Court Opinion

ID: 9559377
Source: CourtListenerOpinion
Date Created: 2023-08-21 17:28:00.139686+00
Date Added: 2024-06-11T09:10:50.449626
License: Public Domain

MARTONE, Justice,
dissenting.
The GICs themselves are not life contingent. There is nothing in the GIC document that makes them life contingent, and nowhere does the majority suggest otherwise. The majority looks to the Plan instead. The Plan, of course, holds more than GICs. It holds certificates of deposit, stocks, bonds, and other investments. Nothing in any those instruments makes them any more or less life contingent than anything in the GIC document. Théy are ah held by the Plan. The Honeywell Plan requires a payout on death. Thus, under the court’s reasoning, holdings in the Plan other than GICs, including certificates of deposit and securities, are also life contingent because of the Plan. They too would be annuities. The court’s answer to this problem is that because coverage under A.R.S. § 20-682(A) is limited to contracts issued by insurance companies, “not all 401(k) retirement plans would be annuities, but only those involving policies and contracts issued by insurance companies.” Ante, at 91, 945 P.2d at 812. But this simply does not follow. That there would be no coverage because they are not issued by insurance companies does not mean that they are not annuities. They would simply be uncovered annuities. But under the court’s reasoning, as long as the contract is issued by an insurance company, it is a covered annuity. Thus, when an insurance company issues a debt instrument like a bond, and it is held by the Plan, it becomes an annuity because the Plan makes it life contingent. There would be coverage under the Guarantee Act.
In deciding whether GICs are annuities, I would look at the GICs alone without reference to the employer’s Plan. There is nothing in the GIC which makes it life contingent. To reach the conclusion that GICs are annuity contracts, the majority relies upon the Plan, not the GIC. Even if, as the court says, it is true that the Plan requires withdrawals from GICs upon the death of a participant, this still does not make the GIC itself contingent on life. The same GIC could be held by an employer plan that did not require withdrawal at death. But its status as an annuity cannot depend on who buys it.
As the majority notes, however, the legislature has now made it quite clear that GICs are excluded from coverage under the Guarantee Act. A.R.S. § 20-682(B)(4)(Supp.1996). Thus there is no coverage for GICs even though today’s decision characterizes them as annuity contracts within the meaning of § 20-682(A). But today’s decision broadens the definition of annuity to include any investment held by the Plan and issued by an insurance company, and therefore the legisla-' ture may wish to revisit the statute to see whether its exclusion of GIC coverage is adequate to achieve its purpose.
I respectfully dissent.