American Standard Life Insurance Co. (Okla.)

Court Denies Shareholders’ Motion to Intervene

On Nov. 9, the Oklahoma Court of Civil Appeals issued an opinion affirming a lower court’s rejection of a motion filed by ASL shareholders seeking to intervene in the liquidation proceedings for the purpose of asserting a claim against the Pennsylvania Life and Health Insurance Guaranty Association.

According to the court, the shareholders, as class 10 creditors of the ASL estate, do not have standing to intervene in the proceedings. If any right of action exists in favor of ASL, it is vested in the receiver and not the shareholders. While this case presented an issue of first impression in Oklahoma, the court recognized that its decision follows the majority view in other states in finding that shareholders do not have standing to pursue claims on behalf of their insolvent insurer.

A copy of the Court of Appeals’ opinion is available upon request.

Task Force Chair — Andrea Bowers;   Staff Contact - Bill O'Sullivan Mutual Security Life Insurance Co. (Ind.)

Early Access Funds Distributed

On Nov. 19, the MSL receiver distributed $26,450,000 in early access funds to NOLHGA on behalf of affected guaranty associations. The MSL estate continues to hold money in reserve for administrative expenses, uncovered policyholder claims, and a pending litigation case. It is anticipated that once the litigation case is resolved, most of the reserve for that item will be distributed to the affected guaranty associations.

NOLHGA is in the process of confirming the allocation of the above-mentioned early access funds among affected guaranty associations and anticipates distributing those funds to the guaranty associations by year-end.

Task Force Chair — Luther Hill;   Staff Contact - Bill O'Sullivan

First Circuit to Revisit Federal Preemption Issues

The Massachusetts receiver for American Mutual Liability Insurance Co. (AMLICO) is asking the First Circuit Court of Appeals to reconsider whether the federal government is bound by the statutory bar date for filing claims against the estate of an insolvent insurer.

This litigation arose as a result of the federal government’s challenge of the Massachusetts liquidation priority statute and the time limitations established under state law for filing claims against insolvent insurers. More specifically, the government challenged the policyholder-level treatment afforded insurance guaranty associations, arguing that the priority statute is preempted by federal law to the extent that it provides for payment of guaranty association claims ahead of the claims of the federal government. The government also argued that it is not bound by the state’s statutory bar date for filing claims against the insolvent insurer’s estate.

In March, the receiver filed a motion for summary judgment arguing that both the statutory claims bar date and the liquidation priority statute are laws regulating the business of insurance and are therefore shielded from federal preemption under the McCarran-Ferguson Act. NOLHGA and several of the affected property and casualty guaranty funds submitted amicus briefs in support of the receiver’s position on both issues. Oral argument was heard on May 23, and the district court issued its decision on Sept. 27.

With respect to the priority statute, the court held 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 First Circuit decision from 1993 in Garcia v. Island Program Designer, Inc., in which the court held that the benefits provided to policyholders by a state’s claims bar date were too tenuous to prevent federal preemption. In its decision, the district court criticized the analysis in the Garcia decision, further citing cases from other jurisdictions that have expressly rejected that analysis. The court acknowledged, however, that the decision remains controlling in the First Circuit and, lacking authority to reject the Garcia analysis, the district court was constrained to apply it.

The receiver has filed an appeal to the First Circuit on the issue of the bar date, asking that the court, in effect, reverse its prior ruling in Garcia. It is not yet known whether the government will appeal the district court’s ruling on the priority statute. Once the record is complete for appeal, a briefing schedule will follow.

For further information, contact Joni Forsythe at 703.787.4103.

  Staff Contact - Joni Forsythe

Correction to 2000 Assessment Data Survey Files Mailed Out

A memo listing the assessable premium and licensing information for three companies that were not included in the recent mailing of the year 2000 assessment data survey files was sent to all guaranty associations on Nov. 26.

Guaranty association administrators reviewing the 2000 assessment data survey files noted that three companies had been deleted from the files. This resulted from licensing information indicating that all three companies were licensed as surplus-lines writers in all states. Each state will need to include the premium information in the correction memorandum for any assessment using the 2000 information.

Administrator review of the data files is an important step in the collection of assessable premium information because it allows the data collection process to be revised continually to provide the best possible information to NOLHGA members.

Please contact Candace Jennings (703.787.4114) if you have not received the memorandum.

  Staff Contact -