Section 7434. Distribution of assets

(a) (1) Upon the recommendation of the
  superintendent,  and  under  the  direction  of  the court, distribution
  payments shall  be  made  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. The priority of distribution of
  claims from an insolvent property/casualty  insurer  in  any  proceeding
  subject  to  this article shall be in accordance with the order in which
  each class of claims is set forth in this paragraph and as  provided  in
  this  paragraph.  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.  No  claim by a shareholder, policyholder or other creditor shall
  be permitted to circumvent the  priority  classes  through  the  use  of
  equitable remedies. The order of distribution of claims shall be:
    (i)  Class  one. Claims with respect to the actual and necessary costs
  and  expenses   of   administration,   incurred   by   the   liquidator,
  rehabilitator or conservator under this article.
    (ii) Class two. All claims under policies including such claims of the
  federal  or  any  state  or  local government for losses incurred, third
  party claims, claims for unearned premiums, and all claims of a security
  fund, guaranty association or the equivalent except claims arising under
  reinsurance contracts.
    (iii) Class three. Claims of the federal government except those under
  class two above.
    (iv) Class four. Claims for wages owing to  employees  of  an  insurer
  against  whom  a proceeding under this article is commenced for services
  rendered within one year before  commencement  of  the  proceeding,  not
  exceeding  one thousand two hundred dollars to each employee, and claims
  for unemployment insurance contributions required by article eighteen of
  the labor law. Such priority shall be  in  lieu  of  any  other  similar
  priority which may be authorized by law.
    (v)  Class  five.  Claims  of state and local governments except those
  under class two above.
    (vi) Class six. Claims of general creditors including, but not limited
  to, claims arising under reinsurance contracts.
    (vii) Class seven. Claims filed late or any other  claims  other  than
  claims under class eight or class nine below.
    (viii)  Class  eight.  Claims  for  advanced  or  borrowed  funds made
  pursuant to section one thousand three hundred seven of this chapter.
    (ix) Class nine. Claims of  shareholders  or  other  owners  in  their
  capacity as shareholders.
    (2)  Severability.  If  any classification or priority provided for in
  paragraph one of this subsection  is  held  to  be  unconstitutional  or
  otherwise  invalid,  the  remaining classifications and priorities shall
  continue in effect.
    (b) No creditor shall be entitled  to  interest  on  any  dividend  by
  reason of delay in payment of such dividend.
    (c)  Any  claimant of another state or foreign country who is entitled
  to, or receives, a dividend upon his claim out of a statutory deposit or
  the proceeds of any qualifying bond or other asset located in such other
  state or foreign country shall not be entitled to any  further  dividend
  from  the  superintendent  until  all  other claimants of the same class
  irrespective of residence or place of the acts or contracts  upon  which
  their  claims are based shall have received an equal dividend upon their
  claims. After such equalization, such  claimant  shall  be  entitled  to
  share  in  the  distribution  of further dividends by the superintendent
  like all other creditors of the same class wherever residing.

    (d) If, after an adjudication of insolvency, a mutual insurer is found
  clearly solvent upon re-examination, its surplus  shall  be  distributed
  among all persons, partnerships or corporations whose membership did not
  cease  earlier  than  five  years prior to the date on which the insurer
  ceased  issuing  policies.  The  distribution shall be in the proportion
  which the total premium contributions of each such member during his  or
  its  entire  membership  in  the  insurer  bear  to  the  total  premium
  contributions of all such members entitled under this subsection to  any
  distributive share of such surplus.
    (e)  The  provisions of this section shall apply to distributions made
  after the effective date of this subsection in any proceeding under this
  article, regardless of the date such proceeding was commenced under this
  article, provided that the foregoing provisions of this subsection shall
  not apply to distributions made pursuant  to  a  final  court  order  of
  distribution entered on or before the effective date of this subsection.