OGC Opinion No. 09-04-13: Life Insurance Company Guaranty Corporation of NY Long-term care insurance

OGC Opinion No. 09-04-13

The Office of General Counsel issued the following opinion on April 29, 2009, representing the position of the New York State Insurance Department.

RE: Life Insurance Company Guaranty Corporation of NY Long-term care insurance

Question:

Would a NY resident insured under an individual long-term care policy purchased in New York, with a maximum lifetime value of $393,000, be protected under LICGC if the insurer becomes insolvent either before or after the insured enters a long-term care facility?

Conclusions:

Provided the insured qualifies as a New York resident as defined in N.Y. Ins. Law § 7705(k) (McKinney 2000), a long-term care insurance policy issued by a New York authorized life insurance company is covered up to $500,000 should that insurer become insolvent either before or after the insured enters the facility.

Facts:

It is reported that a long-term care insurance policy was purchased from a New York authorized life insurance company in December 1990. The maximum lifetime value of the policy is $393,000. The inquirer asks whether the policy benefits are guaranteed up to $500,000 by the LICGC should the insurer become insolvent either before or after the inquirer may enter a long-term care facility.

Analysis:

The LICGC is a not-for-profit membership corporation governed by Article 77 of the New York Insurance Law. LICGC is an entity separate and distinct from the Insurance Department, and has its own Board of Directors. See www.nylifega.org.

Article 77 applies to covered policies issued on or after August 2, 1985. The scope of Article 77 is set forth in Insurance Law § 7703(a) as follows:

(a) This article shall apply to direct life insurance policies, health insurance policies, annuity contracts, funding agreements and contracts supplemental to life and health insurance policies, annuity contracts or funding agreements issued to a resident by a life insurance company licensed to transact life or health insurance or annuities in this state at the time the policy, contract or agreement was issued or at the time it became an impaired or insolvent insurer, as the case may be.

Accident and health insurance includes long-term care insurance. See N.Y. Law § 1113(a)(3).

Insurance Law § 7705(h) provides that all life insurance companies licensed to sell life or health insurance or annuities in the State of New York are members of the LICGC. Under Insurance Law § 7709, the LICGC is funded by assessments from its members only after a member insurer is declared insolvent by a court of law.

Under Insurance Law § 7705(k), to be qualified as a resident of New York with a policy protected under Article 77, the insured either must reside in New York at the time the LICGC member insurer is determined to be an impaired or insolvent insurer, or else be a resident of New York at the time the insurer issued a covered policy to the insured.

Accordingly, the LICGC should guarantee the long-term care policy in question up to its limit below $500,000 in benefits, provided that the inquirer is qualified to receive such benefits at the time of insolvency and remains qualified within the terms and conditions of the policy, as set forth in Insurance Law § 7708.

For further information you may contact Associate Attorney Jeffrey A. Stonehill at the New York City Office.