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insurance reserves” as used in section 816(c)(2) to define an
insurer’s “total reserves” includes accrued unpaid losses on CA&H
insurance policies. The Court of Appeals for the Seventh Circuit
has concluded it does not. See Harco Holdings, Inc. v. United
States, 977 F.2d 1027 (7th Cir. 1992), revg. 754 F. Supp. 130
(N.D. Ill. 1990). The Court of Appeals for the Ninth Circuit has
concluded that the term “unpaid losses” did include accrued
unpaid losses for purposes of section 806(c), before its repeal
by section 2 of the Life Insurance Company Income Tax Act of
1959, Pub. L. 86-69, 73 Stat. 112.3 See United States v.
Occidental Life Ins. Co., 385 F.2d 1, 6 (9th Cir. 1967), revg. on
this issue 250 F. Supp. 130 (S.D. Cal. 1965). The United States
Court of Claims also considered this issue in the context of
former section 806(c)'s predecessor. That court reached a
conclusion consistent with the view of the Court of Appeals for
the Ninth Circuit. See Prudential Ins. Co. v United States, 162
Ct. Cl. 55, 319 F.2d 161, 165-166 (1963).
3 Former sec. 806(c) provided:
In the case of a life insurance company writing
contracts other than life insurance or annuity
contracts (either separately or combined with
noncancellable health and accident insurance), the term
“adjustment for certain reserves” means an amount equal
to 3 1/4 percent of the unearned premiums and unpaid
losses on such other contracts which are not included
in life insurance reserves * * *.
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