Ins. Guar. Ass'n v. Ms Cas. Ins. Co., No. 2005-CA-01158-SCT.

• Decision Date: 26 October 2006
• Docket Number: No. 2005-CA-01158-SCT.
• Parties: MISSISSIPPI INSURANCE GUARANTY ASSOCIATION v. MS CASUALTY INSURANCE COMPANY and American Reliable Insurance Company, Inc.
• Court: Mississippi Supreme Court

947 So.2d 865

MISSISSIPPI INSURANCE GUARANTY ASSOCIATION v. MS CASUALTY INSURANCE COMPANY and American Reliable Insurance Company, Inc.

No. 2005-CA-01158-SCT.

Supreme Court of Mississippi.

October 26, 2006.

James D. Holland, Louis Glazier Baine, Jr., Robert S. Addison, Terry R. Levy, Jason Hood Strong, Jackson, attorneys for appellant.

Kelly D. Simpkins, Walter D. Willson, Rosemary G. Durfey, Ridgeland, attorneys for appellees.

Before WALLER, P.J., EASLEY and CARLSON, JJ.

CARLSON, Justice, for the Court.

¶ 1. Aggrieved by the Madison County Chancery Court's grant of summary judgment in favor of MS Casualty Insurance Company and American Reliable Insurance Company, Inc., the Mississippi Insurance Guaranty Association appeals to us. Finding no reversible error, we affirm.

FACTS AND PROCEEDINGS IN THE TRIAL COURT

¶ 2. MS Casualty Insurance Company (MS Casualty) is a Mississippi-based insurance company. It began issuing workers' compensation insurance policies in 1993. American Reliable Insurance Company, Inc. (American Reliable) is an Arizona-based insurance company which also formerly issued workers' compensation insurance policies. General Reinsurance Corporation (Gen Re) was the reinsurer of MS Casualty's workers' compensation policies from January 1, 1993, to December 31, 1995. American Reinsurance Company (Am Re) was the reinsurer of MS Casualty's workers' compensation policies effective January 1, 1996. Gen Re was the reinsurer of American Reliable's workers' compensation policies.

¶ 3. On September 28, 2000, American Reliable exited the workers' compensation business by entering an "Assumption Reinsurance Agreement" (ARA) with Legion Insurance Company (Legion), a Pennsylvania insurance company. MS Casualty followed suit on September 29, 2000. The ARAs were approved by the Mississippi Department of Insurance. The ARA between MS Casualty and Legion retroactively transferred MS Casualty's obligations under the policies to Legion as of January 1, 1993, through December 31, 2000. Also, the ARA between American Reliable and Legion retroactively transferred American Reliable's obligations to Legion as of October 1, 1999, through December 31, 2000. MS Casualty and American Reliable ceded all outstanding net loss and voluntary unearned premium reserves to Legion. Gen Re and Am Re, the reinsurers, entered into assignment agreements which transferred to Legion all obligations they owed MS Casualty and American Reliable. As of January 1, 2001, Legion had sole responsibility to the policyholders and claimants.

¶ 4. Legion sent policyholders "Certificates of Assumption" stating that Legion would be responsible for any claims under the policies. Legion requested that all future claim requests be directed to Am-Fed Companies, its claims administrator, and directed that all future premiums be paid to Legion. The certificates also stated that Legion would be responsible for any future claims. Legion did not contact the claimants who were already receiving benefits under the MS Casualty and American Reliable policies.

¶ 5. Subsequently, Legion entered rehabilitation due to cash flow problems. The Pennsylvania Insurance Commissioner petitioned for liquidation of Legion, and on July 25, 2003, liquidation was ordered by the Commonwealth Court of Pennsylvania. The insurance commissioner was appointed as the statutory liquidator (Liquidator) and was responsible for making arrangements for continued payment of claims under Legion's policies.

¶ 6. The Liquidator ordered that policyholders asserting a right to proceeds of a reinsurance agreement to which Legion was a party should file a petition to intervene with the court. Subsequently, the Liquidator filed an emergency application for stay pending appeal or confirmation of automatic stay with respect to the portion of the court's Order of Liquidation allowing direct access to reinsurance. Gen Re and Am Re were ordered to pay any monies they would have owed to Legion as reinsurance to the Liquidator.

¶ 7. Following the court's entry of the Order of Liquidation, the Mississippi Insurance Guaranty Association (MIGA), by statutory authority, stepped into the shoes of Legion to protect the interests of Legion's Mississippi policyholders and claimants. MIGA was statutorily created by the Mississippi Legislature to pay "covered claims under direct insurance" when an insurer becomes insolvent.

¶ 8. After reviewing the claims made to Legion, MIGA decided that the claims were not "covered claims under direct insurance" within the meaning of the statute. MIGA requested MS Casualty and American Reliable to pay any claims made under the policies to avoid numerous multiparty lawsuits filed by the claimants. There were 181 claims at issue. Rather than having to deal with all of these potential lawsuits, MIGA requested MS Casualty and American Reliable to try one suit before a chancellor to decide if the claims were "covered claims under direct insurance." MIGA agreed to reimburse MS Casualty and American Reliable for any claims the companies wrongly paid if a chancellor ordered MIGA to do so.

¶ 9. MS Casualty and American Reliable thereafter commenced suit against MIGA in the Madison County Chancery Court demanding (1) reimbursement of claims paid by MS Casualty and American Reliable, and (2) MIGA's assumption of liability for future claims. The reinsurers, Gen Re and Am Re, were original parties to the suit, but they were dismissed by MS Casualty and American Reliable because Gen Re and Am Re were ordered to pay their monies to the Liquidator.

¶ 10. Chancellor William J. Lutz conducted a hearing on May 3, 2005, on the motion for summary judgment filed by MS Casualty and American Reliable.¹ The chancellor concluded that (1) the ARAs constituted a novation between MS Casualty and American Reliable and Legion, which ceded to Legion all responsibilities previously assumed by MS Casualty and American Reliable; (2) the claims constituted covered claims according to the statute; (3) the policies assumed by Legion were direct insurance according to the statute; and, (4) the policyholders, and not the claimants themselves, were the only ones to whom notice had to be given concerning the ARA. The chancellor granted summary judgment in favor of MS Casualty and American Reliable and ordered MIGA to reimburse past claims and to assume payments of future claims.²

¶ 11. Further, the chancellor recognized that the reinsurers, Gen Re and Am Re, were the insurance companies that should be liable for the claims. The reinsurers were obligated to pay the claims according to the reinsurance contracts; however, Gen Re and Am Re had already been ordered to pay that sum to the Liquidator. Gen Re and Am Re had refused MIGA's demand that they pay MIGA directly inasmuch as this action would have resulted in double payment by Gen Re and Am Re. The chancellor denied MIGA's motion to rejoin the reinsurers since it was the opinion of the chancellor that MS Casualty and American Reliable should never have been parties to the suit. The chancellor urged MIGA to sue Gen Re and Am Re if MIGA felt that the Liquidator would not cover the claims of the Mississippi claimants.³ The chancellor also denied MIGA's motion to stay the grant of summary judgment for further discovery. The chancellor further ordered MIGA to immediately review the claims files to determine the specific dollar amount of reimbursement owed to MS Casualty and American Reliable.

¶ 12. MIGA did not immediately start paying the claims as the chancellor ordered. In a subsequent hearing on May 26, 2005, MIGA argued before the chancellor that some of the claims were from claimants who did not live in Mississippi and, thus, MIGA was not liable for those claims. The chancellor allowed MIGA extra time to review seven claims files and ordered MIGA to file a brief report concerning its opinion on liability as to those seven claims.⁴

¶ 13. At the final hearing on June 8, 2005, the chancellor ruled that MIGA was liable for six of the seven contested nonresident claims. The chancellor made a detailed finding on the record as to why MIGA was or was not liable for each claim. The chancellor also denied MIGA's motion for a full accounting of the funds of MS Casualty and American Reliable. Finally, the chancellor granted the motion to strike portions of the record considered redundant, as filed by MS Casualty and American Reliable.⁵

¶ 14. It is from the chancellor's grant of summary judgment in favor of MS Casualty and American Reliable that MIGA appeals to us.

DISCUSSION

¶ 15. This Court reviews a grant of summary judgment de novo. Richardson v. Norfolk Southern Ry., 923 So.2d 1002, 1007 (Miss.2006) (citing Leffler v. Sharp, 891 So.2d 152, 156 (Miss.2004)); Pitts v. Watkins, 905 So.2d 553, 555 (Miss. 2005) (citing Aetna Cas. & Sur. Co. v. Berry, 669 So.2d 56, 70 (Miss.1996)). This Court shall consider "all the evidentiary matters before it—admissions in pleadings, answers to interrogatories, depositions, affidavits, etc. The evidence must be viewed in the light most favorable to the party against whom the motion has been made." McDaniel v. Shaklee U.S., Inc., 807 So.2d 393, 395 (Miss.2001) (citing Lumberman's Underwriting Alliance v. City of Rosedale, 727 So.2d 710, 712-13 (Miss.1998)). "If any triable issues of material fact exist, the lower court's decision to grant summary judgment will be reversed." Id. (citing Brown v. Credit Ctr., Inc., 444 So.2d 358, 362 (Miss.1983)).

¶ 16. Turning to the issues with which we are confronted today, this Court must decide (1) whether the Assumption Reinsurance Agreements (ARA's) constituted a novation; (2) whether the claims are "covered claims under direct insurance;" (3) whether MIGA is liable for claims from nonresidents; and, (4) whether the chancellor abused his discretion in (a) denying MIGA's motion to stay summary judgment to allow further discovery, (b) denying MIGA's motion for a full accounting, and (c)...