-
My claim has been allowed for purposes of participating in a distribution of company assets.
Will I receive the full amount of my allowed claim?
-
When a distribution is made at a given priority level, all claims allowed at that level receive the same percentage of their
claims. This is referred to as a pro rata distribution. Although some receivership estates have assets to pay all allowed
policyholder-related claims at priority level (d) in full, this is the exception. The percentage of a claim that is paid is
based on the dollar amount of all allowed claims at a particular priority level to the remaining assets of the estate
available for distribution. For purposes of illustration only, if your claim was allowed in the amount of $5,000 and a 25%
pro-rata distribution is being made on all claims at your priority level, then you will receive a check for $1,250.
The Liquidator does not usually know what the distribution percentage will be until shortly before the Liquidator petitions
the supervisory court for authority to make a distribution.
(top)
-
How are funds distributed in liquidation?
-
When the Liquidator determines that there are sufficient assets available in a company to make payment,
in whole or in part, on allowed claims against the company, he will file a petition with the supervisory
court requesting authorization to do so. There are nine priority levels and no claims at a lower priority
can be paid until such time that either all claims allowed at the immediately higher level of priority have
been paid in full or the Liquidator has reserved sufficient funds with which to pay all such claims.
Interest is neither earned nor paid on the allowed amount of a claim. Upon receiving court approval,
funds are distributed to claimants having allowed claims at a given priority level. If there are not
enough funds available to pay the claims in full, then payment at a priority level is made on a prorated basis.
(top)
-
What is the schedule of priorities for the distribution of company assets?
-
As set forth in Section 205(1) of the Illinois Insurance Code
Article
XIII the schedule of priorities is as follows:
(a) The costs and expenses of administration, including the expenses of the Illinois Insurance Guaranty Fund, the Illinois Life and Health Insurance Guaranty Association, the Illinois Health Maintenance Organization Guaranty Association and of any similar organization in any other state as prescribed in subsection (c) of Section 545.
Article
XXXIV
(b) Secured claims, including claims for taxes and debts due the federal or any state or local
government, that are secured by liens perfected prior to the filing of the complaint.
(c) Claims for wages actually owing to employees for services rendered within 3 months
prior to the date of the filing of the complaint, not exceeding $1,000 to each employee unless
there are claims due the federal government under paragraph (f), then the claims for wages shall
have a priority of distribution immediately following that of federal claims under paragraph (f)
and immediately preceding claims of general creditors under paragraph (g).
(d) Claims by policyholders, beneficiaries, insured's and liability claims against insureds
covered under insurance policies and insurance contracts issued by the company, and claims of the Illinois
Insurance Guaranty Fund, the Illinois Life and Health Insurance Guaranty Association, the Illinois Health
Maintenance Organization Guaranty Association and any similar organization in another state as prescribed in Section 545.
(e)) Claims by policyholders, beneficiaries, and insured's, the allowed values of which were determined by estimation under paragraph (b) of subsection (4) of Section 209.
Article
XIII
(f) Any other claims due the federal government.
(g) All other claims of general creditors not falling within any other priority
under this Section including claims for taxes and debts due any state or local government which are
not secured claims and claims for attorneys' fees incurred by the company in contesting its conservation,
rehabilitation, or liquidation.
(h) Claims of guaranty fund certificate holders, guaranty capital shareholders, capital note
holders, and surplus note holders.
(i) Proprietary claims of shareholders, members, or other owners.
(top)
-
When can I expect to have my claim paid by the Liquidator?
-
As it takes a number of years to liquidate an insolvent company, it cannot quickly be determined if
and or when the Liquidator will be in a position to distribute its assets or how large the distribution
may be. Some of the tasks undertaken by the Liquidator in order to make a distribution include:
organizing company records for mailing out proof of claim forms; evaluating, negotiating and
adjudicating proof of claim forms and marshalling assets due the estates from various sources
which may require lengthy litigation, as well as collecting reinsurance recoveries on allowed claims.
(top)
-
I am an attorney with an allowed claim for pre-liquidation fees and expenses incurred on behalf of an insured.
Why is my claim classified as a general creditor rather than policy level claim?
-
Company assets are distributed pursuant to a detailed statutory schedule of priority levels
Article XIII. When a type of creditor of the company, such as insurance defense attorneys,
is not otherwise expressly identified in the schedule of priorities they are a general creditor.
(top)
-
What happens to unclaimed, uncashed or undeliverable distribution/ dividend checks issued by a
receivership estate?
-
In a company in which one or more distributions of company assets have been made on allowed claims, funds with which to
pay unclaimed, uncashed and undeliverable distribution checks are delivered to the Illinois State Treasurer's office
or the state of residence of the payee as abandoned property. This process is known as "escheatment." These funds
must be delivered to the Treasurer's office as abandoned property following the passage of 30 months from the entry of
a final order of distribution in the company. The funds delivered to the Treasurer's office are then handled pursuant
to the provisions of the
Uniform Disposition of Unclaimed Property Act (Illinois residents). Also see off-site link.
(top)
Back to Frequently Asked Questions
|
