July 5, 1994
Mr. Anthony Blalock, Chairman NCDOT Employee Insurance Committee Transportation Building Raleigh, North Carolina
Re: Advisory Opinion; Proposal of American Franklin Life Insurance Company
Dear Mr. Blalock:
By memorandum dated May 25, 1994 you have requested an opinion regarding legal issues which may arise as a result of the execution of a contract between the NCDOT Employee Insurance Committee and American Franklin Life Insurance Company under which "variable life insurance" will be made available to NCDOT employees. In conjunction with your request you have provided the proposal submitted by American Franklin Life Insurance Company and a letter dated May 24, 1994, from Ted A. Hamby, Life & Health Section Supervisor with the North Carolina Department of Insurance.
The American Franklin proposal was submitted and selected in response to a request for proposals dated March 10, 1994 for variable life insurance coverage. A previous request for proposals was withdrawn in February, 1994 as a result of questions raised by Statewide Benefits, Inc., which currently provides "universal" life insurance to NCDOT employees. Statewide Benefits Inc. alleged that the product requested, "variable universal life insurance," violated their contract dated June 22, 1992, which purportedly reserved to them the exclusive right to provide "universal" life insurance.
By letter dated February 7, 1994 to Mr. J. Bradley Wilson, General Counsel for the Governor, from Eugene A. Smith, Senior Deputy Attorney General, and John R. McArthur, Chief Counsel to the Attorney General, we advised that the product requested through the solicitation could have been misconstrued. We therefore recommended that the proposals be rejected and a new solicitation initiated. We further recommended that the Department of Insurance be consulted in connection with any future solicitation.
In connection with your review of the current proposals you have solicited the opinion of the Department of Insurance as to the type of product proposed by American Franklin. Mr. Hamby states in his letter of May 24, 1994, that the product offered by American Franklin has been approved for use in North Carolina and is a "flexible premium variable life insurance policy product." In a subsequent letter to this office dated June 14, 1994, Mr. Hamby has advised that the product offered is not a universal life product, as viewed by the Department of Insurance. We have previously been advised by Mr. Rodney Finger, Assistant Deputy Commissioner for the Department of Insurance, that "variable" life insurance and "universal" life insurance are two distinct products.
Statewide Benefits, Inc. contends that the previously referenced contract dated June 22, 1992 reserves to them the exclusive right to market "universal" life insurance products. Without expressing an opinion as to the validity of this contention, the correspondence from the
Department of Insurance is clear that "universal" and "variable" life insurance are distinct
products, and that American Franklin has offered "variable" life insurance. Based on this
determination, we find no legal impediment should your committee decide to proceed to accept
the proposal submitted by American Franklin.
Andrew A. Vanore, Jr.
Chief Deputy Attorney General
Grayson G. Kelley
Special Deputy Attorney General