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Alaska
Arizona
California
Illinois
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
for portions of plan which were invested in four ELIC group annuity contracts,
arguing that participants were beneficial owners’ of the ELIC contracts, and thus
satisfied the Act’s prerequisite for ownership in order to obtain coverage.
Plaintiffs also alleged the ELIC contracts represented allocated annuities
because they guaranteed annuity benefits to an individual. The Association
prevailed on summary judgment arguing alternatively a statute of limitation
defense, and that the ELIC contracts were unallocated annuity contacts for
which the contract holder failed to meet the prerequisite of being an Alaska
resident.
Arizona Life & Disability Ins. Guar. Fund v. Honeywell, Inc., 190 Ariz. 84, 945 P.2d
805 (1997). Although GICs were issued to trustees of employee retirement plan,
court found individual plan participants to be equitable owners of the GICs.
Accordingly, the GICs fell within the coverage provision for annuity contracts
issued to state residents, and the Arizona association was obligated to cover
losses to pension plan caused by GICs.
Unisys Corp. v. California Life & Health Ins. Guar. Ass'n, No. 387566, slip op. (Cal.
Super. Ct., Sept. 27, 1995) aff’d, 63 Cal. App. 4th 634, 74 Cal. Rptr. 2d 106 (1998)
(finding that California Act excluded coverage for all GICs, whether allocated or
unallocated). Executive Life GICs were “unallocated annuity contracts” under
Model Act definition and as such excluded from Guaranty Association Act by
exclusionary provisions based on the definition.
Dynamic Systems, Inc. v. Boozell, 312 Ill. App. 3d 326, 726 N.E.2d 1156 (Ill. App. Ct.
2000). Trustees of nonresident employee savings plan in Maryland purchased
investment contracts from Illinois insurer, who was licensed in Maryland, at
employee’s election. The plan sought coverage for the contracts when the
insurer became insolvent. Because the contracts were issued to the trust as
“contractholder,” they were unallocated annuity contacts under 215 Ill. Comp.
Stat. 5/531.05(15) because the contacts had been neither issued to nor owned by
an individual. Accordingly, under 215 Ill. Comp. Stat. 5/531.03(1)(b)’s exclusionary
provisions, nonresident status of plan and trust precluded coverage under Life
and Health Insurance Guaranty Association Law. The court rejected nonresident
coverage based on a theory of equitable ownership because the plan
participants had no control over the contracts and were not named as owners.
Dynamic Systems, Inc. v. Boozell, No. 95‐CH‐10657 (Ill. App. Ct. May 27, 1997).
Virginia 401K plan sought coverage under Illinois law for three pension GICs
issued by Illinois insurer. The Illinois association having denied the claims, the
plan appealed to the Illinois Department of Insurance. The Director held that
the Illinois association was liable, but only as to plan participants residing in
Maryland, where the issuer was not licensed. In subsequent proceedings, the
Circuit Court determined that the GICs were unallocated annuity contracts and
were not covered by Illinois law. The court also upheld the Director’s denial of
coverage for plan participants residing in Virginia or another state where the
issuer was licensed.
Indiana
Bennett v. Indiana Life & Health Ins. Guar. Ass’n, 688 N.E.2d 171 (Ind. Ct. App.
1997). The trustee of a pension benefit plan holds the assets of the plan in trust
for the exclusive benefit of the plan participants, who are, in turn, the beneficial
or equitable owners of any contracts held in trust for their benefit. Resident
plan participants are residents to whom contractual obligations are owed under
Indiana guaranty association law. The term “life,” against which statutory
obligations and coverage limitations are measured, refers to the lives of resident