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Oklahoma
Oklahoma Life & Health Ins. Guar. Ass’n v. Hilti Retirement Sav. Plan, 939 P.2d
1110 (Okla. 1997). Executive Life GICs were unallocated annuities under Model
Act definition and excluded from coverage in the Oklahoma Life and Health
Insurance Guaranty Association Act. The 1991 amendments excluding the
contracts applied to contracts issued before statutory effective date because
Executive Life’s insolvency, the operative event, occurred after amendments
became effective. Because the association acts in a similar capacity to a state
agency, its interpretation of the provisions of the guaranty association act
should be treated like that of an agency and given “highest respect” by the
courts.
Attorney’s Fees
Nebraska Nebraska Life & Health Ins. Guar. Ass’n v. Dobias, 247 Neb. 900, 531 N.W.2d 217
(1995). Despite a liberal interpretation of the Act, guaranty association is not
responsible for attorneys’ fees and interest awarded against insurer before
insolvency.
Bad Faith Damages
Georgia Crider v. Georgia Life & Health Ins. Guar. Ass’n, 188 Ga. App. 407, 373 S.E.2d 30
(1988). Notwithstanding a liberal construction mandate, “contractual
obligations” for guaranty association coverage purposes did not include bad
faith damages and attorneys’ fees.
Constitutionality of Exclusions and Limitations
Eighth Circuit
Liberty State Bank v. Minnesota Life & Health Guar. Ass’n, 149 F.3d 832 (8th Cir.
1998). Amendment to Minnesota’s Act expressly excluded municipal GICs from
the Act’s coverage. Retroactive application of the amendment to plaintiff’s
claim was constitutionally permissible because the amendment was an
appropriate curative measure to clarify coverage of an unanticipated product
and, as a purely statutory right, payment under the Act can be retroactively
modified or eliminated unless it is vested.
Honeywell, Inc. v. Minnesota Life & Health Ins. Guar. Ass'n, 110 F.3d 547 (8th Cir.
1997) (en banc). The retroactive application of amendment which limited
guaranty association coverage for unallocated annuities to state residents did
not violate the contract or due process clauses of the U.S. Constitution. Rights
against guaranty associations are statutory in nature, not contractual. The
contract clause is thus not involved. The amendment did not violate due
process because it was rationally related to the legitimate state interest of
“regulating the insurance industry, easing the economic burden on its own
residents, and insuring the economic life of an association created by its statute
to protect its residents.”
Michigan
Henry L. Meyers Moving & Storage v. Michigan Life & Health Ins. Guar. Ass'n,
222 Mich. App. 675, 566 N.W.2d 632 (1997). Michigan court ruled that a
coverage exclusion in the Michigan Guaranty Association Act which excluded
GICs issued to employee benefit plans protected by the PBGC, was applicable to
a plan for which PBGC coverage had not been triggered. Because PBGC
coverage was available to the plaintiff's pension plan upon termination, the plan
came under the exclusion even though the plan had not been terminated.
Application of the amendment containing the exclusion to contracts which
predated the statutory effective date was not retroactive because the
provisions in effect at the time of the insurer’s insolvency govern the
Association’s liability, and the plaintiffs had no vested right in guaranty
association protection prior to the insurer’s insolvency.