any action against the insurer that might have been commenced when the petition was filed may be commenced for at least 60 days after the petition is denied.
(d) Any guaranty association or foreign guaranty association shall have standing to appear in any court proceeding concerning the liquidation of an insurer if such association is or may become liable to act as a result of the liquidation.
History: L. 1991, ch. 125, § 23; July 1.
(b) A submission to the court for disbursement of assets in accordance with K.S.A. 40-3637 fulfills the requirements of subsection (a).
History: L. 1991, ch. 125, § 24; July 1.
(b) (1) A transfer of property other than real property shall be deemed to be made or suffered when it becomes so far perfected that no subsequent lien obtainable by legal or equitable proceedings on a simple contract could become superior to the rights of the transferee.
(2) A transfer of real property shall be deemed to be made or suffered 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) A transfer which creates an equitable lien shall not be deemed to be perfected if there are available means by which a legal lien could be created.
(4) Any transfer not perfected prior to the filing of a petition for liquidation shall be deemed to be made immediately before the filing of the successful petition.
(5) The provisions of this subsection apply whether or not there are or were creditors who might have obtained any liens or persons who might have become bona fide purchasers.
(c) Any transaction of the insurer with a reinsurer shall be deemed fraudulent and may be avoided by the receiver under subsection (a) if:
(1) The transaction consists of the termination, adjustment or settlement of a reinsurance contract in which the reinsurer is released from any part of its duty to pay the originally specified share of losses that had occurred prior to the time of the transactions, unless the reinsurer gives a present fair equivalent value for the release; and
(2) any part of the transaction took place within one year prior to the date of filing of the petition through which the receivership was commenced.
(d) Every person receiving any property from the insurer or any benefit thereof which is a fraudulent transfer under subsection (a) shall be personally liable therefor and shall be bound to account to the liquidator.
History: L. 1991, ch. 125, § 25; July 1.
(b) After a petition for rehabilitation or liquidation has been filed and before either the receiver takes possession of the property of the insurer or an order of rehabilitation or liquidation is granted:
(1) A transfer of any of the property of the insurer, other than real property, made to a person acting in good faith shall be valid against the receiver if made for a present fair equivalent value, or, if not made for a present fair equivalent value, then to the extent of the present consideration actually paid therefor, for which amount the transferee shall have a lien on the property so transferred.
(2) A person indebted to the insurer or holding property of the insurer, if acting in good faith, may pay the indebtedness or deliver the property, or any part thereof, to the insurer or upon the insurer's order, with the same effect as if the petition were not pending.
(3) A person having actual knowledge of the pending rehabilitation or liquidation shall be deemed not to act in good faith.
(4) A person asserting the validity of a transfer under this section shall have the burden of proof. Except as elsewhere provided in this section, no transfer by or on behalf of the insurer after the date of the petition for liquidation by any person other than the liquidator shall be valid against the liquidator.
(c) Every person receiving any property from the insurer or any benefit thereof which is a fraudulent transfer under subsection (a) shall be personally liable therefor and shall be bound to account to the liquidator.
(d) Nothing in this act shall impair the negotiability of currency or negotiable instruments.
History: L. 1991, ch. 125, § 26; July 1.
(2) Any preference may be avoided by the liquidator if:
(A) The insurer was insolvent at the time of the transfer;
(B) the transfer was made within four months before the filing of the petition;
(C) the creditor receiving the preference or to be benefited thereby or the creditor's agent acting with reference thereto 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
(D) the creditor receiving the preference was an officer, or any employee or attorney or other person who was in fact in a position of comparable influence with the insurer to an officer whether or not such creditor held such 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.
(3) Where 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 where a bona fide purchaser or lienor has given less than fair equivalent value, such person shall have a lien upon the property to the extent of the consideration actually given. Where 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 shall pass to the liquidator.
(b) (1) A transfer of property other than real property shall be deemed to be made or suffered when such transfer becomes so far perfected that no subsequent lien obtainable by legal or equitable proceedings on a simple contract could become superior to the rights of the transferee.
(2) A transfer of real property shall be deemed to be made or suffered when such transfer becomes so far perfected that no subsequent bona fide purchaser from the insurer could obtain rights superior to the rights of the transferee.
(3) A transfer which creates an equitable lien shall not be deemed to be perfected if there are available means by which a legal lien could be created.
(4) A transfer not perfected prior to the filing of a petition for liquidation shall be deemed to be made immediately before the filing of the successful petition.
(5) 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.
(c) (1) A lien obtainable by legal or equitable proceedings upon a simple contract is one arising in the ordinary course of such 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 which under applicable law are given a special priority over other liens which are prior in time.
(2) 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 (b), if such 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. Such a lien could not, however, become superior and such a purchase could not create superior rights for the purpose of subsection (b) through any actions subsequent to the obtaining of such a lien or subsequent to such a purchase which requires the agreement or concurrence of any third party or which require any further judicial action or ruling.
(d) A transfer of property for or on account of a new and contemporaneous consideration which is deemed under subsection (b) to be made or suffered after the transfer because of delay in perfecting such transfer does not thereby 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 law, whichever is less. A transfer to secure a future loan, if such a loan is actually made, or a transfer which becomes security for a future loan, shall have the same effect as a transfer for or on account of a new and contemporaneous consideration.
(e) If any lien deemed voidable under subsection (a)(2) 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 act which results in a liquidation order, the indemnifying transfer or lien shall also be deemed voidable.
(f) The property affected by any lien deemed voidable under subsections (a) and (e) shall be discharged from such lien, and that property and any of the indemnifying property transferred to or for the benefit of a surety shall pass to the liquidator, except that the court may on due notice order any such lien to be preserved for the benefit of the estate and the court may direct that such conveyance be executed as may be proper or adequate to evidence the title of the liquidator.
(g) The district court of Shawnee county shall have summary jurisdiction of any proceeding by the liquidator to hear and determine the rights of any parties under this section. Reasonable notice of any hearing in the proceeding shall be given to all parties in interest, including the obligee of a releasing bond or other like obligation. Where 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 any party in interest, shall in the same proceeding ascertain the value of the property or lien, and if the value is less than the amount for which the property is indemnity or than the amount of the lien, the transferee or lienholder may elect to retain the property or lien upon payment of its value, as ascertained by the court, to the liquidator, within such reasonable times as the court shall fix.
(h) The liability of the surety under a releasing bond or other like obligation shall be discharged to the extent of the value of the indemnifying property recovered or the indemnifying lien nullified and avoided by the liquidator, or where the property is retained under subsection (g) to the extent of the amount paid to the liquidator.
(i) If a creditor has been preferred, and afterward in good faith gives the insurer further credit without security of any kind, for property which becomes a part of the insurer's estate, the amount of the new credit remaining unpaid at the time of the petition may be setoff against the preference which would otherwise be recoverable.
(j) If an insurer shall, directly or indirectly, within four months before the filing of a successful petition for liquidation under this act, or at any time in contemplation of a proceeding to liquidate such insurer, pay money or transfer property to an attorney-at-law for services rendered or to be rendered, the transactions may be examined by the court on its own motion or shall be examined by the court on petition of the liquidator and shall 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 liquidator for the benefits of the estate provided that where the attorney is in a position of influence with the insurer or an affiliate thereof payment of any money or the transfer of any property to the attorney-at-law for services rendered or to be rendered shall be governed by the provision of subsection (a)(2)(D).
(k) (1) Every officer, manager, employee, shareholder, member, subscriber, attorney or any other person acting on behalf of the insurer who knowingly participates in giving any preference when such person has reasonable cause to believe the insurer is or is about to become insolvent at the time of the preference shall be personally liable to the liquidator for the amount of the preference. It is permissible to infer that there is a reasonable cause to so believe if the transfer was made within four months before the date of filing of this successful petition for liquidation.
(2) Every person receiving any property from the insurer or the benefit thereof as a preference voidable under subsection (a) shall be personally liable therefor and shall be bound to account to the liquidator.
(3) Nothing in this subsection shall prejudice any other claim by the liquidator against any person.
History: L. 1991, ch. 125, § 27; July 1.
(b) A claim allowable under subsection (a) by reason of the avoidance, whether voluntary or involuntary, or a preference, lien, conveyance, transfer, assignment or encumbrance, may be filed as an excused last filing under K.S.A. 40-3640 if filed within 30 days from the date of the avoidance, or within the further time allowed by the court under subsection (a).
History: L. 1991, ch. 125, § 28; July 1.
(b) No setoff, except as provided in K.S.A. 40-3602, and amendments thereto, shall be allowed in favor of any person where:
(1) The obligation of the insurer to the person would not at the date of the filing of a petition for liquidation entitle the person to share as a claimant in the assets of the insurer;
(2) the obligation of the insurer to the person was purchased by or transferred to the person with a view to its being used as a setoff;
(3) the obligation of the insurer is owed to an affiliate of such person, or any other entity or association other than the person;
(4) the obligation of the person is owed to an affiliate of the insurer, or any other entity or association other than the insurer;
(5) the obligations of the person is to pay an assessment levied against the members or subscribers of the insurer, or is to pay a balance upon a subscription to the capital stock of the insurer, or is in any other way in the nature of a capital contribution; or
(6) the obligations between the person and the insurer arise out of transactions where either the person or the insurer has assumed risks and obligations from the other party and then has ceded back to that party substantially the same risks and obligations.
(c) The receiver shall provide persons with accounting statements identifying debts which are currently due and payable. Accounts currently due and payable as identified by such accounting statements shall be promptly paid to the receiver. However, persons making such payments may setoff against such payments mutual credits currently due and payable by the insurer and may assert setoff of mutual credits which become due and payable from the insurer in the future. Notwithstanding K.S.A. 40-3641, the receiver shall promptly and fully refund to the extent of the person's prior payments any mutual credits so asserted that may become due and payable to the person by the insurer.
(d) This section shall apply to all contracts entered into, renewed, extended or amended on or after the effective date of this act.
History: L. 1991, ch. 125, § 29; July 1.
History: L. 1991, ch. 125, § 30; L. 1999, ch. 66, § 2; July 1.
(b) Such proposal shall at least include provisions for:
(1) Reserving amounts for the payment of expenses of administration and the payment of claims of secured creditors, to the extent of the value of the security held, and claims falling within the priorities established in K.S.A. 40-3641, Class 1 and Class 2;
(2) disbursement of the assets marshaled to date and subsequent disbursement of assets as they become available;
(3) equitable allocation of disbursements to each of the guaranty associations and foreign guaranty associations entitled thereto;
(4) the securing by the liquidator from each of the associations entitled to disbursements pursuant to this section of an agreement to return to the liquidator such assets, together with income earned on assets previously disbursed, as may be required to pay claims of secured creditors and claims falling within the priorities established in K.S.A. 40-3641 in accordance with such priorities. No bond shall be required of any such association; and
(5) a full report to be made by each association to the liquidator accounting for all assets so disbursed to the association, all disbursements made therefrom, any interest earned by the association on such assets and any other matter as the court may direct.
(c) The liquidator's proposal shall provide for disbursements to the associations in amounts estimated at least equal to the claim payments made, or to be made thereby, for which such associations could assert a claim against the liquidator, and shall further provide that if the assets available for disbursement from time to time do not equal or exceed the amount of such claim payments made or to be made by the association then disbursements shall be in the amount of available assets.
(d) The liquidator's proposal shall, with respect to an insolvent insurer writing life or health insurance or annuities, provide for disbursements of assets to any guaranty association or any foreign guaranty association covering life or health insurance or annuities or to any other entity or organization reinsuring, assuming or guaranteeing policies or contracts of insurance under the acts creating such associations.
(e) Notice of such application shall be given to the association in each state and to the commissioners of insurance of each of the states. Any such notice shall be deemed to have been given when deposited in the United States certified mails, first-class postage prepaid, at least 15 days prior to submission of such application to the court. Action on the application may be taken by the court provided the above required notice has been given and provided further, that the liquidator's proposal complies with subsection (b)(1) and (2).
History: L. 1991, ch. 125, § 31; July 1.
(b) The liquidator may permit a claimant making a late filing to share in distributions, whether past or future, as if the claimant were not late, to the extent that any such payment will not prejudice the orderly administration of the liquidation, under the following circumstances:
(1) The existence of the claim was not known to the claimant and that the claim was filed as promptly as reasonably possible after learning of such claim;
(2) a transfer to a creditor was avoided under K.S.A. 40-3629 through 40-3631, or was voluntarily surrendered under K.S.A. 40-3632, and that the filing satisfies the conditions of K.S.A. 40-3632; or
(3) the valuation under K.S.A. 40-3640, of security held by a secured creditor shows a deficiency, which is filed, within 30 days after the valuation.
(c) The liquidator shall permit late filing claims to share in distributions, whether past or future, as if they were not late, if such claims are claims of a guaranty association or foreign guaranty association for reimbursement of covered claims paid or expenses incurred, or both, subsequent to the last day for filing where such payments were made and expenses incurred as provided by law.
(d) The liquidator may consider any claim filed late which is not covered by subsection (b), and permit it to receive distributions which are subsequently declared on any claims of the same or lower priority if the payment does not prejudice the orderly administration of the liquidation. The late-filing claimant shall receive, at each distribution, the same percentage of the amount allowed on such claim as is then being paid to claimants of any lower priority. This shall continue until the claim has been paid in full.
History: L. 1991, ch. 125, § 32; July 1.
(1) The particulars of the claim including the consideration given for it;
(2) the identity and amount of the security on the claim;
(3) the payments made on the debt, if any;
(4) that the sum claimed is justly owing and that there is no setoff, counterclaim or defense to the claim;
(5) any right of priority of payment or other specific right asserted by the claimants;
(6) a copy of the written instrument which is the foundation of the claim; and
(7) the names and addresses of the claimant and the attorney who represents the claimant, if any.
(b) No claim need be considered or allowed if it does not contain all the information in subsection (a) which may be applicable. The liquidator may require that a prescribed form be used, and may require that other information and documents be included.
(c) At any time, the liquidator may request the claimant to present information or evidence supplementary to that required under subsection (a) and may take testimony under oath, require production of affidavits or depositions, or otherwise obtain additional information or evidence.
(d) No judgment or order against an insured or the insurer entered after the date of filing of a successful petition for liquidation, and no judgment or order against an insured or the insurer entered at any time by default or by collusion need be considered as evidence of liability or of quantum of damages. No judgment or order against an insured or the insurer entered within four months before the filing of the petition need be considered as evidence of liability or of the quantum of damages.
(e) All claims of a guaranty association or foreign guaranty association shall be in such form and contain such substantiation as may be agreed to by the association and the liquidator.
History: L. 1991, ch. 125, § 33; July 1.
(b) A claim may be allowed even if contingent, if it is filed in accordance with K.S.A. 40-3636. It may be allowed and may participate in all distributions declared after it is filed to the extent that it does not prejudice the orderly administration of the liquidation.
(c) Claims that are due except for the passage of time shall be treated as absolute claims are treated, except such claims may be discounted at the legal rate of interest.
(d) Claims made under employment contracts by directors, principal officers, or persons in fact performing similar functions or having similar powers are limited to payment for services rendered prior to the issuance of any order of rehabilitation or liquidation under K.S.A. 40-3617 or 40-3622.
History: L. 1991, ch. 125, § 34; July 1.
(b) Whenever objections are filed with the liquidator and the liquidator does not alter denial of the claim as a result of the objections, the liquidator shall ask the court for a hearing as soon as practicable and give notice as set by the court of the hearing to the claimant or the claimant's attorney and to any other persons directly affected. The matter may be heard by the court or by a court-appointed referee who shall submit findings of fact along with recommendation.
(c) Whenever a creditor whose claim against an insurer is secured, in whole or in part, by the undertaking of another person, fails to prove and file that claim the other person may do so in the creditor's name, and shall be subrogated to the rights of the creditor, whether the claim has been filed by the creditor or by the person in the creditor's name, to the extent that the person discharges the undertaking. In the absence of an agreement with the creditor to the contrary, the other person shall not be entitled to any distribution; however, until the amount paid to the credit on the undertaking plus the distributions paid on the claim from the insurer's estate to the creditor equals the amount of the entire claim of the creditor. Any excess received by the creditor shall be held by such creditor in trust for such other person, the term "other person," as used in this section is not intended to apply to a guaranty association or foreign guaranty association.
History: L. 1991, ch. 125, § 35; July 1.
(1) By converting the same into money according to the terms of the agreement pursuant to which the security was delivered to such creditors; or
(2) by agreement, arbitration, compromise or litigation between the creditor and the liquidator.
(b) The determination shall be under the supervision and control of the court with due regard for the recommendation of the liquidator. The amount so determined shall be credited upon the secured claim, and any deficiency shall be treated as an unsecured claim. If the claimant surrenders the security to the liquidator, the entire claim shall be allowed as if unsecured.
History: L. 1991, ch. 125, § 36; July 1.
(a) 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 fees and other professional services rendered in the rehabilitation and liquidation;
(6) the reasonable expenses of a guaranty association or foreign guaranty association in handling claims.
(b) Class 2. All claims under policies including claims for unearned premium or other premium refunds and such 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 other than those claims included in Class 1. All claims under life insurance policies, funding agreements, guaranteed investment contracts, synthetic guaranteed investment contracts 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 an employee shall be treated as a gratuity.
(c) Class 3. Claims of the federal government not included in Class 2.
(d) Class 4. Reasonable compensation to employees for services performed to the extent they do not exceed two months of monetary compensation and represent 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 benefits 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. Where there are no claims and no potential claims of the federal government in the estate, claims in this class will have priority over claims in Class 2 and below.
(e) Class 5. Claims of general creditors including claims of ceding and assuming companies in their capacity as such.
(f) 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 be equal to the class of claims under subsection (i).
(g) Class 7. Claims filed late or any other claims other than claims under subsections (h) and (i).
(h) 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.
(i) Class 9. The claims of shareholders or other owners in their capacity as shareholders.
The provisions of this section, as amended, shall apply to all claims which have not been paid prior to the effective date of this act.
History: L. 1991, ch. 125, § 37; L. 2005, ch. 92, § 5; L. 2005, ch. 186, § 11; July 1.
(b) The court may approve, disapprove or modify the report on claims by the liquidator. Such reports as are not modified by the court within a period of 60 days following submission by the liquidator shall be treated by the liquidator as allowed claims, subject thereafter to later modification or to rulings made by the court pursuant to K.S.A. 40-3639. No claim under a policy of insurance shall be allowed for an amount in excess of the applicable policy limits.
History: L. 1991, ch. 125, § 38; July 1.
History: L. 1991, ch. 125, § 39; July 1.
History: L. 1991, ch. 125, § 40; July 1.
History: L. 1991, ch. 125, § 41; July 1.
History: L. 1991, ch. 125, § 42; July 1.
History: L. 1991, ch. 125, § 43; July 1.
(1) Any of the grounds in K.S.A. 40-3616;
(2) that any of its property has been sequestered by official action in its domiciliary state, or in any other state;
(3) that enough of its property has been sequestered in a foreign country to give reasonable cause to fear that the insurer is or may become insolvent;
(4) (A) that its certificate of authority to do business in this state has been revoked; and
(B) that there are residents of this state with outstanding claims or outstanding policies.
(b) When an order is sought under subsection (a), the court shall cause the insurer to be given such notice and time to respond thereto as is reasonable under the circumstances.
(c) The court may issue the order in whatever terms it shall deem appropriate. The filing or recording of the order with the clerk of the court or the register of deeds of the county in which the principal business of the company is located, shall impart the same notice as a deed, bill of sale or other evidence of title duly filed or recorded with the register of deeds would have imparted.
(d) The conservator may at any time petition for, and the court may grant an order, under K.S.A. 40-3654 to liquidate assets of a foreign or alien insurer under conservation, or, if appropriate, for an order under K.S.A. 40-3656, to be appointed ancillary receiver.
(e) The conservator may at any time petition the court for an order terminating conservation of an insurer. If the court finds that the conservation is no longer necessary, such court shall order that the insurer be restored to possession of its property and the control of the insurer's business. The court may also make such finding and issue such order at any time upon motion of any interested party, but if such motion is denied all costs shall be assessed against such party.
History: L. 1991, ch. 125, § 44; July 1.
(1) Any of the grounds in K.S.A. 40-3616 or 40-3621; or
(2) any of the grounds specified in K.S.A. 40-3648(a)(2) through (4), inclusive.
(b) When an order is sought under subsection (a), the court shall cause the insurer to be given such notice and time to respond thereto as is reasonable under the circumstances.
(c) If it appears to the court that the best interests of creditors, policyholders and the public require, the court may issue an order to liquidate in whatever terms it shall deem appropriate. The filing or recording of the order with the clerk of the court or the register of deeds of the county in which the principal business of the company is located or the county in which its principal office or place of business is located, shall impart the same notice as a deed, bill of sale or other evidence of title duly filed or recorded with the register of deeds would have imparted.
(d) If a domiciliary liquidator is appointed in a reciprocal state while a liquidation is proceeding under this section, the liquidator under this section shall thereafter act as ancillary receiver under K.S.A. 40-3652. If a domiciliary liquidator is appointed in a nonreciprocal state while a liquidation is proceeding under this section, the liquidator under this section may petition the court for permission to act as ancillary receiver under K.S.A. 40-3651.
(e) On the same grounds as are specified in subsection (a), the commissioner may petition any appropriate federal district court to be appointed receiver to liquidate that portion of the insurer's assets and business over which the court will exercise jurisdiction, or any lesser part thereof the commissioner deems desirable for the protection of the policyholders and creditors in this state.
(f) The court may order the commissioner, when the assets of a foreign or alien insurer have been liquidated under this section, to pay claims of residents of this state against the insurer under such rules as to the liquidation of insurers under this act as are otherwise compatible with the provisions of this section.
History: L. 1991, ch. 125, § 45; July 1.
(b) If a domiciliary liquidator is appointed for an insurer not domiciled in a reciprocal state, the commissioner shall be vested by operation of law with the title to all of the property, contracts and right of action, and all of the books, accounts and other records of the insurer located in this state, at the same time that the domiciliary liquidator is vested with title in the domicile. The commissioner may petition for a conservation or liquidation order under K.S.A. 40-3648 or 40-3649, for an ancillary receivership under K.S.A. 40-3651, or after approval by the court, may transfer title to the domiciliary liquidator, as the interests of justice and the equitable distribution of the assets require.
(c) Claimants residing in this state may file claims with the liquidator or ancillary receiver, if any, in this state or with the domiciliary liquidator, if the domiciliary law permits. The claims must be filed on or before the last date fixed for the filing of claims in the domiciliary liquidation proceedings.
History: L. 1991, ch. 125, § 46; July 1.
(1) If such liquidator finds there are sufficient assets of the insurer located in this state to justify the appointment of an ancillary receiver;
(2) if the protection of creditors or policyholders in this state so requires.
(b) The court may issue an order appointing an ancillary receiver in whatever terms the court deems appropriate. The filing or recording of the order with the register of deeds in this state imparts the same notice as a deed, bill of sale or other evidence of title duly filed or recorded with the register of deeds.
(c) When a domiciliary liquidator has been appointed in a reciprocal state, then the ancillary receiver appointed in this state, whenever necessary, may aid and assist the domiciliary liquidator in recovering assets of the insurer located in this state. The ancillary receiver, as soon as practicable, shall liquidate from its securities those special deposit claims and secured claims which are proved and allowed in the ancillary proceedings in this state, and shall pay the necessary expenses of the proceedings. Such liquidator shall promptly transfer all remaining assets, books, accounts and records to the domiciliary liquidator. Subject to this section, the ancillary receiver and deputies shall have the same powers and be subject to the same duties with respect to the administration of assets as a liquidator of an insurer domiciled in this state.
(d) When a domiciliary liquidator has been appointed in this state, ancillary receivers appointed in reciprocal states shall have, as to assets and books, accounts, and other records in their respective states, corresponding rights, duties and powers to those provided in subsection (c) for ancillary receivers appointed in this state.
History: L. 1991, ch. 125, § 47; July 1.
History: L. 1991, ch. 125, § 48; July 1.
(b) Claims belonging to claimants residing in reciprocal states may be proved either in the liquidation proceeding in this state as provided in this act, or in ancillary proceedings, if any, in the reciprocal states. If notice of the claims and opportunity to appear and be heard is afforded the domiciliary liquidator of this state as provided in K.S.A. 40-3654(b) with respect to ancillary proceedings, the final allowance of claims by the courts in ancillary proceedings in reciprocal states shall be conclusive as to amount and as to priority against special deposits or other security located in such ancillary states, but shall not be conclusive with respect to priorities against general assets under K.S.A. 40-3641.
History: L. 1991, ch. 125, § 49; July 1.
(b) Claims belonging to claimants residing in this state may be proved either in the domiciliary state under the law of the domiciliary state, or in ancillary proceedings, if any, in this state. If a claimant elects to prove such a claim in this state, the claimant shall file the claim with the liquidator in the manner provided in K.S.A. 40-3636 and 40-3637. The ancillary receiver shall make a recommendation to the court as under K.S.A. 40-3642, and also shall arrange a date for hearing if necessary under K.S.A. 40-3639 and shall give notice to the liquidator in the domiciliary state, either by certified mail or by personal service at least 40 days prior to the date set for hearing. If the domiciliary liquidator, within 30 days after the giving of such notice, gives notice in writing to the ancillary receiver and to the claimant, either by certified mail or by personal service, of such liquidator's intention to contest the claim, such liquidator shall be entitled to appear or be represented in any proceeding in this state involving the adjudication of the claim.
(c) The final allowance of the claim by the courts of this state shall be accepted as conclusive as to amount and as to priority against special deposits or other security located in this state.
History: L. 1991, ch. 125, § 50; July 1.
History: L. 1991, ch. 125, § 51; July 1.
(b) The owners of special deposit claims against an insurer for which a liquidator is appointed in this state or any other state shall be given priority against the special deposits in accordance with K.S.A. 40-222b and amendments thereto. If there is a deficiency in any deposit, so that claims secured by it are not fully discharged from it, the claimants may share in the general assets, but the sharing shall be deferred until general creditors, and also claimants against other special deposits who have received smaller percentages from their respective special deposits, have been paid percentages of their claims equal to the percentage paid from the special deposit.
(c) The owner of a secured claim against an insurer for which a liquidator has been appointed in this state or any other state may surrender security and file a claim as a general creditor, or the claim may be discharged by resort to the security in accordance with K.S.A. 40-3640, in which case the deficiency, if any, shall be treated as a claim against the general assets of the insurer on the same basis as claims of unsecured creditors.
History: L. 1991, ch. 125, § 52; July 1.
History: L. 1991, ch. 125, § 53; July 1.
History: L. 1991, ch. 125, § 54; July 1.