H. B. 2914


(By Delegates H. White, Hrutkay and R. M. Thompson)

[Introduced February 7, 2003 ; referred to the

Committee on Banking and Insurance then the Judiciary.]
A BILL to repeal sections fourteen through forty-two, article twenty-four, chapter thirty-three of the code of West Virginia, as amended; to repeal section twenty-seven, article ten of said chapter; to amend article twenty-four of chapter thirty-three by adding thereto a new section, designated section fourteen; to amend and reenact sections one, two, three, four, ten, eleven, thirteen, fourteen, eighteen, nineteen-a, twenty-six, twenty-eight, twenty-nine, thirty, thirty-six, thirty-eight and thirty-nine of article ten of said chapter; and to amend and reenact article ten of said chapter by adding thereto ten new sections, designated sections four-a, four-b, four-c, four-d, four-e, twenty-six-a, twenty-six-b, twenty-six-c, twenty-six-d, and forty, all relating to the rehabilitation and liquidation of insurers subject to the regulatory authority of the West Virginia insurance commissioner; revising delinquency proceedings; clarifying what parties will be affected upon the effective date of the revisions; expanding the liquidators powers, expediting appeals, modifying current state law relative to liquidation proceedings so as to create conformity with recent federal case law and making numerous technical changes.

Be it enacted by the Legislature of West Virginia:
That sections fourteen through forty-two, article twenty-four, chapter thirty-three of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be repealed; that section twenty-seven, article ten of said chapter be repealed; that article twenty-four, chapter thirty-three of the said code be amended by adding thereto a new section, designated section fourteen; that sections one, two, three, four, ten, eleven, thirteen, fourteen, eighteen, nineteen-a, twenty-six, twenty-eight, twenty-nine, thirty, thirty-six, thirty-eight and thirty-nine of article ten, chapter thirty-three of said chapter be amended and reenacted; and that article ten of said chapter be amended by adding thereto ten new sections, designated sections four-a, four-b, four-c, four-d, four-e, twenty-six-a, twenty-six-b, twenty-six-c, twenty-six-d, and forty, all to read as follows:
ARTICLE 10. REHABILITATION AND LIQUIDATION.
§33-10-1. Definitions.
For the purpose of this article the following definitions shall apply:
(a) "Impairment" means a financial situation in which, based upon the financial information which would be required by this chapter for the preparation of the insurer's annual statement, the assets of an insurer are less than the sum of all of its liabilities and required reserves including any minimum capital and or surplus or both required of that insurer by this chapter so as to maintain its authority to transact the kinds of business or insurance it is so authorized to transact.
(b) "Insolvency" or "insolvent" means a financial situation in which, based upon the financial information which would be required by this chapter for the preparation of the insurer's annual statement, the assets of the insurer are less than the sum of all of its liabilities and required reserves.
(c) "Insurer" means any person, firm, corporation, association or aggregation of persons doing an insurance business and which is or has been subject to the insurance supervisory authority of, or to liquidation, rehabilitation, reorganization or conservation by the commissioner or the equivalent insurance supervisory official of another state. For purposes of this article, all persons, corporations, associations or entities to whom this article applies and which are subject to delinquency proceedings commenced in this state shall be considered "insurers."
(d) "Delinquency proceeding" means any proceeding commenced against an insurer pursuant to this article for the purpose of liquidating, rehabilitating, reorganizing or conserving such insurer, and any summary proceeding under section forty-six of this article. "Formal delinquency proceeding" means any liquidation or rehabilitation proceeding.
(e) "State" means any state, district or territory of the United States.
(f) "Foreign country" means any other jurisdiction not in any state.
(g) "Domiciliary state" means the state in which an insurer is incorporated or organized, or in the case of an alien insurer as defined in section eight, article one of this chapter, the state in which such insurer, having become authorized to do business in such state, has at the commencement of delinquency proceedings, the largest amount of its assets held in trust and assets held on deposit for the benefit of its policyholders or policyholders and creditors in the United States or its state of entry.
(h) "Ancillary state" means any state other than a domiciliary state.
(i) "Reciprocal state" means any state other than this state in which in substance and effect the provisions of the Uniform Insurers Liquidation Act, as defined in section twenty-one of this article, are in force, including the and in which provisions are in force requiring that the insurance commissioner or equivalent insurance supervisory official be the receiver of a delinquent insurer, and in which some provision exists for the avoidance of fraudulent conveyances and preferential transfers.
(j) "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 a limited class or classes of persons, and as to such specifically encumbered property the term includes all such property or its proceeds in excess of the amount necessary to discharge the sum or sums secured thereby. Assets held in trust and assets held on deposit for the security or benefit of all policyholders or all policyholders and creditors in more than a single state shall be deemed considered general assets.
(k) "Preferred claim" means any claim with respect to which the terms of this article accord priority of payments from the general assets of the insurer.
(l) "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 general assets.
(m) "Secured claim" means any claim secured by mortgage, trust deed, pledge, deposit as security, escrow, or otherwise, but not including special deposit claim or claims against general assets. The term also includes claims which more than four months prior to the commencement of delinquency proceedings in the state of the insurer's domicile have become liens upon specific assets by reason of judicial process.
(n) "Receiver" means receiver, liquidator, rehabilitator, or conservator as the context may require.
(o) "Guaranty association" means the West Virginia Insurance Guaranty Association created by article twenty-six of this chapter, the West Virginia Life and Health Insurance Guaranty Association Act created by article twenty-six-a of this chapter, and any other similar entity now or hereafter created by the Legislature of this state for the payment of claims of insolvent insurers.
(p) "Foreign guaranty association" means any similar entities now in existence in or hereafter created by the Legislature of any other state that are similar to the entities described in subsection (o) of this section.
(q) "Surplus" means the amount by which an insurer's assets exceeds its liabilities and required reserves based upon the financial information which would be required by this chapter for the preparation of the insurer's annual statement.
(r) "Affiliate" or a person "affiliated with" a specific person means a person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.
(s) "Control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing ten percent or more of the voting securities of any other person. This presumption may be rebutted by a showing that control does not, in fact, exist.
(t) "Transfer" means the sale and every other and different mode, direct or indirect, of disposing of or of parting with 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 considered a transfer suffered by the debtor.
§33-10-2. Jurisdiction, venue and appeal of delinquency proceedings; exclusive remedy.

(a)  The circuit courts of this state or the judges thereof in vacation are vested with exclusive original jurisdiction of delinquency proceedings under this article, and are authorized to make all necessary and proper orders to carry out the purposes of this article.
(b)  The venue of delinquency proceedings against a domestic insurer shall be in the circuit court of the county of the insurer's principal place of business. The venue of such proceedings against foreign insurers, alien insurers or domestic insurers in which their principal place of business is outside of the state of West Virginia shall be in the circuit court of Kanawha County.
(c)  With the exception of administrative supervision pursuant to article thirty-four of this chapter, delinquency proceedings pursuant to this article shall constitute the sole and exclusive method of liquidating, rehabilitating, reorganizing or conserving an insurer, and no court shall entertain a petition for the commencement of such proceedings unless the same has been filed in the name of the state on the relation of the insurance commissioner.
(d) An appeal shall lie to the West Virginia supreme court of appeals from an order granting or refusing rehabilitation, liquidation, or conservation, and from every other order in delinquency proceedings having the character of a final order as to the particular portion of the proceedings embraced therein. Appeals from orders granting or refusing rehabilitation, liquidation or conservation shall be prosecuted pursuant to section nine of this article.
(e) At any time after an order is made under section ten or eleven of this article, the commissioner may remove the principal office of the insurer proceeded against to Kanawha County. In the event of such removal, the court wherein the proceeding was originally commenced shall, upon the application of the commissioner, direct its clerk to transmit all the pleadings, motions and other papers filed therein with such clerk to the clerk of the circuit court of Kanawha County. The proceeding shall thereafter be subject to the jurisdiction of the Kanawha County circuit court and conducted in the same manner as though it had been commenced in the Kanawha County circuit court.
§33-10-3.  Court's seizure order.
(a) The commissioner may file in the appropriate circuit court of this state, as provided in section two three of this article, a petition alleging, with respect to a domestic insurer:
(1) That there exists exist 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 considered 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 assets, books, accounts, documents, and 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 its business except with the written consent of the commissioner.
(c) The court shall specify in the order what its duration shall be, which shall be such time as the court deems considers necessary for the commissioner to ascertain the condition of the insurer. On motion of either party or on its own motion, the court may from time to time hold such hearings as it deems considers desirable after such notice as it deems considers 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 delinquency proceeding under this article after having had a reasonable opportunity to do so. An order of the court pursuant to a formal proceeding under this article shall ipso facto vacate the seizure order.
(d) Entry of a seizure order under this section shall will 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 the order for a hearing and review of the order. The court shall hold such the hearing and review not more than fifteen days after the request. Subject to the approval of the court, a hearing under this subsection may be held privately in chambers 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 will not stay the effect of any order previously issued by the court.
§33-10-4.  Injunctions and other orders.
(a) Upon application by the commissioner for an order under this article:
(1) The court may without notice issue an injunction restraining the insurer, its officers, directors, stockholders, members, subscribers, agents and all other persons from the transaction of its business or the waste or disposition of its property until the further order of the court.
(2) The court may at any time during a proceeding under this article issue such other injunctions or orders as may be deemed considered necessary to prevent interference with the commissioner or the proceeding, or waste of the assets of the insurer, or the commencement or prosecution of any actions, or the obtaining of preferences, judgments, attachments or other liens, or the making of any levy against the insurer or against its assets or any part thereof.
(3) The court may order any managing general agent or attorney in fact to release to the commissioner any books, records, accounts, documents or other writings relating to the business of such person: Provided, That any of the same or the property of such an agent or attorney shall be returned when no longer necessary to the commissioner or at any time the court after notice and hearing shall so direct.
(b) Any person having possession of and refusing to deliver any of the books, records, or assets of an insurer against whom a seizure order has been issued by the commissioner court shall be guilty of a misdemeanor and punishable by fine not exceeding one thousand dollars or imprisoned not more than one year, or both such fine and imprisonment.
(c) Whenever the commissioner makes any seizure as provided in section three four, it shall be the duty of the sheriff of any county of this state, and of the police department of any municipality therein, to furnish the commissioner, upon demand, with such deputies, patrolmen or officers as may be necessary to assist the commissioner in making and enforcing any such seizure.
(d) Notwithstanding any other provision of law, no bond shall be required of the commissioner as a prerequisite for the issuance of any injunction or restraining order pursuant to this section.
§33-10-4a. Commencement of formal delinquency proceeding.
(a) Any formal delinquency proceeding against a person shall be commenced by filing a petition in the name of the commissioner.
(b) The petition shall state the grounds upon which the proceeding is based and the relief requested, and may include a prayer for restraining orders and injunctive relief as described in section four of this article.
(c) Any petition that prays for a temporary restraining order must be verified by the commissioner or the commissioner's designee, but need not plead or prove irreparable harm or inadequate remedy by law. The commissioner shall provide only such notice as the court may require.
(d) If any temporary restraining order is prayed for:
(1) The court may issue an initial order containing the relief requested;
(2) The order shall state the time and date of its issuance;
(3) The court shall set a time and date for the return of summons, not more than ten days from the time and date of the issuance of the initial order, at which time the person proceeded against may appear before the court for a summary hearing;
(4) The order shall not continue in effect beyond the time and date set for the return of summons, unless the court shall expressly enter one or more orders extending the restraining order; and
(5) The verified petition shall be filed with the clerk of the circuit court and maintained as confidential, except for good cause shown, until service of the petition and summons is effected.
(e) If no temporary restraining order is requested, the court shall cause a summons to be issued. The summons shall specify a return date not more than thirty days after issuance and that an answer to the petition must be filed at or before the return date.
(f) Service of process required pursuant to this article shall be upon the person named in the petition in accordance with the West Virginia rules of civil procedure.
§33-10-4b. Return of summons and summary hearing.
(a) The court shall hold a summary hearing at the time and date for the return of summons.
(b) If a person is not served with the petition and summons and fails to appear for the summary hearing, the court shall:
(1) Continue the summary hearing not more than ten days;
(2) Require the commissioner to make additional or alternative attempts at service of the petition and summons upon the person; and
(3) Extend any restraining order.
(c) Upon a showing of good faith efforts to effect service upon a person who has failed to appear for a continued summary hearing, the court shall order notice of the petition to be published. The order and notice shall specify a return date not less than ten nor more than twenty days after the publication and that the restraining order has been extended to the continued hearing date.
(d) If a person fails to appear for a summary hearing after service of the summons, the court shall enter judgment in favor of the commissioner against that person.
(e) A person who appears for the summary hearing shall file its answer at the hearing and the court shall:
(1) Determine whether to extend any temporary restraining orders pending final judgment; and
(2) Set the case for trial on a date not more then ten days from the summary hearing.
The court shall grant no continuance for filing an answer.
§33-10-4c. Proceedings for expedited trial: continuances, discovery, evidence.

(a) The court shall hear the case at the time and date set forth for trial without a jury and without unnecessary delays. To the extent not inconsistent with other laws or applicable rules, the court shall give precedence to the matter over all other matters. To the extent otherwise authorized by law or applicable rules, the court may assign the matter to other judges if necessary to comply with the need for expedited proceedings under this article.
(b) Continuances for trial shall be granted only in extreme circumstances.
(c) The court shall receive as self-authenticated any of the following when offered by the commissioner:
(1) Certified copies of the financial statements made by the person; and
(2) Certified copies of examination reports of the person made by or on behalf of the commissioner.
(d) The facts contained in any such examination report shall be presumed to be true as of the date of the hearing if the examination was made as of a date not more than two hundred seventy days before the petition was filed. This presumption shall be rebuttable and shall shift the burden of production and persuasion.
(e) Discovery shall be limited to grounds alleged in the petition, and shall be concluded on an expedited basis.
§33-10-4d. Decision and appeals.
(a) The court shall enter judgment within fifteen days after the conclusion of the evidence.
(b) The judgment shall be final when entered. Any appeal shall be prosecuted on an expedited basis and must be taken within five days of entry. No request for reconsideration, review or appeal, and no posting of a bond shall dissolve or stay the judgment.
§33-10-4e. Confidentiality.
(a) In all proceedings and judicial reviews under section four, all records of the insurer, other documents, and all insurance department files and court records and papers, so far as they pertain to or are a part of the record of the proceedings, shall be and remain confidential, and all papers filed with the clerk of the circuit court shall be held by the clerk in a confidential file, except as is necessary to obtain compliance with any order entered in connection with the proceedings, unless and until:
(1) The circuit court, after hearing argument in chambers, shall order otherwise;
(2) The insurer requests that the matter be made public; or
(3) The commissioner applies for an order under sections ten or eleven of this article.
(b) The commissioner may share documents, materials or other information in his or her possession or control pertaining to an insurer that is the subject of a proceeding under this article with other state insurance departments, the national association of insurance commissioners, and federal banking agencies in accordance with section nineteen, article two of this chapter. No waiver of any applicable privilege or claim of confidentiality shall occur as a result of disclosure by the commissioner under this section or as a result of sharing documents, materials or other information pursuant to this subsection.
§33-10-10.  Order of rehabilitation.
(a) An order to rehabilitate a domestic insurer or the United States branch of an alien insurer having trusteed assets in this state shall direct the commissioner forthwith to take possession of the property assets of the insurer and to conduct the business thereof, and to take such steps toward removal of the causes and conditions which have made rehabilitation necessary as the court may direct.
(b) If at any time the commissioner deems that further efforts to rehabilitate the insurer would be useless, he or she may apply to the court for an order of liquidation.
(c) The commissioner, or any interested person upon due notice to the commissioner, at any time may apply to the court for an order terminating the rehabilitation proceedings and permitting the insurer to resume possession of its property and the conduct of its business, but no such order shall be granted except when, after a full hearing, the court has determined that the purposes of the proceeding have been fully accomplished.
§33-10-11. Order of liquidation of domestic insurer.
(a) An order to liquidate the business of a domestic insurer shall direct the commissioner forthwith to take possession of the property assets of the insurer, to liquidate its business, to deal with the insurer's property and business in his or her own name as insurance commissioner or in the name of the insurer, as the court may direct, and to give notice to all creditors who may have claims against the insurer to present such their claims.
(b) The commissioner may apply for and secure an order dissolving the corporate existence of a domestic insurer upon his or her application for an order of liquidation of such the insurer or at any time after such order has been granted.
§33-10-13. Order of conservation or ancillary liquidation of foreign or alien insurers.

(a) An order to conserve the assets of a foreign or alien insurer shall require the commissioner forthwith to take possession of the property assets of the insurer within this state and to conserve it, subject to the further direction of the court.
(b)  An order to liquidate the assets in this state of a foreign insurer shall require the commissioner forthwith to take possession of the property assets of the insurer within this state and to liquidate it subject to the orders of the court and with due regard to the rights and powers of the domiciliary receiver, as provided in this article.
§33-10-14. Conduct of delinquency proceedings against domestic or alien insurers.

(a) Whenever under this article a receiver is to be appointed in delinquency proceedings for a domestic or alien insurer, the court shall appoint the insurance commissioner as such the receiver. The court shall order the commissioner forthwith to take possession of the assets of the insurer and to administer the same under the orders of the court.
(b) As domiciliary receiver, the commissioner shall be vested by operation of law with the title to all the property, contracts, and rights of action and all of the books and records of the insurer, wherever located, as of the date of entry of the order directing him or her to rehabilitate or liquidate a domestic insurer or to liquidate the United States branch of an alien insurer domiciled in this state and he or she shall have the right to recover the same and reduce the same to possession; except that ancillary receivers in reciprocal states shall have, as to assets located in their respective states, the rights and powers which are herein prescribed for ancillary receivers appointed in this state as to assets located in this state.
(c) The recording of a certified copy of the order directing possession to be taken in the office of the clerk of the county commission of the county where the proceedings are pending and in the office of the clerk of the county commission of any county wherein the insurer has property or other assets, recorded in the same manner as deeds to real property are recorded, shall impart the same notice as would be imparted by a deed, bill of sale, or other evidence of title duly recorded or filed.
(d) The commissioner as domiciliary receiver shall be responsible for the proper administration of all assets coming into his or her possession or control. The court may at any time require a bond from him the commissioner or his or her deputies if deemed considered desirable for the protection of such the assets. The cost of such the bond shall be paid out of the assets of the insurer as a cost of administration.
(e) Upon taking possession of the assets of an insurer, the domiciliary receiver shall, subject to the direction of the court, immediately proceed to conduct the business of the insurer or to take such steps as are authorized by this article for the purpose of rehabilitating, liquidating, or conserving the affairs or assets of the insurer.
(f) In connection with delinquency proceedings, the commissioner may appoint one or more special deputy commissioners of insurance to act for him or her and may employ such counsel, clerks, and assistants as he deems or she considers necessary. The compensation of the special deputies, counsel, clerks, or assistants and all expenses of taking possession of the insurer and of conducting the proceedings shall be fixed by the receiver, subject to the approval of the court, and shall be paid out of the funds or assets of the insurer. In the event the property of such person does not contain cash or liquid assets sufficient to defray the cost of the service required to be performed under the terms of this article, the commissioner may pay the cost of such the services first out of the commissioner's "Operating-Additional Fees" closed estate fund account. If the moneys in the closed estate fund account are insufficient to fully defray the cost of the services required under the terms of this article, the commissioner may pay the costs out of the commissioner's "operating - additional fees" account. Any amount so paid from either account shall be deemed considered to be expenses of administration and shall be repaid to said fund the appropriate account out of the first available moneys in the estate.
(g) Within the limits of duties imposed upon them, special deputies shall possess all the powers given to and, in the exercise of those powers, shall be subject to all of the duties imposed upon the receiver with respect to such proceedings. All transactions involving estate accounts shall be reconciled quarterly by a special deputy commissioner appointed pursuant to subsection (f) of this section, and reported to the commissioner. An annual audit of any special deputy commissioner appointed under this section may be conducted, at the discretion of the commissioner, by an independent, outside certified public accountant. The cost of this audit shall be allocated among the estates of the companies in conservation, rehabilitation, or liquidation on a basis of allocation established by the commissioner.
§33-10-18.  Proof of claims.
(a) All claims against an insurer against which delinquency proceedings have begun shall set forth all of the following that are applicable:
(1) In reasonable detail, the amount of the claim, or the basis upon which such the amount can be ascertained;
(2) The facts upon which the claim is based, including any consideration given for it; and
(3) The priorities asserted, if any;
(4) The identity and amount of any security on the claim;
(5) The payments made on the debt, if any; and
(6) A statement that the sum claimed is justly owing and whether there is a right of setoff, counterclaim or defense to the claim.
All such claims shall be verified by the affidavit of the claimant, or someone authorized to act on his behalf and having knowledge of the facts, and shall be supported by such any documents as may be material thereto.
(b) All claims filed in this state shall be filed with the receiver, whether domiciliary or ancillary, in this state, on or before the last date for filing as specified in this article.
(c) When a claim is denied in whole or in part by the liquidator, written notice of the determination shall be given to the claimant or his attorney by first class mail at the address shown in the proof of claim. Within sixty days from the mailing of the notice, the claimant may file his objections with the liquidator. If no such filing is made, the claimant may not further object to the determination.
(d) Whenever objections are filed with the liquidator and the liquidator does not alter his 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 of the hearing by first class mail to the claimant or his attorney and to any other persons directly affected, not less than ten nor more than thirty days before the date of the hearing. The matter may be heard by the court or by a court-appointed referee who shall submit findings of fact along with his recommendation. Upon receipt of such the report, the court shall fix a time for hearing the claim and shall direct that the claimant or the receiver, as the court shall specify, shall give such notice as the court shall determine to such any persons as shall appear to the court to be interested therein. All such notices shall specify the time and place of the hearing and shall concisely state the amount and nature of the claim, the priorities asserted, if any, and the recommendation of the receiver with reference thereto.
(e) At the hearing, all persons interested shall be entitled to appear and the court shall enter an order allowing, allowing in part, or disallowing the claim. Any such order shall be deemed to be considered an appealable order.
§33-10-19a. Priority of distribution.
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 herein set forth. Every claim in each class shall be paid in full or adequate funds retained for such payment before the members of the next class receive any payment. No subclasses shall may be established within any class. No claim by a shareholder, policyholder or other creditor shall may be permitted to circumvent the priority classes through the use of equitable remedies. The order of distribution shall be:
(a) Class I. The costs and expenses of administration, 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 liquidation;
(3) Any necessary filing fees;
(4) The fees and mileage payable to witnesses;
(5) Reasonable attorney's fees and fees for other professional services rendered in the proceeding; and
(6) All expenses incurred by the department of insurance arising out of the enforcement of chapter thirty-three and its regulations.
(b) Class II. Debts due to employees for compensation under the provisions of section twenty-seven of this article. All claims for refund of unearned premiums under nonassessable policies and all claims of policyholders including such claims of the federal or any state or local government as policyholders for losses incurred and third party claims of an insolvent insurer, and all reasonable claims of the West Virginia insurance guaranty associations and associations or entities performing a similar function in other states.
(c) Class III. All claims for refund of unearned premiums under nonassessable policies and all claims of policyholders including such claims of the federal or any state or local government for losses incurred and third party claims of an insolvent insurer and all reasonable claims of the West Virginia insurance guaranty associations and associations or entities performing a similar function in other states. Claims of the federal government other than as an insured policyholder.
(d) Class IV. Claims of general creditors including claims of ceding and assuming companies in their capacity as such. Debts due to employees for compensation, which may not exceed two months of monetary compensation and must represent payment for services performed within six months before the filing of the petition for liquidation, or if rehabilitation preceded liquidation, within one year before the filing of the petition for rehabilitation. Principal officers and directors shall not be entitled to the benefit of this priority except as otherwise approved by the liquidator and the court. This priority shall be in lieu of any other similar priority which may be authorized by law as to wages or compensation of employees.
(e) Class V. Claims of the federal or any state or local government. Claims, including those of any governmental body for a penalty or forfeiture, shall be allowed in this class only to the extent of the pecuniary loss sustained from the act, transaction or proceeding out of which the penalty or forfeiture arose, with reasonable and actual costs occasioned thereby. The remainder of such claims shall be postponed to the class of claims under subdivision (h) of this section. Claims of general creditors including claims of ceding and assuming companies in their capacity as such.
(f) Class VI. Claims filed late or any other claims other than claims under subdivisions (g) and (h) of this section. Claims of any state or local government. Claims, including those of any governmental body for a penalty or forfeiture, shall be allowed in this class only to the extent of the pecuniary loss sustained from the act, transaction, or proceeding out of which the penalty or forfeiture arose, with reasonable and actual costs occasioned thereby. The remainder of such claims shall be postponed to the class of claims under subsection (h) of this section.
(g) Class VII. 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. Claims filed late or any other claims other than claims under subsection (h) of this section.
(h) Class VIII. The claims of shareholders or other owners. Surplus or contribution notes, or similar obligations and premium refunds on assessable policies. Payments to members of domestic mutual corporations shall be limited in accordance with law.
(i) Class IX. The Claims of shareholders or other owners.
§33-10-26. Voidable preferences and liens.
(a) Any transfer of, or lien upon, the property of an insurer which is made or created within four months prior to the granting of an order to show cause under this article with the intent of giving to any creditor or of enabling him to obtain a greater percentage of his debt than any other creditor of the same class and which is accepted by such creditor having reasonable cause to believe that such preference will occur, shall be voidable. A preference is a transfer of any of the property of an insurer to or for the benefit of a creditor, for or on account of an antecedent debt, made or suffered by the insurer within one year before the filing of a successful petition for liquidation under this article, the effect of which transfer may be to enable the creditor to obtain a greater percentage of this debt than another creditor of the same class would receive. If a liquidation order is entered while the insurer is already subject to a rehabilitation order, then the transfers shall be deemed preferences if made or suffered within one year before the filing of the successful petition for rehabilitation, or within two years before the filing of the successful petition for liquidation, whichever time is shorter.
(b) Every director, officer, employee, stockholder, member, subscriber, and any other person acting on behalf of such insurer who shall be concerned in any such act or deed and every person receiving thereby any property of such insurer or the benefit thereof shall be personally liable therefor and shall be bound to account to the insurance commissioner. Any preference may be avoided by the liquidator if:
(1) The insurer was insolvent at the time of the transfer; and
(2) The transfer was made within four months before the filing of the petition; or
(3) The creditor receiving it or to be benefited thereby or his 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
(4) The creditor receiving it was an officer, or any employee or attorney or other person who was in fact in a position of comparable influence in the insurer to an officer whether or not he held such position, or any shareholder holding directly or indirectly more than five percent (5%) of any class of any equity security issued by the insurer, or any other person, firm, corporation, association, or aggregation of persons with whom the insurer did not deal at arm's length.
(c) The insurance commissioner as a receiver in any proceeding under this article may avoid any transfer of or lien upon the property of an insurer which any creditor, stockholder, subscriber or member of such insurer might have avoided and may recover the property so transferred unless such person was a bona fide holder for value prior to the date of the granting of an order to show cause under this article. Such property or its value may be recovered from anyone who has received it except a bona fide holder for value as herein specified. 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, the purchaser or lienor 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.
(d) A transfer under this section will be considered to have been made as follows:
(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) 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.
(e)(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 (d) of this section, 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 (d) through any acts subsequent to the obtaining of such a lien or subsequent to such a purchase which require the agreement or concurrence of any third party or which require any further judicial action or ruling.
(f) A transfer of property for or on account of a new and contemporaneous consideration which is considered under subsection (d) of this section to be made or suffered after the transfer because of delay in perfecting it 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 prefect the transfer as against liens or bona fide purchasers' rights are performed within twenty-one days or any period expressly allowed by the 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.
(g) If any lien deemed voidable under subsection (b) of this section 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 article which results in a liquidation order, the indemnifying transfer or lien shall also be considered voidable.
(h) The property affected by any lien considered voidable under subsections (a), (b) and (g) of this section shall be discharged from the 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.
(i) The circuit court 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.
(j) 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 (i) of this section to the extent of the amount paid to the liquidator.
(k) 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 set off against the preference which would otherwise be recoverable from him.
(l) If an insurer shall, directly or indirectly, within four months before the filing of a successful petition for liquidation under this article, or at any time in contemplation of a proceeding to liquidate it, 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 in 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 subdivision (4), subsection (b) of this section.
(m)(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 he or she 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 (4) 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 subsections (a) and (b) of this section 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.
§33-10-26a. Fraudulent transfers prior to petition.
(a) Every transfer made or suffered and every obligation incurred by an insurer within one year prior to the filing of a successful petition for rehabilitation or liquidation under this article is fraudulent as to then existing and future creditors if made or incurred without fair consideration, or with actual intent to hinder, delay or defraud either existing or future creditors. A transfer made or an obligation incurred by an insurer ordered to be rehabilitated or liquidated under this article, which is fraudulent under this section, may be avoided by the receiver, except as to a person who in good faith is a purchaser, lienor, or obligee for a present fair equivalent value, and except that any purchaser, lienor or obligee, who in good faith has given a consideration less than fair for such transfer, lien, or obligation, may retain the property, lien or obligation as security for repayment. The court may, on due notice, order any such transfer or obligation to be preserved for the benefit of the estate, and in that event, the receiver shall succeed to and may enforce the rights of the purchaser, lienor, or obligee.
(b) A transfer under this section will be considered to have been made as follows:
(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 under subsection (e) of section twenty-six.
(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) of this section 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) of this section shall be personally liable therefore and shall be bound to account to the liquidator.
§33-10-26b. Recoupment from affiliates.
(a) If an order instituting a delinquency proceeding against an insurer authorized to do business in this state is entered under this article, the receiver appointed under the order has a right to recover on behalf of the insurer from any affiliate that controlled the insurer the amount of distributions, other than stock dividends paid by the insurer on its capital stock, made at any time during the five years preceding the petition for liquidation, rehabilitation or conservation. This recovery is subject to the limitations of subsections (b) through (g) of this section.
(b) No dividend is recoverable if the recipient shows that, when paid, the distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect its solvency.
(c) The maximum amount recoverable under this section is the amount needed, in excess of all other available assets, to pay all claims under the receivership, reduced for each recipient by any amount the recipient has already paid to receivers under similar laws of other states.
(d) Any person who was an affiliate that controlled the insurer at the time the distributions were paid is liable up to the amount of distributions received. Any person who was an affiliate that controlled the insurer at the time the distributions were declared is liable up to the amount of distributions the person would have received if the distributions had been paid immediately. If two or more persons are liable regarding the same distributions, they are jointly and severally liable.
(e) If any person liable under subsection (d) of this section is insolvent, all affiliates that controlled that person at the time the dividend was declared or paid are jointly and severally liable for any resulting deficiency in the amount recovered from the insolvent affiliate.
(f) This section does not reduce the personal liability of a director under existing law.
(g) An action or proceeding under this section may not be commenced after the earlier of:
(1) Two years after the appointment of a liquidator pursuant to this article; or
(2) The date the rehabilitation or liquidation is terminated.
§33-10-26c. Fraudulent transfer after petition.
(a) After a petition for rehabilitation or liquidation has been filed, a transfer of any of the real property of the insurer 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 therefore, for which amount the transferee shall have a lien on the property so transferred. The commencement of a proceeding in rehabilitation or liquidation shall be constructive notice upon the recording of a copy of the petition for or order of rehabilitation or liquidation with the clerk of the county commission of the county where any real property in question is located. The exercise by a court of the United States or any state or jurisdiction to authorize or effect a judicial sale of real property of the insurer within any county in any state shall not be impaired by the pendency of such a proceeding unless the copy is recorded in the county prior to the consummation of the judicial sale.
(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 made for less than a present fair equivalent value, then to the extent of the present consideration actually paid therefore, 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 may, if acting in good faith, pay the indebtedness or deliver the property, or any part thereof, to the insurer or upon his 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 considered 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 this section shall be personally liable therefore and shall be bound to account to the liquidator.
(d) Nothing in this article shall impair the negotiability of currency or negotiable instruments.
§33-10-26d. Claims of holders of void or voidable rights.
(a) No claim of a creditor who has received or acquired a preference, lien, conveyance, transfer, assignment or encumbrance voidable under this article shall be allowed unless the creditor surrenders the preference, lien, conveyance, transfer, assignment or encumbrance. If the avoidance is effected by a proceeding in which a final judgment has been entered, the claim will not be allowed unless the money is paid or the property is delivered to the liquidator within thirty days from the date of entry of the final judgment, except that the court having jurisdiction over the liquidation may allow further time if there is an appeal or other continuation of the proceeding.
(b) A claim allowable under subsection (a) of this section by reason of the avoidance, whether voluntary or involuntary, of a preference, lien, conveyance, transfer, assignment or encumbrance, may be filed as a late filing if filed within thirty days from the date of the avoidance, or within the further time allowed by the court under subsection (a). A claimant having a late filed claim under this section may be permitted by the liquidator to share in distribution as though the claim were not late, to the extent that the payment will not interfere with the orderly administration of the liquidation.
§33-10-28. Setoffs.
(a) In all cases of mutual debts or mutual credits between the insurer and another person in connection with any action or proceeding under this article, such the credits and debts shall be set off and the balance only shall be allowed or paid, except as provided in subsection (b), below.
(b) No offset shall setoff may be allowed in favor of any such person where:
(1) The obligation of the insurer to such the person would not at the date of the entry of any liquidation order or otherwise, as provided in section twenty-five thirty-two of this article, entitle him to share as a claimant in the assets of the insurer; or
(2) The obligation of the insurer to such the person was purchased by or transferred to such the person with a view of its being used as an offset a setoff; or
(3) The obligation of such the person is to pay an assessment levied against the members of a mutual insurer, or against the subscribers of a reciprocal insurer, or is to pay a balance upon the subscription to the capital stock of a stock insurer;
(4) The obligation of the insurer is owed to an affiliate of such person, or any other entity or association other than the person;
(5) The obligation of the person is owed to an affiliate of the insurer, or any other entity or association other than the insurer; or
(6) The obligations between the person and the insurer arise from transactions by which the person or the insurer assumed risk and obligations from the other party and ceded back substantially the same risks and obligations except the receiver may permit setoffs if in his or her discretion, a setoff is appropriate because of specific circumstances.
(c) Notwithstanding the foregoing, a setoff of sums due on obligations in the nature of those set forth in subdivision six, subsection (b) of this section shall be allowed for those sums accruing from business written where the contracts were entered into, renewed or extended with the approval of the commissioner of insurance of the state of domicile of the now insolvent insurer, when in the judgment of such commissioner it was necessary to provide reinsurance in order to prevent or mitigate a threatened impairment or insolvency of a domiciliary insurer in connection with the exercise of the commissioner's regulatory responsibilities.
(d) The provisions of this section shall supersede any agreements or contractual provisions which might be construed to enlarge the setoff rights of any person under any contract with the insurer.
§33-10-29. Allowance of certain claims.
(a) No contingent claim shall may share in a distribution of the assets of an insurer which has been adjudicated to be insolvent by an order made pursuant to this article, except that such claim shall be considered, if properly presented, and may be allowed to share where:
(1) It does not prejudice the orderly administration of the liquidation, or
(2) There is a surplus and the liquidation is thereafter conducted upon the basis that such the insurer is solvent.
(b) Where an insurer has been so adjudicated to be insolvent any person who has a cause of action against an insured of such the insurer under a liability insurance policy issued by such the insurer shall have the right to file a claim in the liquidation proceeding, regardless of the fact that such the claim may be contingent, and such the claim may be allowed:
(1) If it may be reasonably inferred from the proof presented upon such the claim that such person would be able to obtain a judgment upon such the cause of action against such the insured; and
(2) If such person shall furnish furnishes suitable proof, unless the court for good cause shown shall otherwise direct directs, that no further valid claim against such the insurer arising out of his cause of action other than those already presented can be made; and
(3) If the total liability of such the insurer to all claimants arising out of the same act of its insured shall be is no greater than its maximum liability would be were it not in liquidation.
(c)(1) No judgment against such an insured taken after the date of entry of the liquidation order shall may be considered in the liquidation proceedings as evidence of liability, or of the amount of damages, and no judgment against an insured taken by default or by collusion prior to the entry of the liquidation order shall may be considered as conclusive evidence in the liquidation proceedings, either of the liability of such the insured to such the person upon such the cause of action or of the amount of damages to which such the person is therein entitled.
(2) A claim by a third party founded upon an insurance a policy may be allowed without requiring such the claim to be reduced to judgment, provided it can be reasonably inferred from the proof presented that the claimant would be able to obtain a judgment upon his cause of action against the insured and that such the judgment would represent a liability of the insurer in liquidation under the policy of insurance upon which such the claim is founded.
(d) No claim of any secured claimant shall may be allowed at a sum greater than the difference between the value of the claim without security and the value of the security itself as of the date of the entry of the order of liquidation or such other date set by the court for determining rights and liabilities as provided in section twenty-five of this article unless the claimant shall surrender surrenders his security to the commissioner, in which event the claim shall be allowed in the full amount for which it is valued.
(e) 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 other person in the creditor's name, to the extent that he 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 creditor 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 him 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.
(f) Unless such claim is filed in the manner and within the time provided in section sections eighteen and thirty, it shall not be entitled to filing or allowance, and no action may be maintained thereon. In the liquidation, pursuant to the provisions of this article, of any domestic insurer which has issued policies insuring the lives of persons, the commissioner shall, within thirty days after the last day set for the filing of claims, make a list of the persons who have not filed proofs of claim with him or her and to whom, according to the books of said the insurer, there are amounts owing under such policies, and he or she shall set opposite the name of each such person the amount so owing to such the person. Each person whose name shall appear appears upon said the list shall be deemed considered to have duly filed, prior to the last day set for the filing of claims, a claim for the amount set opposite his name on said the list.
(g)(1) Claims founded upon unliquidated or undetermined demands must be filed within the time limit provided in this article for the filing of claims, but claims founded upon such demands shall not share in any distribution to creditors of a person proceeded against under section nineteen-a until such the claims have been definitely determined, proved and allowed. Thereafter, such the claims shall share ratably with other claims of the same class in all subsequent distributions.
(2) An unliquidated or undetermined claim or demand within the meaning of this article shall be deemed considered to be any such claim or demand upon which a right of action has accrued at the date of the order of liquidation and upon which the liability has not been determined or the amount thereof liquidated.
(h) The commissioner may require, as a condition of payment of the final liquidation dividend to a lender, or his assignee, who has filed a claim for an unearned premium as an assignee of the insured for valuable consideration:
(1) That such assignee of the insured shall assign to the liquidator all his right, title, and interest in any unsatisfied debt of the insured to such the assignee, pertaining to policies of the insolvent insurer, remaining unpaid after crediting the final liquidation dividend, if the amount of such the unsatisfied debt is less than one hundred dollars and one cent; and
(2) That all of the documents giving rise to such the debt be delivered to him or her.
(i) The commissioner may determine whether or not it will be feasible to attempt to collect any such assigned debt. If he the commissioner determines not to pursue collection of any such debt, he or she shall file a declaration to that effect with the liquidation court and be relieved of any further responsibility in respect to such the debt.
(j) As used in this section, "insured" means a natural person who purchased insurance or coverage from the insolvent insurer for personal, family, or household purposes.
§33-10-30.  Time within which claims to be filed.
(a) If upon the granting of an order of liquidation under this article or at any time thereafter during the liquidation proceeding, the insurer shall not be clearly solvent, the court shall, after such notice and hearing as it deems proper provided in this article, make an order declaring the insurer to be insolvent. Thereupon regardless of any prior notice which may have been given to creditors, the commissioner shall notify all persons who may have claims against such the insurer and who have not filed proper proofs thereof to present the same to him or her, at a place specified in such the notice, within four months from the date of entry of such the order, or if the commissioner shall certify that it is necessary, within such longer time as the court shall prescribe. The last day for filing of proofs of claims shall be specified in the notice, and notice shall be given in a manner to be determined by the court.
(b) Proofs of claim may be filed subsequent to the date specified, but no such claim shall may share in the distribution of the assets until all allowed claims, proofs of which have been filed before said date, have been paid in full with interest, except as provided in section twenty-six-d of this article.
§33-10-36. Early access to distribution.
(a) Within one hundred twenty days of a final determination of insolvency of an insurance company by the circuit court, the commissioner shall make application to the court for approval of a proposal to disburse assets out of such the company's marshaled assets, from time to time as such assets become available, to the appropriate guaranty association having obligations because of the insolvency. West Virginia insurance guaranty association and any similar organization performing a similar function in another state. The West Virginia insurance guaranty association and any entity or person performing a similar function in other states shall hereinafter be referred to collectively as the associations "Appropriate guaranty association" means guaranty association and foreign guaranty association as those terms are defined in section two of this article. If the commissioner determines that there are insufficient assets to disburse, the application required by this section shall be satisfied by a filing by the commissioner stating the reasons for this determination.
(b) Such The proposal shall at least include provisions for:
(1) Reserving amounts for the payment of expenses of administration and of claims falling within the priorities established in the Uniform Insurers Liquidation Act this article but only with respect to such priorities higher than that of the associations;
(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 associations entitled thereto;
(4) The securing by the commissioner from each of the associations entitled to disbursements pursuant to this section of an agreement to return to the commissioner 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 section twenty-seven nineteen-a of this article but only with respect to such priorities higher than that of the associations. No bond shall be required of any such association; and
(5) A full report to be made by the association to the commissioner 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 commissioner's proposal shall provide for disbursements to the association in amounts estimated at least equal to the claim payments made or to be made thereby for which such the association could assert a claim against the commissioner, and shall further provide that if the assets available for disbursement from time to time do not equal or exceed the amount of such the claim payments made or to be made by the association, then disbursements shall be in the amount of available assets.
(d) Notice of such the commissioner's application shall be given to the associations in and to the commissioners of insurance of each of the states. Any such notice shall be deemed considered to have been given when deposited in the United States mail, first class postage prepaid, at least thirty days prior to submission of such the application to the court. Action on the application may be taken by the court provided the above required notice has been given and provided that the commissioner's proposal complies with subdivisions (1) and (2), subsection (b) hereof.
§33-10-38. Unclaimed and withheld funds; termination of proceedings.

(a) All unclaimed funds subject to distribution remaining in the liquidator's hands when he is ready to apply to the court for discharge, including the amount distributable to any creditor, shareholder, member or other person who is unknown or cannot be found, shall be deposited with the state treasurer, and shall be paid without interest to the person entitled thereto or his legal representative upon proof satisfactory to the state treasurer of his right thereto. Any amount on deposit not claimed within six years from the discharge of the liquidator shall be deemed considered to have been abandoned and shall be escheated to the state of West Virginia without formal escheat proceedings and be deposited with the general fund.
(b) When all assets justifying the expense of collection and distribution have been marshaled and distributed under this article, the liquidator shall petition the circuit court to terminate the liquidation proceeding and to close the estate, and for other relief as may be appropriate. Subject to approval of the circuit court, after the completion of all post-closure activities for which moneys were reserved, the liquidator is authorized to deposit any remaining assets reserved for administrative expenses incurred in the closing of the estate that may not be practicably or economically distributed to claimants into a segregated account to be known as the closed estate fund account. The commissioner may thereafter use moneys held in the account to fund the administrative expenses of proceedings against insurers subject to this article that lack sufficient assets to fund administration.
§33-10-39.  Immunity in receivership proceedings and representation of the special deputy supervisor.

(a) No claim of any nature whatsoever that is directly related to the receivership of an insurer shall arise against, and no liability shall be imposed upon, the insurance commissioner, special deputy commissioner, special deputy supervisor or any person or entity acting as a receiver of an insurer, including surety, in rehabilitation, liquidation, or conservation as a result of a court order issued on or after the effective date of this article for any statement made or actions taken or not taken in the good faith exercise of their powers under law. However, this immunity shall not extend to acts or omissions which are malicious or grossly negligent. This qualified immunity extends to agents and employees of the receiver.
(b) In any civil proceeding filed against a special deputy supervisor commissioner appointed pursuant to this article, the special deputy supervisor commissioner shall be entitled to be represented by the attorney general.
§33-10-40. Applicability of amendments.
From and after the effective date of passage, any delinquency proceeding commenced against an insurer for the purpose of liquidating, rehabilitating, reorganizing or conserving the insurer shall be undertaken pursuant to this article. Any delinquency proceeding pending against an insurer under this article prior to the effective date of passage will be administered and concluded under the law in effect at the time the delinquency proceeding was commenced.
ARTICLE 24. HOSPITAL SERVICE CORPORATIONS, MEDICAL SERVICE CORPORATIONS, DENTAL SERVICE CORPORATIONS AND HEALTH SERVICE CORPORATIONS.

§33-24-14. Delinquency proceedings.
From and after the effective date of passage, any delinquency proceeding commenced against a corporation subject to this article for the purpose of liquidating, rehabilitating, reorganizing or conserving the corporation shall be considered to be a delinquency proceeding against an insurance company, and shall be undertaken pursuant to the provisions of article ten of this chapter. Any delinquency proceeding pending against a corporation subject to this article prior to the effective date of passage will be administered and concluded under the law in effect at the time the delinquency proceeding was commenced.



NOTE: The purpose of this bill is to repeal the sections of article 24, chapter 33 pertaining to delinquency proceedings against corporations formed under article 24, so that all delinquency proceedings will be commenced against insurers under article 10, chapter 33. The bill adds a new section 14 to article 24 to clarify that from and after the date of the act all delinquency proceedings against a hospital, medical, dental or health service corporation will be commenced under article 10, however proceedings pending on the effective date will be completed under the law in effect at the time the delinquency proceeding was commenced. The bill further adds a new section designated section one to article 10 to clarify that the amendments in this bill will only apply to delinquencies commenced against insurers after the effective date of the amendments, and amends the section in article 10 regarding priorities of distribution (formerly W.Va. Code §33-10-19a) to make it consistent with the decision rendered by the U.S. Supreme Court in the case of U.S. Dept. of the Treasury v. Fabe, 508 U.S. 491, 113 S.Ct. 2202, 124 L.Ed.2d. 449 (1993), in which it was held that a state's priority statute for distribution in insurance company liquidations was not preempted by a federal superpriority statute to the extent that it regulated policyholders, however it was preempted to the extent that it furthered the interests of other creditors. The bill further adds sections to article 10 from the National Association of Insurance Commissioners Model Liquidation Act that will add a formal delinquency procedure that will allow for expedited appeals and will expand and clarify the liquidator's powers to recover preferential and fraudulent transfers. The bill also makes technical changes to article 10 and repeals section twenty-seven in article 10.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.

§§4A, 4B, 4C, 4D, 4E, 26a, 26b, 26c, 26d and 40 are new; therefore, underlining and strike-throughs have been omitted.