Kentucky Statutes 304.33-290 – Fraudulent transfer prior to petition — Exceptions
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(1) Definition and effect. Except as provided in subsection (5) of this section, every transfer made or suffered and every obligation incurred by an insurer within one (1) year prior to the filing of a successful petition for rehabilitation or liquidation under this subtitle shall be 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 this subtitle, which is fraudulent under this section, may be avoided by the receiver, 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 receiver shall succeed to and may enforce the rights of the purchaser, lienor, or obligee.
(2) Perfection of transfers.
(a) Personal property. A transfer of property other than real property shall be 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 subsection (3) of KRS § 304.33-310.
(b) Real property. A transfer of real property shall be 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.
(c) Equitable liens. A transfer which creates an equitable lien shall not be deemed to be perfected if there are available means by which a legal lien could be created.
(d) Transfer not perfected prior to petition. Any transfer not perfected prior to the filing of a petition for liquidation shall be deemed to be made immediately before the filing of the successful petition.
(e) Actual creditors unnecessary. This subsection shall apply whether or not there are or were creditors who might have obtained any liens or persons who might have become bona fide purchasers.
(3) Fraudulent reinsurance transactions. Any transaction of the insurer with a reinsurer shall be deemed fraudulent and may be avoided by the receiver under subsection (1) of this section if:
(a) 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; and
(b) Any part of the transaction took place within one (1) year prior to the date of filing of the petition through which the receivership was commenced.
(4) Every person receiving any property from the insurer or any benefit thereof which is a fraudulent transfer under this section shall be personally liable therefor and shall be bound to account to the liquidator.
(5) (a) Except as provided in paragraph (b) of this subsection, any transfer of, and any obligation to transfer, money or other property from an insurer-member to the federal home loan bank under a federal home loan bank security, pledge, collateral, or guarantee agreement, or other similar arrangement or credit enhancement, shall not be deemed fraudulent and shall not be avoided by the receiver under subsection (1) of this section if the agreement, arrangement, or enhancement is:
1. Made in the ordinary course of business; and
2. Made in compliance with the applicable federal home loan bank agreement.
(b) A transfer may be deemed fraudulent and may be avoided by the receiver under subsection (1) of this section if the transfer is made with the intent to hinder, delay, or defraud:
1. An insurer-member;
2. The receiver of the insurer-member; or
3. Existing or future creditors of the insurer-member.
Effective: July 14, 2022
History: Amended 2022 Ky. Acts ch. 61, sec. 6, effective July 14, 2022. — Amended
1990 Ky. Acts ch. 422, sec. 20, effective July 13, 1990. — Created 1970 Ky. Acts ch.
301, subtit. 33, sec. 29, effective June 18, 1970.
(2) Perfection of transfers.
Terms Used In Kentucky Statutes 304.33-290
- Contract: A legal written agreement that becomes binding when signed.
- Equitable: Pertaining to civil suits in "equity" rather than in "law." In English legal history, the courts of "law" could order the payment of damages and could afford no other remedy. See damages. A separate court of "equity" could order someone to do something or to cease to do something. See, e.g., injunction. In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in "law" cases but not in "equity" cases. Source: U.S. Courts
- Federal: refers to the United States. See Kentucky Statutes 446.010
- Lien: A claim against real or personal property in satisfaction of a debt.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Personal property: All property that is not real property.
- Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
- Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
- Year: means calendar year. See Kentucky Statutes 446.010
(a) Personal property. A transfer of property other than real property shall be 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 subsection (3) of KRS § 304.33-310.
(b) Real property. A transfer of real property shall be 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.
(c) Equitable liens. A transfer which creates an equitable lien shall not be deemed to be perfected if there are available means by which a legal lien could be created.
(d) Transfer not perfected prior to petition. Any transfer not perfected prior to the filing of a petition for liquidation shall be deemed to be made immediately before the filing of the successful petition.
(e) Actual creditors unnecessary. This subsection shall apply whether or not there are or were creditors who might have obtained any liens or persons who might have become bona fide purchasers.
(3) Fraudulent reinsurance transactions. Any transaction of the insurer with a reinsurer shall be deemed fraudulent and may be avoided by the receiver under subsection (1) of this section if:
(a) 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; and
(b) Any part of the transaction took place within one (1) year prior to the date of filing of the petition through which the receivership was commenced.
(4) Every person receiving any property from the insurer or any benefit thereof which is a fraudulent transfer under this section shall be personally liable therefor and shall be bound to account to the liquidator.
(5) (a) Except as provided in paragraph (b) of this subsection, any transfer of, and any obligation to transfer, money or other property from an insurer-member to the federal home loan bank under a federal home loan bank security, pledge, collateral, or guarantee agreement, or other similar arrangement or credit enhancement, shall not be deemed fraudulent and shall not be avoided by the receiver under subsection (1) of this section if the agreement, arrangement, or enhancement is:
1. Made in the ordinary course of business; and
2. Made in compliance with the applicable federal home loan bank agreement.
(b) A transfer may be deemed fraudulent and may be avoided by the receiver under subsection (1) of this section if the transfer is made with the intent to hinder, delay, or defraud:
1. An insurer-member;
2. The receiver of the insurer-member; or
3. Existing or future creditors of the insurer-member.
Effective: July 14, 2022
History: Amended 2022 Ky. Acts ch. 61, sec. 6, effective July 14, 2022. — Amended
1990 Ky. Acts ch. 422, sec. 20, effective July 13, 1990. — Created 1970 Ky. Acts ch.
301, subtit. 33, sec. 29, effective June 18, 1970.