KRS § 251.400 — KY Code / Title XXI / Chapter 251 / Section 251.400
251.400 Powers and duties of board upon failure involving licensed grain dealer or licensed grain warehouse operator -- When claimant deemed to have assigned all rights, title, and interest to the board
Status: in_force

251.400 Powers and duties of board upon failure involving licensed grain dealer or

licensed grain warehouse operator -- When claimant deemed to have assigned

all rights, title, and interest to the board.

(1) When the board determines there has been a failure involving a licensed grain

dealer or licensed grain warehouse operator, the board shall have the authority to:

(a) Take receivership of any grain on the licensee’s premises to ensure that it is

not destroyed, lost, stolen, or otherwise disposed of;

(b) Sell the grain and place the proceeds in escrow for the benefit of the owners,

or for the benefits of claimants, when the identities of those persons have been

identified;

(c) Establish a priority lien on any grain or other assets that remain in the

licensee’s possession, custody, or control;

(d) Secure and take possession of any grains or other commodities in the

possession, custody, or control of the failed grain dealer or grain warehouse

operator for the purpose of using it to cover outstanding storage obligations. If

there is insufficient grain to cover outstanding shortage obligations, the board

shall determine each depositor’s pro rata share of the value of the remaining

grain. Any remaining deficiency shall be considered a claim of the producer or

depositor against the fund, if applicable. Each grade of grain shall be treated

separately for the purpose of covering outstanding storage obligations and

calculating claims against the fund;

(e) Commence action upon the surety bond, certificate of deposit, letter of credit,

or temporary surety as required by KRS 251.365. The board may commence

action against both the licensee and the surety or other financial institution in

the Franklin Circuit Court or a Circuit Court in the county where the grain is

located;

(f) Deposit into the fund any remaining assets of the failed grain dealer or grain

warehouse operator for the purpose of using those assets to pay claimants;

(g) Establish a period of time, not less than thirty (30) days and not greater than

one (1) year, for potential claimants to file their claims with supporting

documentation;

(h) Make a public announcement of the procedure and deadline for potential

claimants to file their claims;

(i) Examine timely filed claims and make such investigation as may be necessary

for the board to determine whether a claim is a valid claim;

(j) Determine which of the claims that were submitted in advance of the deadline

are valid claims;

(k) Assign to each valid claim an initial value computed as a percentage of the

value of the grain on the date when it was delivered by the claimant to the

licensee, relying on the value established for that grain by the Chicago Board

of Trade on the date of delivery. If there is no price information from the

Chicago Board of Trade for that grain on that date, then the board shall rely on

price information from another exchange in the United States or Canada. If

there is no price information from any exchange in the United States or

Canada for that grain on that date, the board shall determine an alternative

method for determining a value for that grain on that date;

(l) Compute claim values by applying these percentages to each valid claim’s

initial value:

1. One hundred percent (100%), for valid claims that are evidenced by a

grain warehouse receipt issued by a federally licensed warehouse; or

2. A minimum of ninety percent (90%), for all other valid claims; and

(m) Notify each claimant in writing of the board’s determination as to:

1. The validity of the claim;

2. The value of the grain claimed by the claimant;

3. The amount and percent of value that will be reimbursed by the fund;

and

4. The claimant's right to request a hearing on his or her claim within thirty

(30) days of the claimant’s receipt of the written notification.

(2) The board shall not approve for payment from the fund any claims with respect to

grains that are not fund-covered grains.

(3) The board shall not compute a claim’s value in reliance on the price or other terms

of agreement between a claimant and a licensee.

(4) If a producer or other depositor fails to file a claim within the time announced by

the board, then the board and the fund shall not be liable to that depositor.

(5) If the board fails to commence action against the surety bond, certificate of deposit,

letter of credit, or temporary surety that KRS 251.365 required the licensee to obtain

within thirty (30) days of a depositor making a written demand that the board

commence action, then the depositor shall have a right of action against the licensee

to recover damages suffered by reason of the licensee’s failure. The depositor shall

give the board immediate written notice of the commencement of such action.

(6) The board shall deny payment from the fund to a claimant when the board

determines that the claimant:

(a) Elected to opt out of coverage, as permitted by KRS 251.390; or

(b) Engaged in conduct or practices which substantially contributed to the

claimant’s financial loss.

(7) A claimant who accepts payment from the fund shall be deemed to have assigned to

the board all of the claimant’s rights, title, and interest in the grain and in any

judgment with respect to the grain. The board shall have the authority to initiate or

maintain any civil action it deems necessary to compel a licensee or a former

licensee to repay to the fund any sums disbursed therefrom in relation to a claim.