Executive Life (CA)

Court Sets Briefing Schedule on NOLHGA Appeal

The Ninth Circuit U.S. Court of Appeals Sept. 20 issued a briefing schedule for the appeal filed by NOLHGA and the California Life and Health Insurance Guarantee Association. The appeal, filed on Sept. 5, seeks review of U.S. District Judge Matz's Aug. 6 order denying NOLHGA and the California Association's motion to intervene in the California Commissioner's case against Altus finance and other defendants. The appellate court's briefing schedule requires NOLHGA and the California Association to file their opening brief by December 24, 2001. No date has been set for oral argument.

NOLHGA and the California Association sought intervention (1) to show that, if the Commissioner's allegations of misconduct are correct, losses resulting from the ELIC insolvency were substantially exacerbated as a result of such misconduct and (2) to present certain arguments in support of the Commissioner's claims seeking restitution from the defendants.

Task Force Chair - Art Dummer;   Staff Contact - Ohio General Insurance Company (OH)

NOLHGA Weighs Amicus Support for Receiver in Ohio Litigation

NOLHGA is considering providing amicus support for the Receiver's position in litigation arising out of the Ohio General Insurance Company insolvency. The litigation was initiated by U.M.C.-U.M.C. Limited ("UMC") for the purpose of challenging the Receiver's classification of its reinsurance claims as class 5 (general creditor) claims under Ohio's priority statute. UMC has argued that claims arising under the reinsurance contracts constitute "claims under policies" within the meaning of the priority statute, and are therefore entitled to treatment as class 2 policyholder level claims.

On Sept. 22, 2000, a magistrate's decision was issued approving the Receiver's determination of class 5 priority for the reinsurance claims, noting that the priority statute must be construed consistent with the legislative intent to afford direct policyholders priority over reinsurance claims. The trial court subsequently adopted the magistrate's decision on Jan. 19. UMC then took the matter up on appeal.

The Court of Appeals on Sept. 6 reversed, finding that the term "policies" as it appears in the priority statute is sufficiently broad to include all contracts of insurance. The court based its conclusions on the broad definition of the term "policy" set forth in Black's Law Dictionary. Having found the statutory language to be clear and unambiguous, the court concluded that arguments based on legislative intent were not relevant. Notwithstanding, the court went on to state that the lack of an express statutory exclusion for reinsurance from the policyholder class would be persuasive of legislative intent to include reinsurance at that priority level. In reaching its conclusions, the Court of Appeals rejected the reasoning set forth in case law from other states finding reinsurance claims to be ineligible for policy level treatment based on public policy grounds.

Given the potential implications of the ruling, the Receiver is expected to seek review by the Ohio Supreme Court. A request for review is due Oct. 22. The amicus subgroup of NOLHGA's Legal Committee will review the case and consider providing support to the Receiver because this case has potential significant implications for the guaranty system.

  Staff Contact - Joni Forsythe Unison International Life (OK)

Court Approves Additional $2 Million Early Access Distribution

The Oklahoma County District Court Sept. 21 approved the receiver's petition for $2 million in additional early access distribution to affected guaranty associations. The receiver is expected to release the funds to NOLHGA shortly, and then NOLHGA will arrange for the funds to be distributed to affected associations in accordance with the approved allocation schedule.

In another development, the receiver received initial bids in connection with the sale of the majority of the remaining Unison assets. Participating bidders will now have until Oct. 5 to submit "overbids." Based only on the initial bids, the sales price for the assets should total at least $500,000.

Task Force Chair - Bart Boles;   Staff Contact - Bill O'Sullivan