Ohio § 3903.28

§ 3903.28.

(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.