Louisiana Safety Ass'n of Timbermen v. Liga

• Decision Date: 26 June 2009
• Docket Number: No. 2009-C-0023.,2009-C-0023.
• Parties: LOUISIANA SAFETY ASSOCIATION OF TIMBERMEN-SELF INSURERS FUND v. LOUISIANA INSURANCE GUARANTY ASSOCIATION.
• Court: Louisiana Supreme Court

17 So.3d 350

LOUISIANA SAFETY ASSOCIATION OF TIMBERMEN-SELF INSURERS FUND v. LOUISIANA INSURANCE GUARANTY ASSOCIATION.

No. 2009-C-0023.

Supreme Court of Louisiana.

June 26, 2009.

Rehearing Denied September 4, 2009.

Milling Benson Woodward, LLP, James Kee Irvin, Angela Whitaker Adolph, Stephanie Bienvenu Laborde, New Orleans, for Applicant.

Provosty, Sadler, Delaunay, Fiorenza & Sobel, Joseph J. Bailey, Andrew E. Schaffer, H. Bradford Calvit, Alexandria, for Respondent.

KNOLL, Justice.^*

This case involves the res nova question in this Court of whether the unpaid claims of the Louisiana Safety Association of Timbermen Self-Insurers Fund ("Fund") arising from the insolvency of Reliance Indemnity Company ("Reliance") are covered claims under La.Rev.Stat. § 22:1375-1394,¹ the Louisiana Insurance Guaranty Association law ("LIGA"). Finding the Fund was an insurer for purposes of LIGA coverage and that Reliance was the Fund's reinsurer, not an excess insurer, we reverse the lower courts' determinations that the Fund's unpaid Reliance claims were covered claims under LIGA.

FACTS AND PROCEDURE

On February 7, 1941, the Red River Timber Marketing Association was formed under the Louisiana Cooperative Marketing Act. Thereafter, on October 2, 1991, the association changed its name to the Louisiana Safety Association of Timbermen (LSAT). Contemporaneously with its name change, the articles were amended to provide that members of the association could be admitted if they paid a membership fee, signed a membership agreement, and met other uniform conditions detailed in the bylaws. The association articles were further amended to state LSAT was a nonprofit corporation and to recognize the membership rights were not transferable by assignment, sale, or inheritance.

Subsequently, on October 7, 1991, LSAT's members established the Louisiana Safety Association of Timbermen Self-Insurers Fund. The Fund was formed pursuant to the provisions of La.Rev.Stat. §§ 23:1195-1200.5 to allow its members to participate in a trustee-administered fund for the purpose of satisfying each member's workers' compensation obligations. The members then executed an indemnity agreement which had a twofold purpose: (1) to set up a method for the appointment of certain persons as the board of trustees; and (2) to provide that each member agreed to be held liable jointly and in solido for any award, to promptly pay membership premiums, and to pay all assessments lawfully levied.

LSAT's application with the Louisiana Commissioner of Insurance for recognition as a worker's compensation group self-insurance fund was granted. Pertinent to the present litigation, LSAT obtained the "excess insurance" as required by La.Rev. Stat. § 23:1196(A)(5)(1999) from Reliance for the 1998 policy year.² On October 3, 2001, the Commonwealth Court of Pennsylvania placed Reliance into liquidation. The Fund then provided LIGA with proof of its claims against Reliance. On February 4, 2004, LIGA denied the Fund's claims, reasoning the Fund's policy with Reliance was one of reinsurance through which the Fund was an insurer who sought to limit its risk and was not a "covered claim" as defined in La.Rev.Stat. § 22:1379.

Subsequently, the Fund sued LIGA, seeking declaratory relief for continuing coverage for all past and future losses in accordance with the terms of the Reliance policy. LIGA filed responsive pleadings, asserting its coverage only extends to direct insurance, not reinsurance, and that the Fund is an insurer whose claims it does not cover; alternatively, LIGA contended other insurance must be exhausted before LIGA coverage is reached, and the combined net worth of the Fund's members exceeded $25 million during the year prior to Reliance's insolvency thereby precluding coverage as provided in La.Rev. Stat. § 22:1379(3)(f).

Thereafter, the Fund moved for partial summary judgment, seeking a declaration that the Reliance policy was direct excess insurance, that its claims are "covered claims," that the Fund did not have other insurance covering the claims, and that the net worth of its members was immaterial to a determination of whether the claims are covered by LIGA.

LIGA filed a cross-motion for summary judgment, asserting the Fund's claims are not covered because the Fund is an insurer and the 1999 amendments to the definition of a "covered claim" under the Insurance Guaranty Association Law bar the claims of a self-insurer. Additionally, LIGA moved to compel discovery of financial information about the net worth of the Fund's members.

After conducting a contradictory hearing, the trial court granted the Fund's motion for summary judgment, finding the Fund's claims met the statutory definition of a "covered claim" and that the Fund did not provide insurance. In addition, the trial court denied LIGA's motion to compel discovery, finding the Fund's members are not affiliates of the Fund as provided in La.Rev.Stat. § 22:1379(3)(f). LIGA then timely appealed the trial court's judgment.

Noting this was a case of first impression, the appellate court affirmed the trial court judgment, holding the Fund was not an "insurer" for purposes of LIGA that excluded any insurer from LIGA coverage, that the Fund's claims were not excluded from LIGA coverage under provisions that excluded claims within coverage provided by a self-insurer, and that the Fund members were not "affiliates" for LIGA purposes of excluding from coverage claims asserted by an insured whose net worth, including affiliates, exceeded $25 million. Louisiana Safety Association of Timbermen Self-Insurers Fund v. Louisiana Insurance Guaranty Association, 43,615 (La. App. 2 Cir. 12/3/08), 998 So.2d 817. We granted LIGA's writ application to consider the correctness vel non of the appellate court's disposition of this res nova issue. Louisiana Safety Association of Timbermen Self-Insurers Fund v. Louisiana Insurance Guaranty Association, 09-C-0023 (La.2/17/09), ___ So.2d ___.

SUMMARY JUDGMENT LAW

Summary judgments are reviewed de novo on appeal, with the reviewing court using the same criteria that govern the trial court's determination of whether summary judgment is appropriate; whether there is any genuine issue of material fact, and whether the movant is entitled to judgment as a matter of law. Power Marketing Direct, Inc. v. Foster, 05-2023 (La.9/6/06), 938 So.2d 662, 669; Smith v. Our Lady of the Lake Hosp., Inc., 93-2512 (La.7/5/94), 639 So.2d 730, 750.

A motion for summary judgment will be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to material fact, and that mover is entitled to judgment as a matter of law." La.Code Civ. Proc. art. 966(B). This article was amended in 1996 to provide that "summary judgment procedure is designed to secure the just, speedy, and inexpensive determination of every action ... The procedure is favored and shall be construed to accomplish these ends." La.Code Civ. Proc. art. 966(A)(2).

In 1997, the Legislature enacted La.Code Civ. Proc. art. 966(C)(2), which further clarified the burden of proof in summary judgment proceedings, providing:

The burden of proof remains with the movant. However, if the movant will not bear the burden of proof at trial on the matter that is before the court on the motion for summary judgment, the movant's burden on the motion does not require him to negate all essential elements of the adverse party's claim, action, or defense, but rather to point out to the court that there is an absence of factual support for one or more elements essential to the adverse party's claim, action, or defense. Thereafter, if the adverse party fails to produce factual support sufficient to establish that he will be able to satisfy his evidentiary burden of proof at trial, there is no genuine issue of material fact.

This amendment, which closely parallels the language of Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), first places the burden of producing evidence at the hearing on the motion for summary judgment on the mover (normally the defendant), who can ordinarily meet that burden by submitting affidavits or by pointing out the lack of factual support for an essential element in the opponent's case. At that point, the party who bears the burden of persuasion at trial (usually the plaintiff) must come forth with evidence (affidavits or discovery responses) which demonstrates he or she will be able to meet the burden at trial. SEE MARAIST AND LEMMON, LOUISIANA CIVIL LAW TREATISE: CIVIL PROCEDURE, § 6.8 (1999). Once the motion for summary judgment has been properly supported by the moving party, the failure of the non-moving party to produce evidence of a material factual dispute mandates the granting of the motion. Babin v. Winn-Dixie Louisiana, Inc., 00-0078 (La.6/30/00), 764 So.2d 37, 39-40; Hayes v. Autin, 96-287 (La. App. 3 Cir. 12/26/96), 685 So.2d 691. writ denied, 97-0281 (La.3/14/97), 690 So.2d 41.

DISCUSSION

LIGA contends the lower courts erred in holding the Fund was not engaged in the business of insurance and that Reliance's coverage of the Fund was excess insurance covered by LIGA. Rather, LIGA submits that although the Legislature restrictively exempted workers' compensation self-insurance funds from the regulatory provisions of Chapter 1 of the Insurance Code, the Fund nonetheless must be considered an "insurer" or "self-insurer" for other purposes because that is what the Fund does—it pooled its workers' compensation liabilities and then ceded the upper portion of that liability to Reliance in exchange for a premium. Thus, it argues this constitutes a classic example of reinsurance³ for which LIGA does not provide coverage.

The Fund, tracking the holdings of the appellate court, contends its unpaid claims with Reliance, now insolvent, constitute "covered claims" as defined in ...