Bankers Commercial Life Insurance Company (Tex.)
Assumption Agreement Finalized
The assumption agreement with Philadelphia American Life Insurance Company, a wholly owned subsidiary of New Era Life Insurance Company, has been finalized. The company will assume all BCL business effective September 1. Opt-out packages were sent to affected associations by FedEx on September 16, and the 30-day opt-out process expires October 25. The initial closing is scheduled for November 8; guaranty association funding is therefore due November 1. Funding for the assumption transaction is approximately $3.5 million.
Task Force Chair - William Falck; Staff Contact - Paul Peterson National Heritage Life Insurance Company (Del.)Checks Issued to GAs
This week NOLHGA dispensed the twelfth distribution from the NHL estate to affected guaranty associations. With this $4 million payment, the guaranty associations have received a total of $232,941,089 in distributions and early access (the first nine distributions came from the NHL Trust, which closed at the end of March 2001; the tenth and eleventh distributions from the estate were made on July 1, 2001, and November 30, 2001, respectively, in the amount of $5 million each). Of the original $418,878,761 in guaranty association claims against the NHL estate, $185,937,672 remains unpaid.
Task Force Chair - Dan Orth; Staff Contact -Court of Appeals Upholds State Priority Statute in Federal Preemption Case
On September 18, the First Circuit Court of Appeals issued a decision upholding policyholder-level priority for guaranty association claims under the Massachusetts liquidation priority statute, therein affirming the district court’s rejection of the government’s federal preemption challenge.
This litigation arose as a result of the federal government’s challenge of the policyholder-level priority afforded guaranty association claims under the Massachusetts liquidation priority statute and the time limitations established under state law for filing claims against insolvent insurers. More specifically, the government argued that the state liquidation priority statute is preempted by federal law to the extent it provides for payment of guaranty association claims ahead of claims of the federal government, and that the government is not bound by the state’s statutory bar date for filing claims against the insolvent insurer’s estate.
NOLHGA and several of the affected property and casualty guaranty funds filed amicus briefs with the federal district court in support of the receiver’s position on both issues. In a September 27, 2001, decision, the district 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 1993 First Circuit Court 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 parties filed appeals with respect to both issues. NOLHGA filed an amicus brief with the Court of Appeals in March, again providing support for the receiver’s position on both issues. Amicus briefs were also filed on behalf of the NCIGF and several of the affected insurance guaranty funds. Argument on appeal was heard on July 30 before a panel of three judges.
In a decision issued on September 18, the Court of Appeals affirmed on both issues. 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 reaffirmed its 1993 decision in Garcia finding that the claims bar date is neither directed at nor necessary for the protection of policyholders. In its opinion, the court expressed its view that an early bar date for claims of the United States has only a limited effect on policyholders, and equally or primarily helps creditors having lower-priority claims. Based on this view, the court found that the statutory bar date does not escape federal preemption under the Fabe analysis. Having so held, however, the court went on to state that some uniform limit for the filing of claims by the federal government is clearly needed, but that the limit must be established by Congress and not the courts. It is not yet known whether either party in this case will seek rehearing by the full court or appeal to the U.S. Supreme Court.
For further information, contact Joni Forsythe at 703.787.4103.
Staff Contact - Joni ForsytheNOLHGA Journal Correction
An error appeared in the Calendar section of the Fall 2002 NOLHGA Journal. The NCIGF will not be holding a meeting in June 2003. The NCIGF’s Legal Seminar will be held July 24 & 25, 2003, in Jackson Hole, Wyo.
Staff Contact - Sean McKenna