Present: Carrico, C.J., Compton, Stephenson, Lacy, Keenan, and 

Koontz, JJ., and Cochran, Retired Justice 

DAVID H. BENNET, ET AL. 

 OPINION BY 

v. Record No. 950808 CHIEF JUSTICE HARRY L. CARRICO 

 April 19, 1996 

VIRGINIA LIFE, ACCIDENT AND SICKNESS 

INSURANCE GUARANTY ASSOCIATION, ET AL.*

FROM THE STATE CORPORATION COMMISSION 

 This appeal involves application of the provisions of Chapter 

17 of Title 38.2 of the Code of Virginia, Code §§ 38.2-1700 

through -1721. The purpose of Chapter 17 is "to protect, subject 

to certain limitations, policyowners, insureds, beneficiaries, 

annuitants, payees, and assignees of life insurance policies, 

accident and sickness insurance policies, annuity contracts, and 

supplemental contracts against failure to fulfill contractual 

obligations due to the impairment or insolvency of the insurers 

issuing those policies or contracts." Code § 38.2-1700(A). 

 To provide this protection, the General Assembly designated 

the Virginia Life, Accident and Sickness Insurance Guaranty 

Association (the Association), composed of all insurers licensed 

to transact the business of insurance in this Commonwealth, "to 

enable the guaranty of payment of benefits and of continuation of 

coverages." Code §§ 38.2-1700(A), -1702(A). Members of the 

Association are "subject to assessments to provide funds to carry 

out the purpose of [Chapter 17]." Code § 38.2-1700(A). In the 

case of an insolvent insurer, the Association shall "[g]uarantee, 

assume, or reinsure or cause to be guaranteed, assumed, or 

 

 *The State Corporation Commission is also an appellee 

pursuant to Rule 5:21(f). 
reinsured the covered policies of the insolvent insurer," Code 

§ 38.2-1704(B)(1), and shall "[a]ssure payment of the contractual 

obligations of the insolvent insurer," Code § 38.2-1704(B)(2). 

 However, not all such policies or contracts are entitled to 

protection. As pertinent here, Code § 38.2-1700(C)(5) provides 

that Chapter 17 shall not apply to "[a]ny contract or certificate 

which is not issued to and owned by an individual, except to the 

extent of . . . any annuity benefits guaranteed to an individual 

by an insurer under such contract or certificate." This provision 

is at the core of the controversy in the present case, and it was 

brought into focus when, on December 22, 1994, David H. Bennet and 

L. John Fleischmann, Trustees for the Dynamic Systems, Inc. 

Savings Enhancement Plan (the Plan), and Roger Nicholas, a 

participant in the Plan (collectively, the Plan Trustees), filed a 

petition for declaratory relief with the State Corporation 

Commission (the Commission). 

 The petition alleged that Dynamic Systems, Inc. (Dynamic) is 

a firm engaged in the business of providing engineering and 

management services; that Dynamic maintains the Plan for the 

benefit of its employees, who number "94 or more"; and that the 

Plan and the trust implementing it qualify under § 401(a) of the 

Internal Revenue Code and include a qualified cash or deferment 

arrangement under § 401(k). The petition alleged further that the 

Plan had purchased certain Guaranteed Interest Contracts (GICs) 

from InterAmerican Insurance Company of Illinois (InterAmerican); 

that InterAmerican was licensed to transact insurance business in 

Virginia and, consequently, was a member of the Association; and 
that InterAmerican had become insolvent as that term is defined in 

Code § 38.2-1701. Finally, the petition alleged that demand had 

been made upon the Association to extend coverage to the GICs but 

that the Association had refused the demand and the Commissioner 

of Insurance for Virginia had ruled that the GICs were not covered 

by Chapter 17 of Title 38.2. 

 The petition prayed for a declaration that the GICs were 

"annuity contracts" entitled to coverage under Code § 38.2-1700(A) 

and that the Association was required to guarantee the contracts. 

 The petition also prayed for an order requiring the Association 

to pay the Plan Trustees approximately $1.6 million, representing 

the "Contract Value [of the GICs] as of 12/23/91," the date 

InterAmerican became insolvent. 

 The Association moved to dismiss the petition on the ground 

that the GICs were excluded from coverage by the terms of Code 

§ 38.2-1700(C)(5). The Commission sustained the Association's 

motion and dismissed the petition, stating: 

 From the documents filed by the parties, including 

the actual text of the GICs themselves, it is obvious 

that these products are not owned by and issued to 

individuals, nor do they provide any annuity benefits to 

individuals. Thus, there is no basis under which these 

investments can be guaranteed by [the Association]. 

 The Plan Trustees are here upon an appeal of right. Va. 

Const. art. IX, § 4; Code § 12.1-39. They argue that the statute 

in question is remedial in nature and, hence, should be construed 

liberally to promote the underlying policy of providing protection 

to innocent victims of insurer insolvency. The Plan Trustees 

maintain that the Commission's interpretation of Code § 38.2-
1700(C)(5) is both unduly restrictive and inconsistent with the 

spirit and fundamental purposes of the statute in question. 

 The Plan Trustees argue further that, although the Plan and 

the trustees hold legal title to the GICs, the Plan participants 

"are in every sense the equitable and beneficial owners of the 

. . . GICs." These investments, the Plan Trustees say, "were 

purchased by the Plan at the express direction of individual Plan 

participants using individually identifiable participant 

contributions to pay the premiums," the interest of each 

participant "was separately accounted for, and individual Plan 

participants received periodic statements identifying their 

specific interests in the . . . GICs." Furthermore, the Plan 

Trustees point out, each participant "directed the application of 

funds" and had "individual rights to withdraw money under the GICs 

in accordance with the terms of the Plan." 

 We will assume, without deciding, that the Plan Trustees are 

correct in saying the statute in question should be liberally 

construed. Even so, we do not think the statute can be stretched 

to provide coverage for the claims advanced by the Plan Trustees. 

 Accordingly, we find that the Commission's interpretation of Code 

§ 38.2-1700(C)(5) is neither unduly restrictive nor inconsistent 

with the spirit and fundamental purposes of the statute in 

question. 

 Code § 38.2-1700(C)(5) excludes from coverage any contract or 

certificate which is not both issued to and owned by an 

individual, and nothing in the statutory language permits an 

interpretation that a mere beneficial or equitable owner can 
satisfy the "issued to" and the "owned by" requirements. Indeed, 

such an interpretation is impermissible even under the GICs 

themselves. The GICs were issued to the Plan, not the individual 

participants, and 

§ 4.10 of the Plan provides as follows: 

 4.10 Trust as Single Fund: The creation of 

separate Accounts for accounting and bookkeeping 

purposes shall not restrict the Trustee in operating the 

Trust as a single Fund. Allocations to the Accounts of 

Participants in accordance with this Article IV shall 

not vest any right or title to any part of the assets of 

the Fund in such Participants . . . . 

In addition, the GICs are issued to the Plan as the 

"Contractholder," and § 6.7 of the GICs provides as follows: 

 6.7 Ownership

 The Contractholder (and not the Participant, 

beneficiary or contingent annuitant) is the sole owner 

of all payments, rights, options and privileges granted 

or made to any Participant, beneficiary or contingent 

annuitant under the provisions of this Contract and is 

entitled, without the consent or participation of any 

Participant, beneficiary or contingent annuitant, to 

exercise such rights, options and privileges and to 

receive all such payments at the time payable under the 

Plan to the Participant, beneficiary or contingent 

annuitant. 

 Hence, the conclusion is inescapable that the GICs involved 

in this case are neither issued to nor owned by individuals. The 

petitioners can succeed, therefore, only if the GICs guarantee 

"annuity benefits . . . to an individual," within the meaning of 

the exception to Code § 38.2-1700(C)(5). In a footnote to their 

brief, the Plan Trustees state as follows: 

 The . . . GICs are themselves annuity contracts 

because they are agreements to make periodic or lump-sum 

payments and fixed-dollar amounts to the Plan 

participants through the Plan. See Va. Code Ann. 

 § 38.2-106(1993). As annuity contracts, the . . . GICs 

clearly guaranteed annuity benefits to the Plan 

participants. 
 As the Association points out, however, Code § 38.2-106 

defines an annuity as an agreement "to make periodic payments in 

fixed dollar amounts pursuant to the terms of a contract for a 

stated period of time or for the life of the person or persons 

specified in the contract," and the GICs involved in this case 

simply do not satisfy that definition; they neither provide for 

periodic payments nor fix a dollar amount to be paid. Rather, the 

GICs provide only for the accumulation of value at a specified 

rate of interest and for the withdrawal of the accumulated value 

upon certain conditions. 

 Moreover, while one of the options provided by the GICs 

permits withdrawal of accumulated value for the purchase of an 

annuity, the withdrawal must be made by the Contractholder, i.e., 

the Plan, not an individual participant. Section 4.1 of the GICs 

states: 

 4.1 Notice of Benefits

 Written notice shall be given to the Insurance 

Company by the Contractholder whenever any withdrawal is 

to be made from the Accumulated Value for the purpose of 

providing benefits under the Plan. 

 Furthermore, the undertaking assumed by the Contractholder 

according to the terms of the GICs is to purchase annuities for 

participants, upon request. Section 4.2 of the GICs provides: 

 4.2 Withdrawal to Purchase an Income Annuity 

 Upon receipt of a notice from the Contractholder to 

purchase an annuity under this Contract for a person in 

accordance with the Plan, the Insurance Company will 

effect the purchase of such annuity by withdrawing from 

the Accumulated Value the full consideration therefor, 

plus the amount of state premium tax, if any . . . . 

An undertaking to purchase an annuity in the future is not a 
present guarantee of annuity benefits. Hence, the conclusion is 

inescapable that the GICs involved in this case do not guarantee 

"any annuity benefits . . . to an individual," within the 

contemplation of the exception to Code § 38.2-1700(C)(5). 

Board of Trustees v. Life & Health Insurance Guaranty Corp., 

642 A.2d 856 (Md. 1994), cited by the Plan Trustees, is 

inapposite. At the time of that decision, the Maryland guaranty 

statute had no exclusion similar to Virginia's Code § 38.2-

1700(C)(5). And we are not persuaded by the opinions of the 

insurance commissioners of three sister states, cited by the Plan 

Trustees in support of their position. 

 Two subsidiary questions remain, (1) whether the Commission 

erred in refusing to consider "certain binding representations 

[InterAmerican made] to the Plan participants regarding the GICs 

in promotional materials," and (2) whether the Commission erred in 

dismissing the petition for declaratory relief filed by the Plan 

Trustees without leave to amend. We refuse to consider these 

questions. No objection was preserved before the Commission with 

respect to either point and no assignment of error touches either 

point. Rule 5:21(i). 

 Finding no error in the proceedings below, we will affirm the 

judgment of the Commission. 

Affirmed.