GAs “FastForward” to the Net at NOLHGA’s Annual Meeting

Attendees of NOLHGA’s 19th Annual Meeting will be treated to a tour of NOLHGA’s Web site and a look at the next stage of guaranty associations’ presence on the Web at FastForward: Guaranty Associations & the Internet, a presentation on how guaranty associations can use the Internet to improve efficiency and enhance the reputation of the guaranty system. The hour-long presentation will feature a comprehensive tour of the NOLHGA Web site that highlights the wealth of information available to guaranty associations and focuses on recently added sections of the site.

The presentation will also feature an advance look at the work of NOLHGA’s new State Web Site Development Committee, which is spearheading NOLHGA’s efforts to design and host Web sites for state guaranty associations. Committee Chairman Mark Femal (Wisconsin Insurance Security Fund) will present the design for the association Web sites and discuss how the sites can be used to better serve policyholders and to establish the state guaranty association system as a uniform system of protection.

FastForward: Guaranty Associations & the Internet will be held on October 31 from 2:00 p.m. to 3:00 p.m. in the Executive Forum of the Monarch Hotel, site of NOLHGA’s Annual Meeting. If you have any questions about the presentation, please contact Sean McKenna at [email protected] or 703.787.4106.

Receiver Seeks Rehearing in Federal Preemption Case

On October 11, the Massachusetts receiver for American Mutual Liability Insurance Company and American Mutual Insurance Company of Boston filed a petition with the First Circuit Court of Appeals seeking full panel review of that court’s September 18 decision finding that the statutory bar date for filing claims in insurance insolvencies does not apply to claims of the federal government.

In this litigation, the federal government has challenged two aspects of the Massachusetts liquidation statute. First, the government has argued that the liquidation priority provision in the statute is preempted by federal law to the extent it provides for payment of guaranty association claims ahead of claims of the federal government. The government has also argued that the state’s statutory bar date for filing claims against the insolvent insurer’s estate does not apply to claims of the federal government.

In a September 2001 decision, the federal district court in Massachusetts ruled that the provision affording priority to guaranty association claims under the Massachusetts statute is a provision enacted for the purpose of regulating the business of insurance and is therefore shielded from federal preemption in accordance with the McCarran-Ferguson Act. With respect to the claims bar date, the district court concluded that it was bound by a controlling 1993 First Circuit decision finding that the benefits provided to policyholders by a state’s claims bar date were too tenuous for that provision to constitute the regulation of the business of insurance subject to McCarran-Ferguson protections.

The Court of Appeals affirmed on both issues in a decision dated September 18, 2002. With respect to the priority challenge, the court reasoned that guaranty association priority is part of an integrated system aimed at the protection of policyholders and is therefore shielded from federal preemption under the McCarran-Ferguson Act in accordance with the standards set forth by the Supreme Court in Fabe. With respect to the claims bar date, the Court of Appeals concluded that the claims bar date is neither directed at nor necessary for the protection of policyholders and is not therefore shielded from preemption under the McCarran-Ferguson Act as construed in Fabe. This decision appears to have been based on the court’s conclusion that the state bar date for filing claims has only a limited effect on policyholders because they have priority and can be paid ahead of government claims.

The receiver has filed a petition seeking full panel review of the First Circuit’s decision on the grounds that the court misunderstood the effect of the bar date on policyholders and therefore misapplied the Fabe standards. In the petition, the receiver explains that claims of the federal government include policyholder claims, and that without a claims bar deadline enforceable against the federal government, the receiver would be prevented from paying policyholder claims. Statements issued by the Maine, New Hampshire, and Rhode Island Insurance Departments were filed in support of this conclusion. Accordingly, the receiver urges the court to recognize that the claims bar date directly benefits policyholders and is therefore shielded from federal preemption because it permits the receiver to make a final determination of policyholder claims so that policyholders can be paid. The docket does not reflect any further filings or activity at this time.

For further information, contact Joni Forsythe at 703.787.4103.

NOLHGA Welcomes New North Dakota GA Executive Director

Greg Morris has been named the new executive director of the North Dakota Life & Health Insurance Guaranty Association. Morris, who replaces Jim Beckstrom, is in private practice and previously served as general counsel for Pioneer Mutual Life Insurance Company and as general counsel for the North Dakota Department of Insurance.

The new contact information for the association is:

North Dakota Life & Health Insurance Guaranty Association
P.O. Box 9097
Fargo, ND 58106-9097
701.492.8880
FAX: 701.492.2844
[email protected]