SENATE BILL REPORT

ESSJR 8230

BYSenate Committee on Financial Institutions & Insurance (originally sponsored by Senators West and Moore)

Reducing the liability for that portion of debt covered by the Washington life and disability insurance guarantee association.

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):February 5, 1988

Majority Report:  That Substitute Joint Resolution No. 8230 be substituted therefor, and the substitute joint resolution do pass.

      Signed by Senators von Reichbauer, Chairman; West, Vice Chairman; Johnson, Kreidler, McCaslin, Moore, Smitherman.

Senate Staff:Walt Corneille (786-7416);

                  February 17, 1988

AS PASSED SENATE, FEBRUARY 16, 1988

BACKGROUND:

The state Constitution provides that stockholders of domestic corporations are individually and personally liable for all contracts, debts and engagements to the extent of the amount of their stock at par value.  The Legislature created the Life and Disability Insurance Guaranty Association in 1971.  The association is required to establish funds to assume, reinsure, or guaranty the performance of the policies and contracts of any domestic insurer for which a court has entered an order of liquidation.

It has been suggested that in lieu of the guaranty association funds, the stockholders of domestic insurance companies should be relieved of liability for the debts of the corporation to the extent that the life and disability insurance fund satisfies those debts.

SUMMARY:

A constitutional amendment is created to provide that stockholders of insurance companies which contribute to the Life and Disability Guaranty Association fund and the insurance guaranty fund are relieved from liability for the debts of the insurance company to the extent that the debts are satisfied by the fund.

The amendment must be submitted to the qualified voters of the state for ratification at the next general election.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Senate Committee - Testified: Basil Badley, HIAA-WLDIGA (for); Scott Jarvis, Insurance Commissioner's Office