Executive Life Insurance Company (CA)
Appeals Court Decision Affirms GAs' Right To Share Information
The New Mexico Court of Appeals on April 21 ruled in favor of the New Mexico guaranty association and lifted the order of confidentiality sealing certain discovery in the Krahling v. First Trust National Association case, Docket No. 17,916. Victor Marshall, counsel to the New Mexico association, said, "This decision affirms the rights of guaranty associations to share information amongst themselves, and rejects Honeywell's 'multifaceted defense' against disclosure."
The appeals court noted that Honeywell had stamped all 66,000 pages of its documents "confidential," even though they were not protected by any specific privilege. The court ruled that Honeywell had failed to prove good cause for the sealing order, and the New Mexico association was justified in "seeking to share the fruits of discovery in this action with other guaranty associations."
The Krahling declaratory judgment action was brought on the question of whether GICs issued by the Executive Life Insurance Company to the Honeywell Retirement Plan were covered by the New Mexico Life and Health Insurance Guaranty Association. The case reached the appeals court, which held on July 7, 1997, that the GICs in question were not annuities under the New Mexico statute and were not covered by the association. The New Mexico Supreme Court refused to review the decision.
During the course of the litigation, the trial court had granted Honeywell's request that discovery produced to the association be kept confidential, ordering the information sealed and enjoining the association from sharing documents and deposition testimony with other guaranty associations. Following the trial court's April 1, 1996, decision in favor of the association, which relied partially on the sealed evidence, the association moved that the confidentiality order be lifted. The trial court denied the motion, and the association appealed. The appeals court reversed the trial court's order and awarded the association its costs on appeal. Honeywell may petition New Mexico Supreme Court to review the decision, so the sealed information is not available until a final mandate is issued. Transcripts of the oral arguments are available upon request.
Questions regarding this case may be directed to Victor Marshall of Victor R. Marshall & Associates, 505/764-8180. The opinion lifting the order may be found on NOLHGANet's Litigation Database at NM0021.
IN OTHER ELIC NEWS, the task force on April 10 sent to participating guaranty associations an opt-out package regarding the proposed distribution of approximately $41 million by the First Executive Corporation (FEC) Litigation Trust. Participating associations are asked to indicate their opt-out decision by May 11. A follow-up memorandum addressing issues raised by the associations was sent April 24. As noted in the April 10 package, the associations could recover nearly $16 million pursuant to their subrogation claim. The proposed distribution was discussed at the February, 1997 MPC meeting in Los Angeles. The settlement agreement negotiated with the National Structured Settlement Trade Association was approved, subject to a right of opt-out by the associations, at the November MPC meeting in Louisville, Ky. Please direct questions regarding the package to Angela Franklin.
AND FINALLY...CORRECTED WIRE instructions for the seventh Aurora installment payment due April 30, were sent the week of April 20 to participating guaranty associations. Appendix 5 of the information packages dated April 3 has been corrected; it included an Arthur Andersen report summarizing its review of the seventh installment bill, payment confirmation forms and a copy of the detailed billing from Aurora. Please call Angela Franklin with any questions.
Task Force Chair -- Art Dummer; Staff Contact - National Heritage Life Insurance Company (DE)Representatives of the task force attended the quarterly meeting of the National Heritage trustees April 22 in Philadelphia. Topics of discussion included the independent auditor's report, trust financial statements as of March 31 and disposition plans for various assets. The auditors issued the trust a "clean" report. The previous trust distribution, $30 million, was made April 1. Distributions to date total $90 million. The amount and timing of the next distribution is not known. A few stocks, bonds and 924 residential and commercial mortgages remain in the trust.
Later the same day, task force representatives met with the receiver to discuss various estate matters, including the estate's financial statements, the status of certain assets to be transferred to the trust, notices of determination on claims and other miscellaneous items.
Task Force Chair -- Dan Orth; Staff Contact - American Standard Life and Accident Ins. Co. (OK)SEVEN COMPANIES HAVE submitted bids to assume the business of American Standard Life and Accident Insurance Company. The task force will review the bids over the next several weeks and expects to recommend a winning bidder to affected guaranty associations at the June MPC meeting in Portland, Maine.
Task Force Chair -- Andrea Bowers; Staff Contact - Bill O'Sullivan Mid-Continent Life Insurance Company (OK)JUDGE JAMES B. BLEVINS of the Oklahoma County District Court on April 17 dismissed defendant officers and directors from a lawsuit filed by Oklahoma Insurance Commissioner John P. Crawford relating to the Mid-Continent Life Insurance Company receivership. The suit sought damages from the defendant officers and directors of Mid-Continent and its parent, Florida Progress Corporation, on the basis of alleged negligence, breach of fiduciary duty, violations of law and ultra vires acts relating to the company's "extra life" insurance policies. In the same ruling, the judge refused to dismiss Florida Progress from the suit.
Task Force Chair -- Sonya Ekart; Staff Contact - Bill O'Sullivan Centennial Life Insurance Company (KS)Guaranty associations were notified April 21 that the rehabilitator filled a petition to liquidate the company. Representatives of the task force have been meeting with the rehabilitator to develop a joint plan for guaranty association participation, should that become necessary. Centennial, licensed in the District of Columbia and in all states except Maine, New York and Rhode Island, writes primarily cancelable group health insurance. Claims for which the guaranty associations may become obligated include over 900 long-term disability claims, with reserves of approximately $40 million.
The task force and the rehabilitator have scheduled a meeting at the company's offices April 27-28 in Lenexa, Kan. Centennial has suspended claim payments pending a review of its cash position.
Task Force Chair -- Mark Femal; Staff Contact -ETC.
June MPC Information
May 10 is the deadline to make hotel reservations for the June 1-3 Members' Participation Council meeting in Portland, Maine. Call the Sheraton Tara Hotel at 207/775-6161 and mention NOLHGA to assure the special rate of $94 per night.
Al Iuppa, Maine superintendent of insurance, is scheduled to address members and guests at a June 2 luncheon. Also scheduled: a roundtable discussion on reassessments, produced by the Administrators' Education Steering Committee. For the first time, the MPC Executive Committee will meet as part of the Council meeting so that all members will have the opportunity to observe and participate in Executive Committee dealings. Finally, an authentic Downeaster Lobster Bake, co-sponsored by the Maine guaranty association and NOLHGA, is planned for the evening of June 2. Come casual*, come hungry! Questions? Please call Krista Plumhoff at 703/787-4121.
* Although the dress code for the meeting and lobster bake is casual, business attire is recommended for those having their portrait taken.
Legal Seminar Information
Registration materials for NOLHGA's Seventh Annual Legal Seminar will be mailed shortly. Wire readers are encouraged to mark their calendars for the July 23-24 meeting in Reno, Nev. Those who have not received registration materials in the past but who would like to be added to the mailing list are asked to call Chrissy Haley at 703/787-4101.
Staff Contact -- Joni Forsythe 703/787-4103
New Home for the Arizona Guaranty Fund
The Arizona Life and Disability Insurance Guaranty Fund has moved. The new address is 3443 North Central Avenue, Suite 1000, Phoenix, AZ 85012. PHONE: 602/248-0685; FAX: 602/248-0780.
CALENDAR
April 27-28 Centennial Life Task Force, Lenexa, Kan. April 30 Seventh ELIC installment payment due to Aurora April 30 Deadline to sign up for June MPC photographs May 5 Pacific Standard payments due May 10 Deadline for June MPC hotel reservations May 11 Deadline to opt out of FEC Litigation Trust distribution May 12 Joint NOLHGA/NCIGF Legal Committee, St. Louis May 13 NOLHGA Legal Committee, St. Louis May 14-15 Protocols Working Group, Chicago
Staff Contact - Sean McKennaCONFERENCE CALLS
April 29 American Western Task Force, 2 pm EDT
Staff Contact - Sean McKenna