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Texas
Messagephone, Inc., et al v. Texas Life, Accident, Health & Hospital Serv. Ins.
Guar. Ass’n, 966 S.W.2d 133 (Tex. Ct. App. 1998). Messagephone Inc. (“MPI”)
purchased unallocated annuity contracts from insurer, and assigned those
annuity contracts to a trust using them as collateral for several non‐recourse
loans. MPI filed a proof of claim after insurer was placed in receivership in 1989,
but did not disclose the existence of the trust. The Association, having elected
to handle insurer’s claims, denied coverage for the annuity contracts based on
exclusions in 1991 amendments. Statutory amendments can be retroactively
applied without constitutional defect unless vested rights are destroyed or
impaired. There is no vested right to guaranty fund coverage. Moreover, the
annuity contracts were GICs containing no mortality guarantees, and would
have excluded form coverage under the 1989 statute.
Enhancement of Rehabilitation Plans
California
Illinois
Rigney v. National Org. of Life & Health Ins. Guar. Assn’s, No. 102756 (Cal. Dist.
Ct. App. Nov. 4, 1997). Class action plaintiff who opted into enhancement plan
brought suit against NOLHGA and several guaranty associations alleging that
the guaranty associations did not fulfill their statutory obligations, and were
released from their obligations in violation of due process. The court dismissed
the action finding it improper both on procedural grounds and on the merits.
The court went on to conclude that the op‐in/opt‐out process more than
satisfied due process. The dismissal was affirmed on appeal with the court of
appeals going on to state that the plaintiff had failed to appeal the judgment
approving the rehabilitation plan and could not now challenge the Plan in
subsequent litigation.
Lawrence v. Illinois Life & Health Ins. Guar. Ass’n, 293 Ill. App. 3d 489, 688 N.E.2d
675 (1997). Illinois plaintiff was bound by the terms of California court judgment
approving rehabilitation to which he had opted‐in. California court decision was
entitled to full faith and credit from Illinois courts. Plaintiff was subject to the
personal jurisdiction of the California rehabilitation court based on his insurance
contract with the California domiciled insurer, and that the California
proceedings did not violate due process because plaintiffs had both the
opportunity to participate at hearing and the opportunity to opt‐out of
rehabilitation plan.
Limits of Liability and Coverage Exclusions
Fifth Circuit
Eighth Circuit
Alaska
Texas Life, Accident, Health & Hosp. Serv. Ins. Guar. Ass'n v. Gaylord
Entertainment Co., 105 F.3d 210 (5th Cir. 1997). GICs issued to employersponsored
retirement plans are unallocated annuity contracts, and are covered
by guaranty association in the amount of $5 million per contract holder, not per
employee‐participant in the plan.
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.”
Unisys Corp. v. Burke, No. 3AN‐97‐2685 (Alaska Super. Ct. June 25, 1998). Plan
administrator and trustee sued Alaska insurance commissioner and Alaska Life
and Health Insurance Guaranty Association seeking participant level coverage