Letter Opinion 1972 No. 037

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                                                                   May 12, 1972

Honorable Karl Herrmann
Insurance Commissioner
Insurance Building
Olympia, Washington 98504                                                                                            Cite as:  AGLO 1972 No. 37 (not official)

Dear Sir:
 
            This is written in response to your recent letter requesting our opinion on a question pertaining to the scope of the term "covered claims" as used in the Washington insurance guaranty association act ‑ chapter 265, Laws of 1971, 1st Ex. Sess.  Your question reads as follows:
 
            "May obligations under insurance policies be properly termed to be 'covered claims' under the above act when such obligations arose out of a declaration of insolvency made after April 1, 1971, but before May 21, 1971, the effective date of the above act, particularly in view of the Ohio case cited in the attached letter?"
 
            We answer this question in the affirmative.
 
                                                                     ANALYSIS
 
            The case referred to in your attachment is Smith v. Ohio Valley Ins. Co., 27 Ohio St. 2d 268, 272 N.E. 2d 131 (1971).  In this case the Ohio Supreme Court had before it a definition of "covered claim," as contained in the Ohio insurance guaranty association act (R.C. Chapter 3955), which reads as follows:
 
            ". . . an unpaid claim, . . . which arises out of and is within the coverage of an insurance policy to which sections 3955.01 to 3955.20, inclusive, of the Revised Code apply, when issued by an insurer which becomes an insolvent insurer on or after the effective date of this act and the claimant or insured is a resident of this state at the time of the insured event or the property from which the claim arises is permanently located in this state."
 
             [[Orig. Op. Page 2]]
            Based upon this statutory language the Ohio court concluded that
 
            ". . . the definition of 'covered claim' does not include claims in existence before September 4, 1970 . . .";
 
            I.e., the date upon which the act in question became effective.  Your question is whether the reasoning of this decision is applicable to the comparable provisions of our own chapter 265, Laws of 1971, 1st Ex. Sess. (the Washington insurance guaranty association act), the purpose of which is expressed in § 1 (now codified as RCW 48.32.010) as follows:
 
            "The purpose of this chapter is to provide a mechanism for the payment of covered claims under certain insurance policies to avoid excessive delay in payment and to avoid financial loss to claimants or policyholders because of the insolvency of an insurer, to assist in the detection and prevention of insurer insolvencies, and to provide an association to assess the cost of such protection among insurers."
 
            The scope of the act appears in § 2 (RCW 48.32.020), which declares it to be applicable
 
            ". . . to all kinds of direct insurance, except life, title, surety, disability, credit, mortgage guaranty, and ocean marine insurance."1/
 
             Next, § 3 contains the definitions of various key terms, including the following specific definition of a "covered claim":
 
            "(4) 'Covered claim' means an unpaid claim, excluding one for unearned premiums, which arises out of and is within the coverage of an insurance policy to which  [[Orig. Op. Page 3]] this chapter applies issued by an insurer, if such insurer becomes an insolvent insurer after the first day of April, 1971 and (a) the claimant or insured is a resident of this state at the time of the insured event; or (b) the property from which the claim arises is permanently located in this state.  'Covered claim' shall not include any amount due any reinsurer, insurer, insurance pool, or underwriting association, as subrogation recoveries or otherwise."
 
            The language of this definition, it will be seen, is totally determinative of your question.  The legislature has expressly stated therein that obligations under those insurance policies to which the Washington act applies may properly be regarded as "covered claims" under the act when such obligations arose out of a declaration of insolvency made after April 1, 1971 ‑ even though this may have occurred prior to May 21, 1971, when the act became effective.  In this respect, our definition of "covered claim" is materially distinguishable from that which was involved in the Ohio Valley Ins. Co. case, supra, and for this reason, the rationale of this Ohio decision is inapplicable to the Washington statute.  Any notion that this difference between the Ohio and Washington acts resulted from any sort of inadvertence by the legislature is quickly dispelled by a review of the history of our act during the 1971 legislative session.  As originally introduced, the bill which became chapter 265, supra, (Senate Bill No. 18) specifically keyed the definition of "covered claim" to those claims arising "after the effective date of this act."  However, by a senate amendment not adopted until May 3, 1971, this phrase was replaced with the present language "after the first day of April, 1971."  See, Senate Journal, p. 1396.
 
            In giving full effect to this amendment by answering your question in the affirmative, we are aware that some persons have questioned the constitutionality of this assertedly retroactive aspect of the Washington act ‑ presumably on similar grounds to those which were discussed by the court in the Ohio case, supra, but which were not passed upon because of the court's determination that the act there before it was not intended to operate as to claims arising before its effective date.  Notably, however, the Ohio state Constitution, unlike our own, contains an express prohibition against the passage of any retroactive laws.2/   Furthermore, it would in any event be contrary to long-standing policy for this office now to express an opinion with regard to the constitutionality of chapter 265, supra.  Once an act such as this has been enacted by the legislature it must be presumed by this office to be constitutional until otherwise determined by the courts.
 
             [[Orig. Op. Page 4]]
            The reasons for this policy have been most recently explained in our letter dated February 24, 1971, to State Senator Hubert F. Donohue, copy enclosed, in which we first stated that:
 
            "'. . .  The power to declare an act constitutional or unconstitutional is vested solely in the courts.  Consequently, nothing can be gained by this office expressing an opinion as to the constitutionality of a statute.  A pronouncement of unconstitutionality would merely cause confusion and disorder among the administrative officers whose duty it is to give effect to the presumption of constitutionality which attaches to all laws until declared otherwise by a court of competent jurisdiction.'"
 
            In addition, we made note in this letter of the following provisions of RCW 7.24.110, a part of the uniform declaratory judgments act which was adopted by our legislature in 1935 (see, chapter 113, Laws of 1935):
 
            "'. . .  In any proceeding which involves the validity of a municipal ordinance or franchise, such municipality shall be made a party, and shall be entitled to be heard, and if the statute, ordinance or franchise is alleged to be unconstitutional, the attorney general shall also be served with a copy of the proceeding and be entitled to be heard.'  (Emphasis supplied.)"
 
            Of this statute we then said:
 
            "By this enactment, the legislature has imposed upon the attorney general a responsibility to appear and present all available legal arguments to support the constitutionality of any duly enacted statute whenever such a statute is attacked in a declaratory judgment proceeding.  . . .

            "Accord, Clark v. Seiber, 49 Wn.2d 502, 503, 304 P.2d 708 (1956), in which the court said of this statute:
 
            "'. . .  The purpose of this provision is to protect the public, should the parties be indifferent to the result.  The state is  [[Orig. Op. Page 5]] interested in the constitutionality of its statutes as they affect the public welfare.  See Parr v. Seattle, 197 Wash. 53, 84 P. (2d) 375 (1938).'"
 
            We trust that the foregoing explanation of our position, as well as our direct answer to your specific question, will be of some assistance to you.
 
Very truly yours,
 
FOR THE ATTORNEY GENERAL
 
Philip H. Austin
Deputy Attorney General
 
                                                         ***   FOOTNOTES   ***
 
1/A similar act was also passed by the same 1971 legislative session dealing with life and disability insurance.  See, chapter 259, Laws of 1971, 1st Ex. Sess. (chapter 48.32A RCW) ‑ the Washington life and disability insurance guaranty association act.
 
2/See, Ohio Constitution, Article II, § 28.