Section 21.78.260 - Priority of distributionThe priority of distribution of claims from an insurer's estate is in accordance with the order in which each class of claims is set out in this section. Every claim in each class must be paid in full, or adequate money retained for payment, before the members of the next class may receive payment. A subclass may not be established within a class. The order of distribution of claims is
(1) class 1: the costs and expenses of administration during rehabilitation and liquidation, including (A) the actual and necessary costs preserving or recovering the assets of the insurer;(B) compensation for all services rendered in the rehabilitation and liquidation;(C) any necessary filing fees;(D) the fees and mileage payable to witnesses;(E) reasonable attorney's fees and other professional services rendered in the rehabilitation and liquidation;(F) the reasonable expenses of a guaranty association or foreign guaranty association that is handling claims;(2) class 2: reasonable compensation to employees for services performed, to the extent that the claim does not exceed two months of monetary compensation and represents payment for services performed within one year before the filing of the petition for liquidation or, if rehabilitation preceded liquidation, within one year before the filing of the petition for rehabilitation; principal officers and directors of the insurer are not entitled to the benefit of this priority except as otherwise approved by the receiver and the court; the priority in this paragraph is in place of any other similar priority that might be authorized by law as to wages or compensation of employees;(3) class 3: all claims under policies, including claims of the federal or a state or local government, for losses incurred, including third-party claims, 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 a loss for which indemnification is provided by other benefits or advantages recovered by the claimant, may not be included in this class, other than benefits or advantages recovered or recoverable in discharge of familial obligations or support, or by way of succession at death, or as proceeds of life insurance, or as gratuities; payment by an employer to an employee may not be treated as a gratuity;(4) class 4: claims under nonassessable policies for unearned premium or other premium refunds and claims of general creditors, including claims of ceding and assuming companies under contracts of reinsurance;(5) class 5: claims of the federal or a state or local government, other than claims under (3) of this section; claims, including those of a government 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, along with reasonable and actual costs attributable to it; the remaining portion of the claims are in the class of claims set out in (7) of this section;(6) class 6: claims filed late, or any other claims other than claims under (7) and (8) of this section;(7) class 7: 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;(8) class 8: the claims of shareholders or other owners, in their capacity as shareholders.