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Ohio Revised Code

Ohio Rev. Code § 3903.42 (2026)

Priority of distribution of claims

✓ current as of May 2026
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Effective:
October 24, 2024
Latest Legislation:
Senate Bill 175 - 135th General Assembly
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The priority of distribution of claims from the insurer's estate shall be in accordance with the order in which each class of claims is set forth in this section. 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. The order of distribution of claims shall be:

(A) Class 1. The costs and expenses of administration, including but not limited to the following:

(1) The actual and necessary costs of preserving or recovering the assets of the insurer;

(2) Compensation for all services rendered in the liquidation;

(3) Any necessary filing fees;

(4) The fees and mileage payable to witnesses;

(5) Reasonable attorney's fees;

(6) The reasonable expenses of a guaranty association or foreign guaranty association in handling claims.

(B) Class 2. All claims under policies for losses incurred, including third party claims, all claims of contracted providers against a medicaid health insuring corporation for covered health care services provided to medicaid recipients, all claims against the insurer for liability for bodily injury or for injury to or destruction of tangible property that are not under policies, and all claims of a guaranty association or foreign guaranty association. All claims under life insurance, annuity policies, and funding agreements, whether for death proceeds, annuity proceeds, investment values, principal, or interest, shall be treated as loss claims. That portion of any loss, indemnification for which is provided by other benefits or advantages recovered by the claimant, shall not be included in this class, other than benefits or advantages recovered or recoverable in discharge of familial obligations of support or by way of succession at death or as proceeds of life insurance, or as gratuities. No payment by an employer to an employee shall be treated as a gratuity. Claims under nonassessable policies for unearned premium or other premium refunds.

(C) Class 3. Claims of the federal government.

(D) Class 4. Debts due to employees for services performed to the extent that they do not exceed one thousand dollars and represent payment for services performed within one year before the filing of the complaint for liquidation. Officers and directors shall not be entitled to the benefit of this priority. Such priority shall be in lieu of any other similar priority that may be authorized by law as to wages or compensation of employees.

(E) Class 5. Claims of general creditors.

(F) Class 6. Claims of any state or local government. Claims, including those of any state or local governmental 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, with reasonable and actual costs occasioned thereby. The remainder of such claims shall be postponed to the class of claims under division (J) of this section.

(G) Class 7. Claims filed late or any other claims other than claims under divisions (H), (I), and (J) of this section.

(H) Class 8. 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.

(I) Class 9. Interest at the legal rate compounded annually on all claims in the classes prescribed in divisions (A) to (H) of this section, except for claims of the federal government, from the date of the order for liquidation or the date on which the claim becomes due, whichever is later, until the date on which the interest or dividend is declared, according to the terms of a plan proposed by the liquidator and approved by the court supervising the liquidation. The liquidator, with the approval of the court, may make reasonable approximate computations of interest to be paid under this division.

(J) Class 10. The claims of shareholders or other owners.

If any provision of this section or the application of any provision of this section to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this section, and to this end the provisions are severable.

(K) As used in sections 3903.42 and 3903.421 of the Revised Code, "contracted provider" and "medicaid recipient" have the same meanings as in section 3903.14 of the Revised Code.

Last updated August 16, 2024 at 8:34 AM

Notes of Decisions
Cited in 11 cases, 1988–2011 · leading case: Hudson v. Petrosurance, Inc., 2010 Ohio 4505 (Ohio 2010).
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Hudson v. Petrosurance, Inc., 2010 Ohio 4505 (Ohio 2010). · cites it 19× “Chapter 3903, establishes nine prioritized classes of claims that can be filed against an insurer’s estate during liquidation and directs the liquidator to exhaust the estate’s assets by paying approved claims in full to the insurer’s creditors and preferred claimants in the…”
Duryee v. United States Dep't of the Treasury, 6 F. Supp. 2d 700 (S.D. Ohio 1995). · cites it 59× “1 In the complaint, plaintiff, as the liquidator of ADIC, urged the application of the Ohio priority statute governing insurance company liquidations, Ohio Rev.Code § 3903.42, to the claims of the United States.”
Taylor v. Ernst & Young, L.L.P., 2011 Ohio 5262 (Ohio 2011). · cites it 6× “21(A)(7); “[e]nter into such contracts as are necessary to carry out the order to liquidate, and * * * affirm or disavow any contracts to which the insurer is a party,” R.”
United States Dep't of Treasury v. Fabe, 508 U.S. 491 (1993). · cites it 3× “Ohio Rev. Code Ann. § 3903.42 (1989). The federal priority statute preempts the inconsistent Ohio law unless the latter is exempt from pre-emption under the McCarran-Ferguson Act, 59 Stat.”
George Fabe, Superintendent of Ins., State of Ohio v. United States Dep't of the Treasury Mitchell A. Levine, Assistant Comm'r, 939 F.2d 341 (6th Cir. 1991). · cites it 11× “1 Thereafter, Fabe filed for a declaratory judgment in federal district court arguing that the federal superpriority statute does not apply to Ohio’s liquidation of American Druggists’ because the controlling state priority statute, Ohio Rev.Code § 3903.42, is a regulation of…”
Covington v. Ohio Gen. Ins., 789 N.E.2d 213 (Ohio 2003). · cites it 9× “See R.C. 3903.42. For the reasons that follow, we conclude that an insurance company with such a claim is a Class 5 creditor.”
State Ex Rel. Hager v. Iowa Nat'l Mut. Ins. Co., 430 N.W.2d 420 (Iowa 1988). “§ 402-C:44 (1983); Ohio Rev.Code Ann. § 3903.42 (Page Supp.1987); Pa.”
John A. Greene, Receiver for the Great Global Assurance Co. v. United States, 440 F.3d 1304 (Fed. Cir. 2006). “2202 (citing Ohio Rev.Code Ann. § 3903.42 (1989)). The Court held that “the Ohio priority statute escapes pre-emption .”
Greene v. United States (Fed. Cir. 2006). “2 (citing Ohio Rev. Code Ann. § 3903.42 (1989)). The Court held that “the Ohio priority statute escapes pre-emption .”
Fabe v. Am. Druggists' Ins. Co., 591 N.E.2d 835 (Ohio Ct. App. 1990). “R.C. 3903.42. In addition to seeking such a distribution, a secured claimant may also look to its security.”
Duryee v. Am. Druggists' Ins., 661 N.E.2d 1117 (Ohio 1996). · cites it 3× “In the absence of any challenge, R.C. 3903.42, as amended, does not require action by this court prior to application of the statute to pending liquidation proceedings.”
— Ohio Rev. Code § 3903.42(A) — 2 cases
Taylor v. Ernst & Young, L.L.P., 2011 Ohio 5262 (Ohio 2011). “21(A)(7); “[e]nter into such contracts as are necessary to carry out the order to liquidate, and * * * affirm or disavow any contracts to which the insurer is a party,” R.”
Duryee v. United States Dep't of the Treasury, 6 F. Supp. 2d 700 (S.D. Ohio 1995). “1 In the complaint, plaintiff, as the liquidator of ADIC, urged the application of the Ohio priority statute governing insurance company liquidations, Ohio Rev.Code § 3903.42, to the claims of the United States.”
— Ohio Rev. Code § 3903.42(B) — 2 cases
Duryee v. United States Dep't of the Treasury, 6 F. Supp. 2d 700 (S.D. Ohio 1995). “1 In the complaint, plaintiff, as the liquidator of ADIC, urged the application of the Ohio priority statute governing insurance company liquidations, Ohio Rev.Code § 3903.42, to the claims of the United States.”
Covington v. Ohio Gen. Ins., 789 N.E.2d 213 (Ohio 2003). “See R.C. 3903.42. For the reasons that follow, we conclude that an insurance company with such a claim is a Class 5 creditor.”
— Ohio Rev. Code § 3903.42(C) — 1 case
Duryee v. United States Dep't of the Treasury, 6 F. Supp. 2d 700 (S.D. Ohio 1995). “1 In the complaint, plaintiff, as the liquidator of ADIC, urged the application of the Ohio priority statute governing insurance company liquidations, Ohio Rev.Code § 3903.42, to the claims of the United States.”
— Ohio Rev. Code § 3903.42(D) — 1 case
Duryee v. United States Dep't of the Treasury, 6 F. Supp. 2d 700 (S.D. Ohio 1995). “1 In the complaint, plaintiff, as the liquidator of ADIC, urged the application of the Ohio priority statute governing insurance company liquidations, Ohio Rev.Code § 3903.42, to the claims of the United States.”
— Ohio Rev. Code § 3903.42(E) — 1 case
Covington v. Ohio Gen. Ins., 789 N.E.2d 213 (Ohio 2003). “See R.C. 3903.42. For the reasons that follow, we conclude that an insurance company with such a claim is a Class 5 creditor.”
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