SENATE BILL REPORT

SJR 8230

BYSenators 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 5, 1988

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE, FEBRUARY 5, 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 Guarantee Association in 1971.  The association is required to establish funds to assume, reinsure, or guarantee 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 guarantee 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 Guarantee Association 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.

EFFECT OF PROPOSED SUBSTITUTE:

Stockholders of insurance companies which contribute to the insurance guarantee fund as well as those who contribute to the life and disability guarantee fund are relieved from liability for the debts of the insurance company to the extent the debts are satisfied by the prospective funds.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

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