CHAPTER 3903: RESERVE VALUATION; REHABILITATION AND LIQUIDATION

As used in sections 3903.01 to 3903.59 of the Revised Code:

(A) “Admitted assets” means investment in assets which will be admitted by the superintendent of insurance pursuant to the law of this state.

(B) “Assets” means all property, real and personal, of every nature and kind whatsoever or any interest therein.

(C) “Ancillary state” means any state other than a domiciliary state.

(D) “Creditor” means a person having any claim, whether matured or unmatured, liquidated or unliquidated, secured or unsecured, absolute, fixed, or contingent.

(E) “Delinquency proceeding” means any proceeding commenced against an insurer for the purpose of liquidating, rehabilitating, reorganizing, or conserving the insurer, and any summary proceeding under section 3903.09 or 3903.10 of the Revised Code. “Formal delinquency proceeding” means any liquidation or rehabilitation proceeding.

(F) “Doing business” includes 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 collection 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;

(5) Operating under a license or certificate of authority, as an insurer, issued by the department of insurance.

(G) “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.

(H) “Fair consideration” is given for property or obligation when either of the following apply:

(1) When in exchange for such property or obligation, as a fair equivalent therefor, and in good faith, property is conveyed, services are rendered, an obligation is incurred, or an antecedent debt is satisfied;

(2) When such property or obligation is received in good faith to secure a present advance or antecedent debt in an amount not disproportionately small as compared to the value of the property or obligation obtained.

(I) “Foreign country” means any other jurisdiction not in any state.

(J) “Guaranty association” means the Ohio insurance guaranty association created by section 3955.06 of the Revised Code and any other similar entity hereafter created by the general assembly 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 either of the following:

(a) The inability to pay any obligation within thirty days after it becomes payable;

(b) If an assessment is made within thirty days after such date, the inability to pay the obligation thirty 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 either of the following:

(a) Any capital and surplus required by law for its organization;

(b) The total par or stated value of its authorized and issued capital stock.

(3) As to any insurer licensed to do business in this state as of the effective date of sections 3903.01 to 3903.59 of the Revised Code that does not meet the standard established under division (K)(2) of this section, the term “insolvency” or “insolvent” means, for a period not to exceed three years from the effective date of sections 3903.01 to 3903.59 of the Revised Code, that it is unable to pay its obligations when they are due or that its admitted assets do not exceed its liabilities plus any required capital contribution ordered by the superintendent under provisions of Title XXXIX [39] of the Revised Code.

(4) For purposes of divisions (K)(2) to (4) of this section, “liabilities” includes, but is not limited to, reserves required by statute or by rules of the superintendent or specific requirements imposed by the superintendent 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, superintendent, or equivalent official. For purposes of sections 3903.01 to 3903.59 of the Revised Code, any other persons included under section 3903.03 of the Revised Code are deemed to be insurers.

(M) “Preferred claim” means any claim with respect to which the terms of sections 3903.01 to 3903.59 of the Revised Code accord priority of payment from the assets of the insurer.

(N) “Reciprocal state” means any state other than this state in which in substance and effect division (A) of section 3903.18, and sections 3903.52, 3903.53, and 3903.55 to 3903.57 of the Revised Code are in force, in which provisions are in force requiring that the superintendent or equivalent official be the receiver, liquidator, rehabilitator, or conservator of a delinquent insurer, and in which some provision exists for the avoidance of fraudulent conveyances and preferential transfers.

(O) “Secured claim” means any claim secured by mortgage, trust deed, security agreement, pledge, deposit as security, escrow, or otherwise, but not including special deposit claims or claims against assets. The term also includes claims which have become liens upon specific assets by reason of judicial process.

(P) “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 assets.

(Q) “State” has the meaning set forth in division (G) of section 1.59 of the Revised Code.

(R) “Superintendent” or “superintendent of insurance” means the superintendent of insurance of this state, or, when the context requires, the superintendent or commissioner of insurance, or equivalent official, of another state.

(S) “Transfer” includes the sale and every other and different mode, direct or indirect, or disposing of or of parting with property or with an interest in property, or with the possession of property or of fixing a lien upon property or upon an interest in property, absolutely or conditionally, voluntarily, or 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.

Effective Date: 03-07-1983

(A) Sections 3903.01 to 3903.59 of the Revised Code may be cited as “the insurers supervision, rehabilitation, and liquidation act.”

(B) Sections 3903.01 to 3903.59 of the Revised Code do not limit the powers granted the superintendent of insurance under any other section of the Revised Code.

(C) Sections 3903.01 to 3903.59 of the Revised Code shall be liberally construed to effect the purpose stated in division (D) of this section.

(D) The purpose of sections 3903.01 to 3903.59 of the Revised Code is the protection of the interests of insureds, claimants, creditors, and the public generally, with minimum interference with the normal prerogatives of the owners and managers of insurers, through all of the following:

(1) Early detection of any potentially dangerous condition in an insurer, and prompt application of appropriate corrective measures;

(2) Improved methods for rehabilitating insurers, involving the cooperation and management expertise of the insurance industry;

(3) Enhanced efficiency and economy of liquidation, through clarification of the law, to minimize legal uncertainty and litigation;

(4) Equitable apportionment of any unavoidable loss;

(5) Lessening the problems of interstate rehabilitation and liquidation by facilitating cooperation between states in the liquidation process, and by extending the scope of personal jurisdiction over debtors of the insurer outside this state;

(6) Regulation of the insurance business by the impact of the law relating to delinquency procedures and substantive rules on the entire insurance business.

Effective Date: 03-07-1983

The proceedings authorized by sections 3903.01 to 3903.59 of the Revised Code may be applied to any one or more of the following:

(A) All insurers who are doing, or have done, an insurance business in this state, and against whom claims arising from that business may exist now or in the future;

(B) All insurers who purport to do an insurance business in this state;

(C) All insurers who have insureds resident in this state;

(D) All other persons organized or in the process of organizing with the intent to do an insurance business in this state;

(E) All other companies, associations, societies, or entities subject to regulation by the superintendent of insurance under Titles XVII [17] and XXXIX [39] of the Revised Code.

Effective Date: 03-07-1983

(A) No delinquency proceeding shall be commenced under this chapter by anyone other than the superintendent of insurance of this state. No court has jurisdiction to entertain, hear, or determine any delinquency proceeding commenced by any other person.

(B) No court of this state has jurisdiction to entertain, hear, or determine any complaint praying for the dissolution, liquidation, rehabilitation, sequestration, conservation, or restraining order, preliminary injunction, or permanent injunction, or other relief preliminary to, incidental to, or relating to delinquency proceedings other than in accordance with sections 3903.01 to 3903.59 of the Revised Code.

(C) In addition to other grounds for jurisdiction provided by the law of this state, a court of common pleas has jurisdiction over a person served pursuant to the Civil Rules in an action brought by the conservator, rehabilitator, or liquidator of a domestic insurer or an alien insurer domiciled in this state if any of the following apply:

(1) The person served is obligated to the insurer in any way as an incident to any agency or brokerage arrangement that may exist or has existed between the insurer and the agent or broker, in any action on or incident to the obligation;

(2) The person served is a reinsurer who has at any time written a policy of reinsurance for an insurer against which a rehabilitation or liquidation order is in effect when the action is commenced, or is an agent or broker of or for the reinsurer, in any action on or incident to the reinsurance contract;

(3) The person served is or has been an officer, manager, trustee, organizer, promoter, or person in a position of comparable authority or influence in an insurer against which a rehabilitation or liquidation order is in effect when the action is commenced, in any action resulting from such a relationship with the insurer.

(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 stay further proceedings on the action in this state.

(E) All actions authorized in sections 3903.01 to 3903.59 of the Revised Code shall be brought in the court of common pleas of Franklin county.

Effective Date: 03-07-1983

(A) Upon complaint or motion of any receiver, conservator, rehabilitator, or liquidator appointed in a proceeding under sections 3903.01 to 3903.59 of the Revised Code, any court of general jurisdiction may issue a temporary restraining order, a preliminary injunction, a permanent injunction, or such other orders that the court considers necessary and proper to prevent any one or more of the following:

(1) The transaction of further business;

(2) The transfer of property;

(3) Interference with the receiver, conservator, rehabilitator, or liquidator or with a proceeding under sections 3903.01 to 3903.59 of the Revised Code;

(4) Waste of the insurer’s assets;

(5) Dissipation and transfer of bank accounts;

(6) The commencement 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, conservator, rehabilitator, or liquidator of books, accounts, documents, or other records relating to the business of the insurer;

(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 sections 3903.01 to 3903.59 of the Revised Code.

(B) The receivership, conservator, rehabilitator, or liquidator may apply to any court outside of this state for any relief described in division (A) of this section.

Effective Date: 03-07-1983

(A) Any officer, manager, director, trustee, owner, employee, or agent of any insurer, or any other persons with authority over or in charge of any segment of the insurer’s affairs, shall cooperate with the superintendent of insurance in any proceeding under sections 3903.01 to 3903.59 of the Revised Code or any investigation preliminary to the proceeding. The term “person” as used in this section includes, but is not limited to, any person who exercises control directly or indirectly over activities of an insurer through any holding company or other affiliate of the insurer. “To cooperate” includes, but is not limited to, a duty to do both of the following:

(1) Reply promptly in writing to any inquiry from the superintendent requesting such a reply;

(2) Make available to the superintendent any books, accounts, documents, or other records or information or property of or pertaining to the insurer and in the person’s possession, custody, or control.

(B) No person shall fail to cooperate with the superintendent as required under division (A) of this section.

(C) No person shall obstruct or interfere with the superintendent in the conduct of any delinquency proceeding or any investigation preliminary or incidental thereto or violate an order of the superintendent issued under sections 3903.01 to 3903.59 of the Revised Code.

(D) If the superintendent finds, after proceedings in accordance with Chapter 119. of the Revised Code, that any person has violated division (B) or (C) of this section, the superintendent may do either or both of the following:

(1) Impose a civil penalty not to exceed ten thousand dollars;

(2) Suspend, revoke, or refuse to renew any license or certificate issued to the person under Title XVII [17] or XXXIX [39] of the Revised Code.

(E) Nothing in this section shall be construed to abridge otherwise existing legal rights, including the right to resist a complaint for liquidation or other delinquency proceedings, or other orders.

Effective Date: 03-07-1983

(A) In any proceeding under sections 3903.01 to 3903.59 of the Revised Code, the superintendent of insurance and his deputies are responsible on their official bonds for the faithful performance of their duties. If the court considers it desirable for the protection of the assets, it may at any time require an additional bond from the superintendent or his deputies, and such bonds shall be paid for out of the assets of the insurer as a cost of administration.

(B) Sections 9.86 and 9.87 of the Revised Code and sections 109.36 to 109.366 of the Revised Code apply, for purposes of any proceeding under sections 3903.01 to 3903.59 of the Revised Code, to the superintendent, any deputy liquidator, any employee of the department of insurance, any employee appointed by the superintendent as liquidator, and any employee who serves under the liquidator.

(C) For the sole purpose of the application of sections 9.86 and 9.87 of the Revised Code and sections 109.36 and 109.366 of the Revised Code, each person described in division (B) of this section is deemed to be an officer or employee as defined in division (A) of section 9.85 of the Revised Code and division (A) of section 109.36 of the Revised Code.

Effective Date: 04-10-1991

Every proceeding to rehabilitate or liquidate an insurer commenced under the laws in effect before the effective date of sections 3903.01 to 3903.59 of the Revised Code shall be continued as it would have been continued had these sections not been enacted.

Effective Date: 03-07-1983

(A) Whenever the superintendent of insurance has reasonable cause to believe, and determines, after a hearing held under division (E) of this section, that any domestic insurer has committed or engaged in, or is about to commit or engage in, any act, practice, or transaction that would subject it to delinquency proceedings under sections 3903.01 to 3903.59 of the Revised Code, he may make and serve upon the insurer and any other persons involved, such orders as are reasonably necessary to correct, eliminate, or remedy such conduct, condition, or ground.

(B) If upon examination or at any other time, the superintendent has reasonable cause to believe that any domestic insurer is in such condition as to render the continuance of its 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 superintendent shall upon his determination do both of the following:

(1) Notify the insurer of the determination;

(2) Furnish to the insurer a written list of the superintendent’s requirements to abate the determination.

(C) If the superintendent makes a determination to supervise an insurer subject to an order under division (A) or (B) of this section, he shall notify the insurer that it is under the supervision of the superintendent. During the period of supervision, the superintendent may appoint a supervisor to supervise the insurer. The order appointing a supervisor shall direct the supervisor to enforce orders issued under division (A) or (B) of this section and may also require that the insurer may not do any of the following, during the period of supervision, without the prior approval of the superintendent or his 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;

(8) Enter into any new reinsurance contract or treaty.

(D) Any insurer subject to an order under this section shall comply with the lawful requirements of the superintendent and, if placed under supervision, shall have sixty days from the date the supervision order is served within which to comply with the requirements of the superintendent. In the event of the insurer’s failure to comply within such time, the superintendent may commence proceedings under section 3903.12 or 3903.17 of the Revised Code to have a rehabilitator or liquidator appointed, or extend the period of supervision.

(E) The notice of hearing under division (A) of this section and any order issued pursuant to that division shall be served upon the insurer. The notice of hearing shall state the time and place of hearing, and the conduct, condition, or ground upon which the superintendent would base his order. Unless mutually agreed between the superintendent and the insurer, the hearing shall occur not less than ten days nor more than thirty days after notice is served and shall be either in Franklin county or in some other place convenient to the parties to be designated by the superintendent. The superintendent shall hold all hearings under division (A) of this section privately unless the insurer requests a public hearing, in which case the hearing shall be public.

(F)(1) Any insurer subject to an order under division (B) of this section may request a hearing to review that order. Such a hearing shall be held as provided in division (E) of this section, but the request for a hearing shall not stay the effect of the order.

(2) If the superintendent issues an order under division (B) of this section, the insurer may, at any time, waive a superintendent’s hearing and apply for immediate judicial relief by means of any appropriate judicial remedy without first exhausting administrative remedies.

(G) During the period of supervision, the insurer may request the superintendent 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) If the superintendent has reasonable cause to believe that a supervision order issued under this section has been violated, he may, unless the order is stayed by a court of competent jurisdiction, request the attorney general to commence and prosecute any appropriate action or proceeding in the name of the state against the person to recover a civil penalty not to exceed ten thousand dollars.

(I) Upon complaint or motion of the superintendent, the court of common pleas may issue a temporary restraining order, a preliminary injunction, a permanent injunction, or such other orders as the court considers necessary and proper to enforce a supervision order.

(J) In the event that any person, subject to sections 3903.01 to 3903.59 of the Revised Code, including those persons described in division (A) of section 3903.06 of the Revised Code, knowingly violates any valid order of the superintendent issued under the provisions of this section and, as a result of such violation, the net worth of the insurer is reduced or the insurer suffers loss it would not otherwise have suffered, the person is personally liable to the insurer for the amount of any such reduction or less. The superintendent or supervisor may bring an action on behalf of the insurer in the court of common pleas to recover the amount of the reduction or less together with any costs.

(K) Without regard to the status of any proceeding instituted under this section, the superintendent may at any time commence proceedings under section 3903.12 or 3903.17 of the Revised Code to have a rehabilitator or liquidator appointed.

Effective Date: 03-07-1983

(A) The superintendent of insurance may file in the court of common pleas a complaint alleging, with respect to a domestic insurer all of the following:

(1) That there exist any grounds that would justify a court order for a formal delinquency proceeding against an insurer under sections 3903.01 to 3903.59 of the Revised Code;

(2) That the interests of policyholders, creditors, or the public will be endangered by delay;

(3) The contents of a seizure order or other order considered necessary by the superintendent.

(B) Upon a filing under division (A) of this section, the court may issue forthwith, ex parte and without a hearing, the requested order which shall direct the superintendent to take possession and control of all or a part of the property, 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 transaction of its business except with the written consent of the superintendent.

(C) The court shall specify in the order what its duration shall be, which shall be such time as the court considers necessary for the superintendent 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 considers desirable after such notice as it considers appropriate, and may extend, shorten, or modify the terms of the seizure order or other order. The court shall vacate the seizure order or other order if the superintendent fails to commence a formal proceeding under sections 3903.01 to 3903.59 of the Revised Code after having had a reasonable opportunity to do so. An order of rehabilitation or liquidation terminates the seizure order.

(D) Entry of a seizure order or other order under this section does not constitute an anticipatory breach of any contract of the insurer.

(E) An insurer subject to an ex parte order under this section may file a motion in 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 fifteen days after the motion is filed. The court shall, upon request of the insurer, hold hearings under this division in chambers.

(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.

Effective Date: 03-07-1983

(A) In all proceedings and judicial reviews thereof under sections 3903.09 and 3903.10 of the Revised Code, all records of the insurer, other documents, and all department of insurance 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 privileged except as is necessary to enforce compliance with those sections, unless and until the court of common pleas, after hearing arguments from the parties in chambers, shall order otherwise, or unless the insurer requests in writing that the matter be made public. Until such court order or such request from the insurer, all papers filed with the clerk of the court shall be held by the clerk in a confidential file.

(B) Notwithstanding division (A) of this section, the superintendent may do either of the following:

(1) Share the documents and information that are the subject of this section with the chief deputy rehabilitator, the chief deputy liquidator, other deputy rehabilitators and liquidators, and any other person employed by, or acting on behalf of, the superintendent pursuant to Chapter 3901. or 3903. of the Revised Code, with other local, state, federal, and international regulatory and law enforcement agencies, with local, state, and federal prosecutors, and with the national association of insurance commissioners and its affiliates and subsidiaries, provided that the recipient agrees to maintain the confidential or privileged status of the confidential or privileged document or information and has authority to do so;

(2) Disclose documents and information that are the subject of this section in the furtherance of any regulatory or legal action brought by or on behalf of the superintendent or the state, resulting from the exercise of the superintendent’s official duties.

(C) Notwithstanding divisions (A) and (B) of this section, the superintendent may authorize the national association of insurance commissioners and its affiliates and subsidiaries by agreement to share confidential or privileged documents or information received pursuant to division (B)(1) of this section with local, state, federal, and international regulatory and law enforcement agencies and with local, state, and federal prosecutors, provided that the recipient agrees to maintain the confidential or privileged status of the confidential or privileged document or information and has authority to do so.

(D) Notwithstanding divisions (A) and (B) of this section, the chief deputy rehabilitator, the chief deputy liquidator, and other deputy rehabilitators and liquidators may disclose documents and information that are the subject of this section in the furtherance of any regulatory or legal action brought by or on behalf of the superintendent, the rehabilitator, the liquidator, or the state resulting from the exercise of the superintendent’s official duties in any capacity.

(E) Nothing in this section shall prohibit the superintendent from receiving documents or information in accordance with section 3901.045 of the Revised Code.

(F) The superintendent may enter into agreements governing the sharing and use of documents and information consistent with the requirements of this section.

(G)(1) No waiver of any applicable privilege or claim of confidentiality in the documents and information described in this section shall occur as a result of sharing or receiving documents and information as authorized in divisions (B)(1), (C), and (E) of this section.

(2) The disclosure of documents or information in connection with a regulatory or legal action pursuant to divisions (B)(2) and (D) of this section does not prohibit an insurer or any other person from taking steps to limit the dissemination of the document or information to persons not involved in or the subject of the regulatory or legal action on the basis of any recognized privilege arising under any other section of the Revised Code or the common law.

Effective Date: 06-18-2002

The superintendent of insurance may file a complaint in the court of common pleas for an order authorizing him to rehabilitate a domestic insurer or an alien insurer domiciled in this state on any one or more of the following grounds:

(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) The insurer has failed to remove any person who in fact has executive authority in the insurer, whether an officer, manager, general agent, director, trustee, employee, or other person, if the person has been found after notice and hearing by the superintendent to be dishonest or untrustworthy in a way affecting the insurer’s business.

(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, trustee, employee, or other person, has refused to be examined under oath by the superintendent 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 his influence on management.

(F) After demand by the superintendent under section 3901.07 or sections 3903.01 to 3903.59 of the Revised Code, the insurer has failed to promptly make available for examination any of its 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.

(G) Without first obtaining the written consent of the superintendent, the insurer has transferred, or attempted to transfer, 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.

(H) 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 sections 3903.01 to 3903.59 of the Revised Code.

(I) Within the previous four years the insurer has willfully violated its charter or articles of incorporation, its bylaws, any insurance law of this state, or any valid order of the superintendent under section 3903.09 of the Revised Code.

(J)(1) The insurer has failed to pay within sixty days after due date any obligation to any state or any subdivision of this state or any judgment entered in any state, if the court in which such judgment was entered had jurisdiction over the subject matter except that such nonpayment shall not be a ground until sixty days after any good faith effort by the insurer to contest the obligation has been terminated, whether it is before the superintendent or in the courts.

(2) 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.

(K) The insurer has failed to file its annual report or other financial report required by statute within the time allowed by law and, after written demand by the superintendent, has failed to give an adequate explanation immediately.

(L) The board of directors or the holders of a majority of the shares entitled to vote, or a majority of those individuals entitled to the control of those entities specified in section 3903.03 of the Revised Code request or consent to rehabilitation under sections 3903.01 to 3903.59 of the Revised Code.

Effective Date: 03-07-1983

(A) An order to rehabilitate the business of a domestic insurer, or an alien insurer domiciled in this state, shall appoint the superintendent of insurance and his successors in office the rehabilitator, and shall direct the rehabilitator forthwith to take possession of the assets of the insurer, and to administer them under the general supervision of the court. The rehabilitator is vested by operation of law with the title to all property, contracts, and rights of action of the company as of the date of the entry of the judgment of the court order directing rehabilitation.

Third persons dealing with the interest of the insurer in real property in a county are charged with notice of the pendency of an action for rehabilitation of the insurer when a complaint for rehabilitation of the insurer is filed in the court of common pleas of that county or when a certified copy of the complaint is filed with the clerk of that county under Civil Rule 3(F).

Third persons dealing with the interest of the insurer in real property in a county are charged with notice of the order for rehabilitation when the judgment ordering rehabilitation is entered in that county or when a certified copy of the judgment is filed in that county under Civil Rule 3(F).

Subject to section 3903.27 of the Revised Code, third persons dealing with the interest of the insurer in other types of property are charged with notice of the pendency of the action for rehabilitation when the complaint is filed in the court of common pleas, or when a certified copy of the complaint is filed under Civil Rule 3(F) with the clerk of the court of common pleas, of the county in which the principal business of the company is conducted or in which its principal office or place of business is located. Such persons are charged with notice of the judgment ordering rehabilitation when the judgment is filed under Civil Rule 58, or a certified copy of the judgment is filed under Civil Rule 3(F), with the clerk of the court of common pleas of the county in which the principal business of the company is conducted or in which its principal office or place of business is located.

(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 its order.

(C) Entry of an order of rehabilitation does not constitute an anticipatory breach of any contracts of the insurer.

Effective Date: 03-07-1983

(A) The superintendent of insurance as rehabilitator may appoint one or more special deputies, who shall have all the powers and responsibilities of the rehabilitator granted under this section, and the superintendent may employ such clerks and assistants as considered necessary. The compensation of the special deputies, clerks, and assistants and all expenses of taking possession of the insurer and of conducting the proceedings shall be fixed by the superintendent, with the approval of the court and shall be paid out of the funds or assets of the insurer. The persons appointed under this section shall serve at the pleasure of the superintendent. In the event that the property of the insurer does not contain sufficient cash or liquid assets to defray the costs incurred, the superintendent may advance the costs so incurred out of any appropriation for the maintenance of the department of insurance. Any amounts so advanced for expenses of administration shall be repaid to the superintendent for the use of the department out of the first available money of the insurer.

(B) The rehabilitator may take such action as the rehabilitator considers 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.

(C) 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, director, trustee, broker, employee, or other person, the rehabilitator may pursue all appropriate legal remedies on behalf of the insurer.

(D) 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 it 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.

(E) In the case of a medicaid health insuring corporation that has posted a bond or deposited securities in accordance with section 1751.271 of the Revised Code, the plan proposed under division (D) of this section may include the use of the proceeds of the bond or securities to first pay the claims of contracted providers for covered health care services provided to medicaid recipients, then next to pay other claimants with any remaining funds, consistent with the priorities set forth in sections 3903.421 and 3903.42 of the Revised Code.

(F) The rehabilitator shall have the power under sections 3903.26 and 3903.27 of the Revised Code to avoid fraudulent transfers.

(G) As used in this section:

(1) “Contracted provider” means a provider with a contract with a medicaid health insuring corporation to provide covered health care services to medicaid recipients.

(2) “Medicaid recipient” means a person eligible for assistance under the medicaid program operated pursuant to Chapter 5111. of the Revised Code.

Effective Date: 03-07-1983; 09-29-2005

(A) Any court in this state, before which any action or proceeding in which the insurer is a party or is obligated to defend a party is pending when a rehabilitation order against the insurer is entered, shall stay the action or proceeding for ninety days and such additional time as is necessary for the rehabilitator to obtain proper representation and prepare for further proceedings. The rehabilitator shall take such action respecting the pending litigation as he considers necessary in the interests of justice and for the protection of creditors, policyholders, and the public. The rehabilitator shall immediately consider all litigation pending outside this state and shall petition the courts having jurisdiction over that litigation for stays whenever necessary to protect the estate of the insurer.

(B) No statute of limitations or defense of laches shall run with respect to any action by or against an insurer between the filing of a complaint for appointment of a rehabilitator for that insurer and the order granting or denying that complaint. Any action by or against the insurer that might have been commenced when the complaint was filed may be commenced for at least sixty days after the order of rehabilitation is entered or the complaint is denied.

(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.

Effective Date: 03-07-1983

(A) Whenever the superintendent of insurance believes rehabilitation of an insurer would substantially increase the risk of loss to creditors, policyholders, or the public, or would be futile, the superintendent may file a motion in the court of common pleas for an order of liquidation. A motion under this division has the same effect as a complaint under section 3903.17 of the Revised Code. The court shall permit the directors of the insurer to take such actions as are reasonably necessary to defend against the motion and may order payment from the estate of the insurer of such costs and other expenses of defense as justice may require.

(B) The court may at any time, upon motion of the rehabilitator, enter an order terminating rehabilitation of an insurer. The court may also, upon motion of the directors of the insurer, enter 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 motion as justice may require. If the court finds that rehabilitation has been accomplished and that grounds for rehabilitation under section 3903.12 of the Revised Code no longer exist, it shall order that the insurer be restored to possession of its property and the control of its business. The court may also make such a finding and issue such an order at any time upon its own motion.

Effective Date: 03-07-1983

The superintendent of insurance may file a complaint in the court of common pleas for an order directing him to liquidate a domestic insurer or an alien insurer domiciled in this state on the basis of any one or more of the following:

(A) Upon any ground for an order of rehabilitation specified in section 3903.12 of the Revised Code, whether or not there has been a prior order directing the rehabilitation of the insurer;

(B) That the insurer is insolvent;

(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.

Effective Date: 03-07-1983

(A) An order to liquidate the business of a domestic insurer shall appoint the superintendent of insurance and his successors in office as liquidator and shall direct the liquidator forthwith to take possession of the assets of the insurer and to administer them under the general supervision of the court. The liquidator shall be vested by operation of law with the title to all of the property, contracts, and rights of action and all of the books and records of the insurer ordered liquidated, wherever located, as of the entry of the final order of liquidation.

Third persons dealing with the interest of the insurer in real property in a county are charged with notice of the pendency of an action for liquidation of the insurer when a complaint for liquidation of the insurer is filed in the court of common pleas of that county or when a certified copy of the complaint is filed with the clerk of that county under Civil Rule 3(F).

Third persons dealing with the interest of the insurer in real property in a county are charged with notice of the order for liquidation when the judgment ordering liquidation is filed under Civil Rule 58, or a certified copy of the judgment is filed under Civil Rule 3(F), with the clerk of the court of common pleas of that county.

Third persons dealing with the interest of the insurer in other types of property are charged with notice of the pendency of the action for liquidation when the complaint is filed in the court of common pleas, or when a certified copy of the complaint is filed under Civil Rule 3(F) with the clerk of the court of common pleas, of the county in which the principal business of the company is conducted or in which its principal office or place of business is located. Such persons are charged with notice of the judgment ordering liquidation when the judgment is filed under Civil Rule 58, or a certified copy of the judgment is filed under Civil Rule 3(F), with the clerk of the court of common pleas of the county in which the principal business of the company is conducted or in which its principal office or place of business is located.

(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 its estate shall become fixed as of the date of entry of the order of liquidation, except as provided in sections 3903.19 and 3903.37 of the Revised Code.

(C) An order to liquidate the business of an alien insurer domiciled in this state shall be in the same terms and have the same legal effect as an order to liquidate a domestic insurer, except that the assets and the business in the United States shall be the only assets and business included therein.

(D) At the time of filing the complaint for an order of liquidation, or at any time thereafter, the superintendent may file a motion for a judicial declaration of the insurer’s insolvency. After providing such notice and hearing as it considers proper, the court may make the declaration.

(E) Any order issued under this section shall require accounting to the court by the liquidator. Accountings shall be at such intervals as the court specifies in its order.

Effective Date: 03-07-1983

(A) All policies, other than life or health insurance or annuities, in effect at the time of issuance of an order of liquidation shall continue in force only for the lesser of any of the following:

(1) A period of thirty days from the date of entry of the liquidation order;

(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;

(4) The liquidator has effected a transfer of the policy obligation pursuant to division (A)(8) of section 3903.21 of the Revised Code.

(B) An order of liquidation under section 3903.18 of the Revised Code terminates coverages at the time specified in division (A) of this section for purposes of any other section of the Revised Code.

(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 of coverage of such policies not covered by a guaranty association or foreign guaranty association shall terminate under divisions (A) and (B) of this section.

Effective Date: 03-07-1983

The superintendent of insurance may file a motion for an order dissolving the corporate existence of a domestic insurer or the United States branch of an alien insurer domiciled in this state at the time he files a complaint for a liquidation order. The court shall order dissolution of the corporation upon motion by the superintendent upon or after the granting of a liquidation order. If the dissolution has not previously been ordered, it shall be effected by operation of law upon the discharge of the liquidator if the insurer is insolvent but may be ordered by the court upon the discharge of the liquidator if the insurer is under a liquidation order for some other reason.

Effective Date: 03-07-1983

(A) The liquidator may do any of the following:

(1) Appoint one or more special deputies to act for him under sections 3903.01 to 3903.59 of the Revised Code, and determine the deputies’ reasonable compensation. Special deputies have all the powers of the liquidator granted by this section. Special deputies shall serve at the pleasure of the liquidator.

(2) Employ employees and agents, actuaries, accountants, appraisers, consultants, and such other personnel as he may consider necessary to assist in the liquidation;

(3) Fix the reasonable compensation of employees and agents, actuaries, accountants, appraisers, and consultants with the approval of the court;

(4) Pay reasonable compensation to persons appointed and 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. In the event that the property of the insurer does not contain sufficient cash or liquid assets to defray the costs incurred, the superintendent of insurance may advance the costs so incurred out of any appropriation for the maintenance of the department of insurance. Any amounts so advanced for expenses of administration shall be repaid to the superintendent for the use of the department out of the first available money of the insurer.

(5) Hold hearings, subpoena witnesses to compel their attendance, administer oaths, examine any person under oath, and compel any person to subscribe to his testimony after it has been correctly reduced to writing, and in connection therewith require the production of any books, papers, records, or other documents which he considers relevant to the inquiry;

(6) Collect all debts and moneys due and claims belonging to the insurer, wherever located. For this purpose, the liquidator may do any of the following:

(a) Institute timely action in other jurisdictions, in order to forestall garnishment and attachment proceedings against such debts;

(b) Do such other acts as are necessary or expedient to collect, conserve, or protect its assets or property, including the power to sell, compound, compromise, or assign debts for purposes of collection upon such terms and conditions as he considers best;

(c) Pursue any creditor’s remedies available to enforce his claims.

(7) Conduct public and private sales of the property of the insurer;

(8) 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 section 3903.42 of the Revised Code.

(9) 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 may 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.

(10) 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;

(11) 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;

(12) Continue to prosecute and to commence in the name of the insurer or in his own name any and all suits and other legal proceedings, in this state or elsewhere, and to abandon the prosecution of claims he considers unprofitable to pursue further. If the insurer is dissolved under section 3903.20 of the Revised Code, he shall have the power to apply to any court in this state or elsewhere for leave to substitute himself for the insurer as plaintiff.

(13) Prosecute any action which may exist in behalf of the creditors, members, policyholders, or shareholders of the insurer against any officer of the insurer or any other person;

(14) Remove any or all records and property of the insurer to the offices of the superintendent 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.

(15) Deposit in one or more banks in this state such sums as are required for meeting current administration expenses and dividend distributions;

(16) Invest all sums not currently needed, unless the court orders otherwise;

(17) File any necessary documents for record in the office of any recorder of deeds or record office in this state or elsewhere where property of the insurer is located;

(18) Assert all defenses available to the insurer as against third persons, including, but not limited to, statutes of limitation, statutes of frauds, and the defense of usury. A waiver of any defense by the insurer after a complaint in liquidation has been filed does 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 association.

(19) 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 under sections 3903.26 to 3903.28 of the Revised Code;

(20) Intervene in any proceeding wherever instituted that might lead to the appointment of a receiver, conservator, rehabilitator, liquidator, or trustee, and to act as the receiver, conservator, rehabilitator, liquidator, or trustee whenever the appointment is offered;

(21) Enter into agreements with any receiver, conservator, rehabilitator, liquidator, or superintendent of any other state relating to the rehabilitation, liquidation, conservation, or dissolution of an insurer doing business in both states;

(22) Exercise all powers now held or hereafter conferred upon receivers, conservators, rehabilitators, or liquidators by the laws of this state not inconsistent with the provisions of sections 3903.01 to 3903.59 of the Revised Code;

(23) Apply to the court for permission to sell the insurer as a going concern. If the court determines that the sale of the insurer as a going concern is in the best interest of the estate and that the sale will not diminish the value of the claims of shareholders and creditors, the court shall order that the insurer be discharged from all of its liabilities, that the outstanding shares of the insurer be canceled, that for no additional consideration new shares of the insurer be issued in the name of the liquidator, that the liquidator be vested with the title to the new shares which shares shall be deemed validly issued, fully paid, and nonassessable pursuant to applicable law, and that the liquidator be authorized to sell the shares, together with such tax credits, of the insurer as the liquidator determines to be in the best interests of the estate. The sale may be at public or private sale and under such terms and conditions as the liquidator determines to be in the best interests of the estate. Upon confirmation of the sale by the court, the purchasers of the shares shall be vested with title to those shares, including any tax credits, of the insurer free and clear of all claims and defenses. The proceeds from the sale of the shares shall become a part of the estate in liquidation.

A sale under this division (A)(23) does not affect the rights and liabilities of the insurer and of its creditors, policyholders, shareholders, members, and all other persons interested in its estate as fixed under division (B) of section 3903.18 of the Revised Code. No person is entitled to any priority or preference rights in the proceeds of the sale except as so fixed.

As used in this division (A)(23), “shareholder” has the same meaning as in division (F) of section 1701.01 of the Revised Code and also includes any secured party or other person or holder who has or claims to have any interest of any kind in any shares of the insurer.

This division (A)(23) applies retrospectively and shall be liberally construed to accomplish its purpose to provide a more expeditious and effective procedure for marshalling the assets of the estate in order to realize the maximum amount possible from the sale of those assets and ensure that the purchasers receive clear and marketable titles.

(B) The enumeration, in this section, of the powers and authority of the liquidator shall not be construed as a limitation upon him, nor shall it exclude in any manner his right to do such other acts not herein specifically enumerated, or otherwise provided for, as may be necessary or appropriate for the accomplishment of or in aid of the purpose of liquidation.

Effective Date: 09-10-1987

(A) Unless the court otherwise directs, the liquidator shall give or cause to be given notice of the liquidation order as soon as possible to all of the following:

(1) By first class mail and either by telegram or telephone to the superintendent of insurance or equivalent officer of each jurisdiction in which the insurer is doing business;

(2) By first class mail to any guaranty association or foreign guaranty association which is or may become obligated as a result of the liquidation;

(3) By first class mail to all insurance agents of the insurer;

(4) By first class mail 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;

(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 considers appropriate.

(B) Notice to potential claimants under division (A) of this section shall require claimants to file with the liquidator their claims together with proper proofs thereof under section 3903.36 of the Revised Code, 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 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 sections 3903.01 to 3903.59 of the Revised Code is conclusive with respect to all claimants, whether or not they received notice.

Effective Date: 03-07-1983

Effective Date: 03-07-1983

(A) Upon entry of an order appointing a liquidator of a domestic insurer or of an alien insurer domiciled in this state, no civil action shall be commenced against the insurer or liquidator, whether in this state or elsewhere, nor shall any such existing actions be maintained or further prosecuted after the entry of the order. The courts of this state shall give full faith and credit to injunctions against the liquidator or the company or the continuation of existing actions against the liquidator or the company, when such injunctions are included in an order to liquidate an insurer issued pursuant to corresponding provisions in other states. Whenever in the liquidator’s judgment, protection of the estate of the insurer necessitates intervention in an action against the insurer that is pending outside this state, he may intervene in the action. The liquidator may defend any action in which he intervenes under this section at the expense of the estate of the insurer.

(B) The liquidator may, upon or after an order for liquidation, within two years or such time in addition to two years as applicable law may permit, commence 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 complaint upon which the order is entered. Where, by any agreement, a period of limitation is fixed for commencing 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 complaint, the liquidator may, for the benefit of the estate, take any such action or do any such act, required of or permitted to the insurer, within a period of one hundred eighty 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 limitations or defense of laches shall run with respect to any action against an insurer between the filing of a complaint for liquidation against an insurer and the denial of the complaint. Any action against the insurer that might have been commenced when the complaint was filed may be commenced for at least sixty days after the complaint 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.

Effective Date: 03-07-1983

(A) As soon as practicable after the liquidation order but not later than one hundred twenty days thereafter, the liquidator shall prepare in duplicate a list of the insurer’s assets. The list shall be amended or supplemented from time to time as the liquidator may determine. One copy shall be filed in the office of the clerk of the court and one copy shall be retained for the liquidator’s files. All amendments and supplements shall be similarly filed.

(B) The liquidator shall reduce the assets to a degree of liquidity that is consistent with the effective execution of the liquidation.

(C) A submission to the court for disbursement of assets in accordance with section 3903.34 of the Revised Code fulfills the requirements of division (A) of this section.

Effective Date: 03-07-1983

(A) Every transfer made or suffered and every obligation incurred by an insurer within one year prior to the filing of a successful complaint for rehabilitation or liquidation under sections 3903.01 to 3903.59 of the Revised Code 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 sections 3903.01 to 3903.59 of the Revised Code, which is fraudulent under this section, may be avoided by the rehabilitator or liquidator, 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 rehabilitator or liquidator shall succeed to and may enforce the rights of the purchaser, lienor, or obligee.

(B)(1) A transfer of property other than real property is 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 division (C) of section 3903.28 of the Revised Code.

(2) A transfer of real property is 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 is not deemed to be perfected if there are available means by which a legal lien can be created.

(4) Any transfer not perfected prior to the filing of a complaint for rehabilitation or liquidation is deemed to be made immediately before the filing of the complaint.

(5) The provisions of divisions (B)(1) to (5) of this section 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 rehabilitator or liquidator under division (A) of this section if both of the following apply:

(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 transaction, unless the reinsurer gives a present fair equivalent value for the release;

(2) Any part of the transaction took place within one year prior to the date of filing of the complaint through which the rehabilitation or liquidation was commenced.

Effective Date: 03-07-1983

(A) After a complaint 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 is valid against the rehabilitator or liquidator 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 has a lien on the property so transferred. The commencement of a proceeding for rehabilitation or liquidation is constructive notice upon the filing of the complaint in the court of common pleas, or upon the filing under Civil Rule 3(F) of a certified copy of the complaint with the clerk of the court of common pleas, of the county in which any real property or tangible property of the insurer is located. The exercise of jurisdiction by a court of the United States or any state 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 complaint or a certified copy of the complaint is filed in the county prior to the consummation of the judicial sale.

(B) After a complaint for rehabilitation or liquidation has been filed and before either the rehabilitator or liquidator 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 rehabilitator or liquidator 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 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 complaint 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 has 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 complaint for rehabilitation or liquidation by any person other than the rehabilitator or liquidator is valid against the rehabilitator or liquidator.

(C) Nothing in sections 3903.01 to 3903.59 of the Revised Code shall be construed to impair the negotiability of currency or negotiable instruments.

Effective Date: 03-07-1983

(A)(1) A preference is a transfer of any of the property of an insurer or of an interest in 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 two years before the complaint date that enables the creditor to receive more than the creditor would receive if the insurer was liquidated under this chapter, the transfer had not been made, and the creditor received payment of the debt to the extent provided by the provisions of this chapter.

(2) Any preference may be avoided by the liquidator if any of the following apply:

(a) The insurer was insolvent at the time of the transfer;

(b) The transfer was made within one hundred twenty days before the complaint date;

(c) The creditor receiving it 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;

(d) The creditor receiving it was any of the following:

(i) An officer or director of the insurer;

(ii) A person, including but not limited to an employee or attorney, who was in fact in a position to effect a level of control over the actions of the insurer comparable to that of an officer or director whether or not the person held such position, but excluding employees of the department of insurance and any person retained or appointed by the department to assist in the examination, supervision, or other regulation or monitoring of the insurer;

(iii) A shareholder holding directly or indirectly more than five per cent of any class of any equity security issued by the insurer ;

(iv) 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 the value of the property from the initial transferee, and if the property has been transferred or converted, the liquidator may recover the property or the value of the property from any person who has received the property, except that a subsequent bona fide purchaser or lienor has 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, such lien or title is preserved for the benefit of the estate, in which event the lien or title shall pass to the liquidator.

(4) The liquidator may not avoid a transfer under this section as provided by the following:

(a) To the extent that the transfer was intended, by both the insurer and the creditor to or for whose benefit the transfer was made, to be a contemporaneous exchange for new value given to the insurer and was in fact a substantially contemporaneous exchange;

(b) To the extent that the transfer was in payment of a debt incurred by the insurer in the ordinary course of business or financial affairs of the insurer and the transferee and the transfer both was made in the ordinary course of business or financial affairs of the insurer and the transferee and was made according to ordinary business terms;

(c) If the transfer was made to or for the benefit of a creditor, to the extent that after the transfer the creditor gave new value to or for the benefit of the insurer not secured by an otherwise unavoidable security interest, on account of which new value the insurer did not make an otherwise unavoidable transfer to or for the benefit of such creditor.

(B)(1) A transfer of property other than real property is 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 can become superior to the rights of the transferee.

(2) A transfer of real property is deemed to be made or suffered when it becomes so far perfected that no subsequent bona fide purchaser from the insurer can obtain rights superior to the rights of the transferee.

(3) A transfer which creates an equitable lien is not deemed to be perfected if there are available means by which a legal lien can be created.

(4) A transfer not perfected prior to the complaint date is deemed to be made immediately before the complaint date.

(5) The provisions of division (B) of this section 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 is superior to the rights of a transferee, or a purchaser may obtain rights superior to the rights of a transferee within the meaning of division (B) of this section, if such consequences 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 is not, however, superior and such a purchase does not create superior rights for the purpose of division (B) of this section 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.

(D) A transfer of property for or on account of a new and contemporaneous consideration that is deemed under division (B) 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 perfect 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, has the same effect as a transfer for or on account of a new and contemporaneous consideration.

(E) If any lien deemed voidable under division (A)(2) 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 complaint date, the indemnifying transfer or lien is also deemed voidable.

(F) The property affected by any lien deemed voidable under divisions (A) and (E) of this section is discharged from such lien, and that property and any of the indemnifying property transferred to or for the benefit of a surety passes 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 Franklin county court of common pleas has jurisdiction of any proceeding initiated by the liquidator filed in the state 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 may 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 a 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 division (G) of this section to the extent of the amount paid to the liquidator.

(I) If an insurer shall, directly or indirectly, within one hundred twenty days before the complaint date, 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 transaction may be examined by the court on its own motion or shall be examined by the court on motion 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 benefit 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 provisions of division (A)(2) of this section.

(J) As to every transfer subject to avoidance under this section:

(1) Every person receiving any property from the insurer or the benefit thereof as a preference voidable under division (A) of this section shall be personally liable for the property and shall be bound to account to the liquidator.

(2) The liquidator has the burden of proving that a transfer is voidable under division (A)(2) of this section, and the person against which recovery or voidability is sought has the burden of proving that a transfer is not voidable under division (A)(4) of this section.

(3) The fact that the insurer was under examination, supervision, or other regulatory oversight by the department of insurance, or that the department may have acquiesced in or approved any payments made by the insurer, does not effect or otherwise create a defense to avoidance of a transfer voidable under this section.

(K) Nothing in this division shall be construed to prejudice any other claim by the liquidator against any person.

(L) As used in this section:

(1) “Complaint date” means the date on which a complaint is filed by the superintendent of insurance seeking the liquidation of an insurer, if the complaint results in an order of liquidation. If the insurer is placed in rehabilitation, which rehabilitation is later converted to liquidation, the “complaint date” is the date on which the original complaint seeking rehabilitation was filed.

(2) “New value” means money or money’s worth in goods, services, new credit, or the release by a transferee of property previously transferred to the transferee in a transaction that is neither void nor voidable by the liquidator under any applicable law, including the proceeds of the transferred property, but does not include an obligation substituted for an existing obligation.

Effective Date: 04-12-2004

(A) No claims of a creditor who has received or acquired a preference, lien, conveyance, transfer, assignment, or encumbrance, voidable under sections 3903.01 to 3903.59 of the Revised Code, shall be allowed unless he 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 shall not be allowed unless the money is paid or the property is delivered to the liquidator within thirty days from the date of the entering 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 division (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 an excused late filing under section 3903.35 of the Revised Code if filed within thirty days from the date of the avoidance, or within the further time allowed by the court under division (A) of this section.

Effective Date: 03-07-1983

(A) Mutual debts or mutual credits between the insurer and another person in connection with any action or proceeding under sections 3903.01 to 3903.59 of the Revised Code shall be set off and the balance only shall be allowed or paid, except as provided in division (B) of this section and section 3903.33 of the Revised Code.

(B) No setoff or counterclaim shall be allowed in favor of any person where any of the following apply:

(1) The obligation of the insurer to the person would not at the date of the filing of a complaint 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 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.

Effective Date: 03-07-1983

(A) As soon as practicable but not more than two years from the date of an order of liquidation under section 3903.18 of the Revised Code of an insurer issuing assessable policies, the liquidator shall make a report to the court setting forth all of the following:

(1) The reasonable value of the assets of the insurer;

(2) The insurer’s probable total liabilities;

(3) The probable aggregate amount of the assessment necessary to pay all claims of creditors and expenses in full, including expenses of administration and costs of collecting the assessment;

(4) A recommendation as to whether or not an assessment should be made and in what amount.

(B)(1) Upon the basis of the report provided in division (A) of this section, including any supplements and amendments thereto, the court may levy one or more assessments against all members of the insurer who are subject to assessment.

(2) Subject to any applicable legal limits on assessability, the aggregate assessment shall be for the amount that the sum of the probable liabilities, the expenses of administration, and the estimated cost of collection of the assessment, exceeds the value of existing assets, with due regard being given to assessments that cannot be collected economically.

(C) After levy of assessment under division (B) of this section, the liquidator shall issue an order directing each member who has not paid the assessment pursuant to the order to show cause why the liquidator should not pursue a judgment therefor.

(D) The liquidator shall give notice of the order to show cause by publication and by first class mail to each member liable thereunder mailed to his last known address as it appears on the insurer’s records, at least twenty days before the return day of the order to show cause.

(E)(1) If a member does not appear and serve duly verified objections under the liquidator on or before the return day of the order to show cause under division (C) of this section, the court shall make an order adjudging the member liable for the amount of the assessment against him, pursuant to division (C) of this section, together with costs, and the liquidator shall have a judgment against the member therefor.

(2) If on or before such return day, the member appears and serves duly verified objections upon the liquidator, the superintendent of insurance may hear and determine the matter or may appoint a referee to hear it and make such order as the facts warrant. In the event that the superintendent determines that such objections do not warrant relief from assessment, the member may, by motion, request the court to review the matter and vacate the order to show cause.

(F) The liquidator may enforce any order or collect any judgment under division (E) of this section by any lawful means.

Effective Date: 03-07-1983

The amount recoverable by the liquidator from reinsurers shall not be reduced as a result of delinquency proceedings, regardless of any provision in the reinsurance contract or other agreement. Payment made by a reinsurer directly to an insured or other creditor does not diminish the reinsurer’s obligation to the insurer’s estate except when the reinsurance contract or other written agreement either provides for direct payment of the reinsurance to the insured or beneficiary of the insurance policy in the event of the insolvency of the ceding insurer or provides for payment to a third party and has received the prior written approval of the superintendent of insurance.

Effective Date: 04-12-2004

(A) An agent, broker, premium finance company, or any other person, other than the insured, responsible for the payment of a premium is obligated to pay any unpaid earned premium due the insurer at the time of the declaration of insolvency, as shown on the records of the insurer. The liquidator may recover from such person any part of an unearned commission of such person.

(B) An insured shall be obligated to pay any unpaid earned premium due the insurer at the time of the declaration of insolvency, as shown on the records of the insurer.

Effective Date: 03-07-1983

(A) Within one hundred twenty days of a final determination of insolvency of an insurer by a court of this state, the liquidator shall make application to the court for approval of a proposal to disburse assets out of marshalled assets, from time to time as such assets become available, to any guaranty associations or foreign guaranty associations having obligations because of such insolvency. If the liquidator determines that there are insufficient assets to disburse, the application required by this section shall be considered satisfied by a filing by the liquidator stating the reasons for this determination.

(B) Such proposal shall include, but not be limited to, provisions for all of the following:

(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 divisions (B) and (D) of section 3903.42 of the Revised Code;

(2) Disbursement of the assets marshalled 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 section 3903.42 of the Revised Code in accordance with such priorities. No bond shall be required of any such association.

(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 by the associations 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 served upon the associations in, and the superintendents or commissioners of insurance or equivalent officers of, each of the states by certified mail as provided in Civil Rule 4.1(E) at least thirty days prior to submission of 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 further that the liquidator’s proposal complies with divisions (B)(1) and (2) of this section.

Effective Date: 12-04-1995

(A) Proof of all claims shall be filed with the liquidator in the form required by section 3903.36 of the Revised Code on or before the last day for filing specified in the notice required under section 3903.22 of the Revised Code, except that proof of claims for cash surrender values or other investment values in life insurance and annuities need not be filed unless the liquidator expressly so requires.

(B) The liquidator may permit a claimant making a late filing to share in distributions, whether past or future, as if he were not late, to the extent that any such payment will not prejudice the orderly administration of the liquidation, under any of the following circumstances:

(1) The existence of the claim was not known to the claimant and he filed his claim as promptly thereafter as reasonably possible after learning of it;

(2) A transfer to a creditor was avoided under sections 3903.26 to 3903.28 of the Revised Code, or was voluntarily surrendered under section 3903.29 of the Revised Code, and the filing satisfies the conditions of section 3903.29 of the Revised Code;

(3) The valuation, under section 3903.41 of the Revised Code, of security held by a secured creditor shows a deficiency, and the claim is filed within thirty 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 division (B) of this section, 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 his claim as is then being paid to claimants of any lower priority. This shall continue until his claim has been paid in full.

Effective Date: 03-07-1983

(A) Proof of claim shall consist of a statement signed by the claimant that includes all of the following that are applicable:

(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 any written instrument which is the foundation of the claim;

(7) The name and address of the claimant and the attorney who represents him, if any.

(B) No claim need be considered or allowed if it does not contain all the information in division (A) of this section 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 division (A) of this section 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 complaint 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 complaint 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.

Effective Date: 03-07-1983

(A) The claim of a third party which is contingent only on his first obtaining a judgment against the insured shall be considered and allowed as if there were no such contingency.

(B) A claim may be allowed even if contingent, if it is filed in accordance with section 3903.35 of the Revised Code. 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 that 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 section 3903.13 or 3903.18 of the Revised Code.

Effective Date: 03-07-1983

(A) Whenever any third party asserts a cause of action against an insured of an insurer in liquidation, the third party may file a claim with the liquidator.

(B) Whether or not the third party files a claim, the insured may file a claim on his own behalf in the liquidation. An insured who fails to file a claim by the date for filing claims specified in the order of liquidation or within sixty days after mailing of the notice required by section 3903.22 of the Revised Code, whichever is later, is an unexcused late filer.

(C)(1) The liquidator shall make recommendations to the court under section 3903.42 of the Revised Code, for the allowance of an insured’s claim under division (B) of this section after consideration of the probable outcome of any pending action against the insured on which the claim is based, the probable damages recoverable in the action, and the probable costs and expenses of defense. After allowance by the court, the liquidator shall withhold any dividends payable on the claim, pending the outcome of litigation and negotiation with the insured. Whenever it seems appropriate, he shall reconsider the claim on the basis of additional information and amend his recommendations to the court. The insured shall be afforded the same notice and opportunity to be heard on all changes in the recommendation as in its initial determination. The court may amend its allowance as it thinks appropriate.

(2) As claims against the insured are settled or barred, the insured shall be paid from the amount withheld the same percentage dividend as was paid on other claims of like priority, based on the lesser of either of the following:

(a) The amount actually recovered from the insured by action or paid by agreement, plus the reasonable costs and expenses of defense;

(b) The amount allowed on the claims by the court.

(3) After all claims are settled or barred, any sum remaining from the amount withheld shall revert to the undistributed assets of the insurer. Delay in final payment under this division shall not be a reason for unreasonable delay of final distribution and discharge of the liquidator.

(D) If several claims founded upon one policy are filed, whether by third parties or as claims by the insured under this section, and the aggregate allowed amount of the claims to which the same limit of liability in the policy is applicable exceeds that limit, each claim as allowed shall be reduced in the same proportion so that the total equals the policy limit. Claims by the insured shall be evaluated as in division (C) of this section. If any insured’s claim is subsequently reduced under division (C) of this section, the amount thus freed shall be apportioned ratably among the claims which have been reduced under this division.

(E) No claim may be presented under this section if it is or may be covered by any guaranty association or foreign guaranty association.

Effective Date: 03-07-1983

(A) 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 objections with the liquidator. If no such filing is made, the claimant may not further object to the determination.

(B) 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 in accordance with the Civil Rules 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.

Effective Date: 03-07-1983

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, does not apply to a guaranty association or foreign guaranty association.

Effective Date: 03-07-1983

(A) The value of any security held by a secured creditor shall be determined in one of the following ways, as the court may direct:

(1) By converting the same into money according to the terms of the agreement pursuant to which the security was delivered to such creditor;

(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 his security to the liquidator, the entire claim shall be allowed as if unsecured.

Effective Date: 03-07-1983

The priority of distribution of claims from the insurer’s estate shall be in accordance with the order in which each class of claims is set forth in this section. 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 be established within any class. The order of distribution of claims shall be:

(A) Class 1. 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 services rendered in the liquidation;

(3) Any necessary filing fees;

(4) The fees and mileage payable to witnesses;

(5) Reasonable attorney’s fees;

(6) The reasonable expenses of a guaranty association or foreign guaranty association in handling claims.

(B) Class 2. All claims under policies for losses incurred, including third party claims, all claims of contracted providers against a medicaid health insuring corporation for covered health care services provided to medicaid recipients, all claims against the insurer for liability for bodily injury or for injury to or destruction of tangible property that are not under policies, and all claims of a guaranty association or foreign guaranty association. All claims under life insurance 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 obligations 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. Claims under nonassessable policies for unearned premium or other premium refunds.

(C) Class 3. Claims of the federal government.

(D) Class 4. Debts due to employees for services performed to the extent that they do not exceed one thousand dollars and represent payment for services performed within one year before the filing of the complaint for liquidation. Officers and directors shall not be entitled to the benefit of this priority. Such priority shall be in lieu of any other similar priority that may be authorized by law as to wages or compensation of employees.

(E) Class 5. Claims of general creditors.

(F) Class 6. Claims of any state or local government. Claims, including those of any state or local 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 division (I) of this section.

(G) Class 7. Claims filed late or any other claims other than claims under divisions (H) and (I) of this section.

(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.

If any provision of this section or the application of any provision of this section to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this section, and to this end the provisions are severable.

(J) As used in sections 3903.42 and 3903.421 of the Revised Code, “contracted provider” and “medicaid recipient” have the same meanings as in secion 3903.14 of the Revised Code.

Effective Date: 12-04-1995; 09-29-2005

(A) Notwithstanding section 3903.42 of the Revised Code, both of the following apply to medicaid health insuring corporation performance bonds and securities:

(1) Proceeds from the bond issued or securities held pursuant to section 1751.271 of the Revised Code that have been paid to or deposited with the department of insurance shall be considered special deposits for purposes of satisfying claims of contracted providers for covered health care services provided to medicaid recipients;

(2) Contracted providers that have claims against a health insuring corporation for covered health care services provided to medicaid recipients shall be given first priority against the proceeds of the bond or securities held pursuant to section 1751.27 of the Revised Code, to the exclusion of other creditors, except as provided for in this section.

(B) If the amount of the proceeds of the bond or securities are not sufficient to satisfy all of the allowed claims of contracted providers for covered health care services provided to medicaid recipients, payment shall proceed as follows:

(1) Contracted providers shall share in the proceeds of the bond or securities pro rata based on the allowed amount of the providers’ claims against the health insuring corporation for covered health care services provided to medicaid recipients;

(2) After payments are made under division (B)(1) of this section, the net unpaid balance of the claims of contracted providers shall be allowed for payment from the general assets of the estate in accordance with the priorities set forth in section 3903.42 of the Revised Code.

(C) If the amount of the proceeds of the bond or securities exceeds the allowed claims of contracted providers for covered health care services provided to medicaid recipients, the excess amount shall be considered a general asset of the health insuring corporation’s estate to be distributed to other claimants in accordance with the priorities set forth in section 3903.42 of the Revised Code.

Effective Date: 09-29-2005

(A) The liquidator shall review all claims duly filed in the liquidation and shall make such further investigation as he considers necessary. He may compound, compromise, or in any other manner negotiate the amount for which claims will be recommended to the court except where the liquidator is required by law to accept claims as settled by any person or organization, including any guaranty association or foreign guaranty association. Unresolved disputes shall be determined under section 3903.39 of the Revised Code. As soon as practicable, he shall present to the court a report of the claims against the insurer with his recommendations. The report shall include the name and address of each claimant and the amount of the claim finally recommended, if any. If the insurer has issued annuities or life insurance policies, the liquidator shall report the persons to whom, according to the records of the insurer, amounts are owed as cash surrender values or other investment value and the amounts owed.

(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 sixty 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 section 3903.39 of the Revised Code. No claim under a policy of insurance shall be allowed for an amount in excess of the applicable policy limits.

Effective Date: 03-07-1983

Under the direction of the court, the liquidator shall pay distributions in a manner that will assure the proper recognition of priorities and a reasonable balance between the expeditious completion of the liquidation and the protection of unliquidated and undetermined claims, including third party claims. Distribution of assets in kind may be made at valuations set by agreement between the liquidator and the creditor and approved by the court.

Effective Date: 03-07-1983

(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 distributed in accordance with section 3903.42 of the Revised Code among those claimants to whom it is possible to make immediate payment.

(B) All funds withheld under section 3903.38 of the Revised Code and not distributed shall upon discharge of the liquidator be deposited with the treasurer of state and paid by him in accordance with section 3903.38 of the Revised Code. Any sums remaining which under section 3903.38 of the Revised Code would revert to the undistributed assets of the insurer shall be distributed by the treasurer of state in accordance with section 3903.42 of the Revised Code among those claimants to whom it is possible to make immediate payment unless the superintendent of insurance in his discretion files a motion requesting the court to reopen the liquidation under section 3903.47 of the Revised Code.

Effective Date: 03-07-1983

(A) When all assets justifying the expense of collection and distribution have been collected and distributed under sections 3903.01 to 3903.59 of the Revised Code, the liquidator shall apply to the court for discharge. The court may grant the discharge and make any other orders, including an order to transfer any remaining funds that are uneconomic to distribute, as may be appropriate.

(B) Any other person may apply to the court at any time for an order under division (A) of this section. If the application is denied, the applicant shall pay the costs and expenses of the liquidator in resisting the application, including a reasonable attorney’s fee.

Effective Date: 03-07-1983

After the liquidation proceeding has been terminated and the liquidator discharged, the superintendent of insurance or other interested party may at any time file a motion to reopen the proceedings for good cause, including the discovery of additional assets. If the court is satisfied that there is justification for reopening, it shall so order.

Effective Date: 03-07-1983

Whenever it shall appear to the superintendent of insurance that the records of any insurer in process of liquidation or completely liquidated are no longer useful, he may recommend to the court and the court shall direct what records should be retained for future reference and what should be destroyed.

Effective Date: 03-07-1983

The court may cause audits to be made of the books of the superintendent of insurance relating to any proceeding established under sections 3903.01 to 3903.59 of the Revised Code, and a report of each audit shall be filed with the superintendent and with the court. The books, records, and other documents of the proceeding shall be made available to the auditor at any time without notice. The expense of each audit shall be considered a cost of administration of the proceeding.

Effective Date: 03-07-1983

(A) If a domiciliary liquidator has not been appointed, the superintendent of insurance may file a complaint in the court of common pleas for an order directing him to act as conservator to conserve the property of an alien insurer not domiciled in this state or a foreign insurer on any one or more of the following grounds:

(1) Any of the grounds in section 3903.12 of the Revised Code;

(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) That its certificate of authority to do business in this state has been revoked or none was ever issued and that there are residents of this state with outstanding claims or outstanding policies.

(B) When an order is sought under division (A) of this section, 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 considers appropriate. Persons dealing with the property of the insurer are charged with notice of a judgment ordering the supervisor to act as conservator under this section from the time when the judgment is filed under Civil Rule 58, or a certified copy of the judgment is filed under Civil Rule 3(F), with the clerk of the court of common pleas of the county i