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Insurance Company, 560 P.2d 560 (Okla. 1977) no longer dispositive on the
priority of claims issue.
State ex rel. Hunt v. Community National Life Ins. Co., 560 P.2d 560 (Okla.
1977). In receivership proceedings against an insurance company, a beneficiary
of a paid‐up life insurance policy was not a preferred creditor entitled to
priority as to assets of the insurance company in the hands of the receiver on
the theory that an unfunded insurance trust was created at the time of death
of the insured because the amount due to the beneficiary under the policy was
held by the company and paid to the beneficiary as provided in the policy,
rather than being paid in lump sums. Rather, the beneficiary was a general
unsecured creditor, entitled to share pro rata as to the allowed claim. The
court cited Cleveland Trust Company v. State ex rel. Hunt, 555 P.2d 594 (Okla.
1976). The claims of assignees of paid‐up policies, who took such policies as
security for loans, would be limited to the amount of the loans for which the
policies were assigned as security, rather than the greater cash surrender value
of the life policies, as no creditor may exercise rights which will secure a larger
part of the percentage of the indebtedness than the percentage of
indebtedness due to fellow creditors of the same class because equity requires
a pro rata distribution of the available assets.
South Carolina Insurance Commissioner v. New South Life Ins. Co., 270 S.C. 612, 244 S.E.2d 289
(1978), on remand, 272 S.C. 438, 248 S.E.2d 591 (1978). On remand for
determination of a better plan of rehabilitation, the court noted that
policyholders are the equivalent of creditors in an ordinary bankruptcy
proceeding, and must be paid before stockholders can receive any benefits in
an insolvency proceeding.
Op. Att'y Gen. 1229, (S.C. 1909). "Certification" issued by two Georgia insurers
were similar in nature to stock certificates. As a result, holders had no claim
against the assets of the company until all claims of policyholders were
satisfied.
Tennessee
Gleason v. Prudential Fire Ins. Co., 127 Tenn. 8, 151 S.W. 1030 (1912). It was held
that the appointment of a receiver for an insolvent mutual fire insurance
company terminates all of its contracts and members of the company, as both
insurers and insureds, have no right to the return of premium until all creditors
have been paid.
McReynolds v. United Physicians Ins. Risk Retention Group, 914 S.W.2d 491,
1995 Tenn. App. LEXIS 162 (1995). Policyholder was a doctor with a malpractice
claim against him. The insurer hired defense counsel to represent him. Then the
insurer was placed into receivership for purposes of rehabilitation. Policyholder
failed to file proof of claim with the receiver and was denied coverage. A special
master found that the policyholder was entitled to the same priority as those
who had filed timely proofs of claim, but the trial court overturned the special
master’s findings under the Act. The court affirmed the trial court’s judgment,
finding that the Act established an order of distribution of claims with a specific
class created for claims filed late.
McReynolds v. Weed, 1993 Tenn. App. LEXIS 321 (Tenn. Ct. App. 1993). Court
held that two claimants, classified as general creditors of the insurer, had a
lower priority to the assets of the receivership than those persons entitled to
benefits under the insurance policies did. Because distribution of receivership
assets to priority claimants required all available funds, claimants, the issue was
moot.
Neff v. Cherokee Insurance Co., 704 S.W.2d 1 (Tenn. 1986). The Supreme Court
of Tennessee held that a contract of reinsurance is not an insurance policy