Court Opinion

ID: 3796591
Source: CourtListenerOpinion
Date Created: 2016-07-06 07:40:48.317871+00
Date Added: 2024-06-11T14:13:12.880457
License: Public Domain

OPINION — AG — **** DEPARTMENT OF HIGHWAYS RATE STABILIZATION RESERVE FUND DISPOSITION **** THE RATE OF STABILIZATION RESERVE FUND, ESTABLISHED PURSUANT TO THE DEPARTMENT OF HIGHWAY'S EMPLOYEE GROUP INSURANCE POLICIES WITH AMERICAN GENERAL LIFE INSURANCE COMPANY, SHOULD BE PAID TO THE DEPARTMENT OF HIGHWAYS TO BE EITHER HELD OR DISTRIBUTED AS MAY BE DETERMINED IN THE DISCRETION OF THE DEPARTMENT FOR THE BENEFIT OF THE EMPLOYEES OF THE DEPARTMENT OF HIGHWAYS. (GARY M. BUSH)
DEPARTMENT OF HIGHWAYS RATE STABILIZATION RESERVE FUND DISPOSITION The rate stabilization reserve fund, established pursuant to the Department of Highways' employee group insurance policies with American General Life Insurance Company, should be paid to the Department of Highways to be either held or distributed as may be determined in the discretion of the Department for the benefit of the employees of the Department of Highways. We have considered your request for an opinion as to the proper disposition of approximately $160,000.00 presently held in a rate stabilization reserve fund established pursuant to employee group insurance policy with American General Life Insurance Company, which policy has terminated.  We have reviewed the specifications and policies for both life and health insurance and find that the provisions pertaining to each are essentially the same. The specifications for both health and life insurance provide for a rate stabilization reserve as follows: "The insuring company shall establish a `rate stabilization reserve' to which fund, all profits accruing under the policy and not otherwise allocated, shall be deposited. "When funds so deposited shall equal or exceed ten percent of the annual premium under the policy, at the sole option of the named insured, same may be used; (a) to pay any monthly premium under the policy, (b) to purchase increased benefits under the policy.  "At termination, the insurance company, shall pay in cash to the named insured, any remaining credit balance under the policy.  "The insuring company shall pay annually, to the rate stabilization reserve, the current rate of interest for use of these funds. "The insurance company may withdraw from this fund annually the amount necessary to equal retention percentage offered by the company after receipt of written authority from policy holder.  "It is the intent that this fund be used to stabilize rates, benefits and the retention percentage." It is the clear intent of the above specifications that the rate stabilization reserve is held for the benefit of the group insured under the policy.  The group insured is, of course, the employees of the Highway Department. Under the provisions that at termination the insurance company shall pay in cash to the named insured any remaining credit balance under the policy, such funds on hand at termination and any accumulated income on such fund must be paid over to the employees of the Department of Highways. Since the rate stabilization reserve was established from funds out of profits or dividends accruing under the policy such funds have lost their characteristic as individual premium payments and have been held by the insurance company for the benefit of all the employees of the Highway Department without regard to the time of employment of the individual employee. It would follow that such funds should be paid over to the Department of Highways for the benefit of employees to be held or distributed in the best interest of the employees.  It is, therefore, the opinion of the Attorney General that the rate stabilization reserve fund, established pursuant to the Department of Highways' employee group insurance policies with American General Life Insurance Company, should be paid to the Department of Highways to be either held or distributed as may be determined in the discretion of the Department for the benefit of the employees of the Department of Highways. (Gary M. Bush) (Department of Transportation)