Mgm Mirage v. Nevada Ins. Guar. Ass'n
| Decision Date | 25 June 2009 |
| Docket Number | No. 49445.,49445. |
| Parties | MGM MIRAGE, A Delaware Corporation; and Steel Engineers, Inc., A Nevada Corporation, Appellants, v. NEVADA INSURANCE GUARANTY ASSOCIATION, A Nonprofit Unincorporated Nevada Entity, Respondent. |
| Court | Nevada Supreme Court |
In this appeal we must determine whether appellants, as self-insured employers under Nevada's Workers' Compensation Act, can seek reimbursement from the Nevada Insurance Guaranty Association (NIGA) for amounts that should have been paid by appellants' insolvent excess insurance carrier. Because we determine that appellants are not insurers for purposes of the Nevada Insurance Guaranty Association Act (NIGA Act), we conclude that self-insured employers under the Workers' Compensation Act, like MGM Mirage (MGM) and Steel Engineers, Inc. (SEI), are not barred from recovering payment from NIGA for their covered workers' compensation claims payable by their insolvent excess insurance carrier.
Appellants MGM and SEI are both employers in the State of Nevada who operate as self-insured employers, as defined under Nevada's workers' compensation laws. In accordance with the requirements set forth in the Workers' Compensation Act, MGM and SEI obtained excess workers' compensation insurance policies. Both employers contracted with Reliance National Insurance Company (Reliance) for their excess policies. The policies, entitled "Specific Excess Workers' Compensation and Employers' Liability Policy," declare that MGM and SEI are "insured[s]" and Reliance is their insurer.
In October 2001, the Commonwealth Court of Pennsylvania declared Reliance Insurance Company, including Reliance, insolvent and entered an order of liquidation. MGM and SEI were required to pay workers' compensation funds to employees whose claims were pending at the time Reliance became insolvent. As a result of Reliance's insolvency, pursuant to NRS 687A.060, NIGA became responsible for claims that were covered under the Reliance policies and the NIGA Act.2 In order to recover the expended funds, MGM and SEI requested reimbursement from NIGA.
NIGA concedes that it is responsible for paying insolvent insurers', like Reliance's, unpaid Nevada claims that are within NRS 687A.033's definition of "covered claims." It further agrees that MGM and SEI could have recovered payment for some or all of the expended workers' compensation funds based on both entities' excess insurance policies with Reliance had Reliance remained solvent. However, NIGA refused to pay the claims because it was uncertain as to whether MGM and SEI fell within the NIGA Act's definition of "insurer," which would place their claims outside the scope of "covered claims" under the NIGA Act, NRS 687A.033(2)(a), and prohibit NIGA from paying the claims.
Because NIGA was uncertain about its statutory obligations towards MGM and SEI, NIGA filed a complaint in district court, seeking a declaration of the meaning of the term "insurer" under the NIGA Act. The district court granted summary judgment in favor of NIGA.
In its order, the district court concluded that summary judgment was appropriate because there were no factual disputes and the sole issue presented was one of statutory construction. The court determined that the definition of "insurer" under NRS 616A.270 of the Workers' Compensation Act—which includes self-insured employers—must be read consistently with the NIGA Act. Because MGM's and SEI's claims were based on funds paid to employees as workers' compensation, the court determined that the Workers' Compensation Act's definition of "insurer" was applicable to the NIGA Act. And, because MGM and SEI did not dispute the fact that they were self-insured employers under the workers' compensation laws, and therefore, that they were insurers under the Workers' Compensation Act, the court concluded that MGM and SEI were insurers under the NIGA Act. As a result, the court held that MGM and SEI were precluded from seeking reimbursement from NIGA. MGM and SEI appeal.
On appeal, MGM and SEI argue that their claims are recoverable, maintaining that self-insured employers' excess workers' compensation claims fall within the NIGA Act's definition of "covered claim" because they do not engage in the business of insurance, although they are self-insured employers under workers' compensation laws.
NIGA, on the other hand, argues that the NIGA Act prohibits it from paying MGM's and SEI's claims because MGM and SEI are considered insurers under the Workers' Compensation Act, as they are self-insured employers. Because MGM and SEI are insurers under Nevada's workers' compensation laws, and the Workers' Compensation Act and the NIGA Act are connected, NIGA contends, MGM and SEI are likewise insurers under the NIGA Act.
In resolving this appeal, we will address whether a self-insured employer, as defined in the Workers' Compensation Act, qualifies as an insurer for purposes of the NIGA Act, thus precluding recovery from the NIGA fund.
Standard of review
"`Summary judgment is ... appropriate [only] when no genuine issues of material fact [exist] and the moving party is entitled to judgment as a matter of law.'" Stalk v. Mushkin, 125 Nev. ___, ___, 199 P.3d 838, 840 (2009) (alterations in original) (quoting Clark v. Robison, 113 Nev. 949, 950, 944 P.2d 788, 789 (1997)). The parties do not dispute the material facts of this case. Instead, they dispute the district court's legal conclusions regarding the construction of NRS 687A.033(2)(a). The construction of a statute is a question of law, which we review de novo. In re Application of Shin, 125 Nev. ___, ___, 206 P.3d 91, 92 (2009). Because the single issue presented in this appeal is whether MGM and SEI, as self-insured employers, are deemed insurers for purposes of the NIGA Act—a legal question of statutory interpretation—this court's review of the district court's grant of summary judgment is plenary. See id.
In 1971, following the majority of other jurisdictions, the Legislature created an insurance guaranty act entitled the Nevada Insurance Guaranty Association Act (NIGA Act). 1971 Nev. Stat., ch. 661, § 21, at 1943; NRS 687A.010. The NIGA Act was codified at NRS Chapter 687A.1971 Nev. Stat., ch. 661, § 21, at 1943. The purpose of the NIGA Act is to provide limited protection for insureds in the event that their insurers become insolvent. NRS 687A.060. The NIGA Act applies to all direct insurance (with exception to certain insurance that is not pertinent to this appeal). See NRS 687A.020.
The NIGA Act created the Nevada Insurance Guaranty Association (NIGA). See NRS 687A.040. NIGA is a nonprofit, unincorporated, legal entity that provides insurance benefits to individuals and entities whose insurers have become insolvent. See NRS 687A.040; NRS 687A.060. NIGA's duty is to accept responsibility for obligations existent at the time that an insurance company loses its solvency, meaning NIGA steps into the shoes of the insolvent insurer, as NIGA "[s]hall be deemed the insurer to the extent of its obligations on the covered claims and to that extent has any rights, duties and obligations of the insolvent insurer as if the insurer had not become insolvent." NRS 687A.060(l)(b) (emphasis added). "Covered claims" are unpaid claims that are within the coverage of a policy written by a now insolvent insurance company. NRS 687A.033(1). While the statute defining "[c]overed claims" generally provides that covered claims are those that are within the policy coverage, the statute specifically prescribes what types of claims are not covered, which, therefore, fall outside the purview of NIGA's duty to pay. Specifically, NRS 687A.033(2) excludes from coverage, in relevant part, "[a]n amount that is directly or indirectly due a[n] ... insurer." NRS 687A.033(2)(a). The NIGA Act does not define "insurer."
NIGA's general fund, from which it pays claims, is supplied by annual assessments of each insurer that is a member of NIGA. See NRS 687A.060; S.B. 74, Bill Summary, 70th Leg. (Nev.1999). In order to transact business within Nevada, all insurers must be members of NIGA and must contribute to the fund. NRS 687A.040; NRS 687A.070(2). The NIGA Act defines these members as persons or entities that "[w]rite [] any kind of insurance" and are "licensed to transact insurance in this state." NRS 687A.037(1), (2).
Prior to 1980, the Nevada Industrial Commission was the sole provider of workers' compensation insurance in Nevada. Legislative Counsel Bureau, Leg. Comm. on Workers' Compensation, Bulletin No. 01-19 at 5, 71st Leg. (Nev., 2001). But, in 1979, recognizing that some employers could fund compensation benefits by themselves, the Legislature allowed employers to opt out of the state industrial insurance system and remain personally liable for the claims of their injured employees. Id.; see generally NRS Chapter 616B. Thus, the Legislature permitted those qualified employers to "self-insure." Id.; NRS 616B.300. As self-insurers, these employers are exempt from the statutory requirement that...
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