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Case Law Digest Supplement
LIFE & HEALTH GUARANTY FUNDS
Purpose
Purpose – In General
Nebraska Unisys Corp. v. Neb. Life & Health Ins. Guar. Ass’n, 673 N.W.2d 15 (Neb. 2004).
Employer brought a declaratory judgment action seeking a determination of the
contracts issued by insolvent insurer were annuity contracts covered by the Life
& Health Insurance Guaranty Association Act and that the resident participants
in the employee retirement plan were entitled to compensation under the Act
for amounts still owed by the insurer. The court held that resident employee
participants whose retirement contributions purchased contracts were entitled
to protection under the Act. In addition, the court held that the Insurance
Guaranty Association must be treated as any other litigant and, accordingly,
plaintiff was entitled to pre‐ and post‐judgment interest in conjunction with the
favorable judgment it obtained against the Insurance Guaranty Association.
Federal Jurisdiction – Preemption
Rhode Island
Kachanis v. United States, 844 F. Supp. 877 (D.R.I. 1994). Guaranty Association
Act is “enacted for the purpose of regulating insurance” and as such is
exempted from federal preemption by the McCarren‐Ferguson Act.
Limits of Liability
New Mexico Krahling v. First Trust National Ass’n, 123 N.M. 685, 944 P.2d 914 (1997).
Executive Life GICs were not covered annuities within the meaning of New
Mexico’s statutory definition because payment was not dependent on the
continuation of human life. In construing the statute and the stated purpose for
which it was enacted, the New Mexico Court of Appeals held that any
construction must be reasonable and in accordance with the plain language of
the statute which was clear as it applied to GICs.
Insurer of Last Resort
Delaware In re Liquidation of Notational Heritage Life Ins. Co., 728 A.2d 52 (Del. Ch. 1998).
The Delaware Life and Health Insurance Guarantee Association Act creates a
scheme for the protection of life and health insurance policyholders in the event
the company issuing the policy fails in the performance of its contractual
obligations due to its impairment or insolvency.
Michigan
Henry L. Meyers Moving & Storage v. Michigan Life & Health Ins. Guar. Ass’n,
222 Mich. App. 675, 566 N.W.2d 632 (1997). Based upon legislative history and
Model Act, statutory limitation for benefits under unallocated annuity contracts
issued to a plan protected by the PBGC applied to all plans with PBGC coverage,
not just those to whom the PBGC had paid benefits. Benefits from a guaranty
association should be a last resort; benefits are not intended for those who are
already adequately protected.
Coverage and Limitations
Applicable Law