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Federal Jurisdiction – Preemption
contracts” as defined in the Texas Guaranty Association Act based on Model Act
definition. Because the contracts at issue were issued to and owned by bank
pension trustees rather than individuals, they met the definition of unallocated
annuity contract. Because none of the contracts were held by a Texas resident
they were not covered by the Association. The court rejected Unisys’ argument
for coverage based on the fact that the statutory exclusion did not specifically
name GICs. The court also rejected Unisys’ argument that pension plan
participants were the beneficial owners of the contracts.
Creation of the Association
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.
State Agency
Oklahoma
Washington
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.
Aetna Life Ins. Co. v. Washington Life & Disability Ins. Guar. Ass'n, 83 Wash.2d
523, 520 P.2d 162 (1974). The Association is not a public body, but is a private,
nonprofit association created under the police powers of the state to fulfill a
needed public purpose of protecting the general welfare.
Powers and Duties of the Association
Assignment
New Mexico New Mexico Life Ins. Guar. Ass'n v. Quinn & Co., Inc., 111 N.M. 750, 809 P.2d 1278
(1991). The Association may require an assignment before providing benefits.
Subject to the terms of the assignment, the association is the proper party and
has the authority to bring suit for amounts in excess of benefits paid.
Contractual Obligations
Alaska
Alaska Life & Disability Ins. Guar. Ass’n v. State of Alaska, 3 AN‐94‐6680 CIV.
(Alaska Super. Ct. April 9, 1997). Alaska Guaranty Association did not fulfill its
statutory obligations through its participation in the Executive Life
Rehabilitation Plan because the restructured contracts assumed by Aurora
differed materially from those issued by Executive Life. The Association Act
does not provide for assumption or guarantee of restructured contracts. The
only relief authorized is the imposition of a contract lien; there is no express
authorization for any other modification of the original contract. Moreover, the
Association failed to obtain the Director’s approval of its participation in the
ELIC rehabilitation plan. There must be some record showing that the Director
reached a considered decision. The Director plays a vital role in the
administration of the Act, including the responsibility to determine whether a