Mississippi Ins. Guar. Ass'n v. Byars

Decision Date25 February 1993
Docket NumberNo. 90-CA-1035,90-CA-1035
Citation614 So.2d 959
PartiesMISSISSIPPI INSURANCE GUARANTY ASSOCIATION v. Donna L. BYARS, Guardian of Russell E. Byars, NCM.
CourtMississippi Supreme Court

Robert H. Pedersen, Watkins & Eager, Jackson, for appellant.

W. Stephens Cox, Merkel & Cocke, Clarksdale, L. Anthony Deal, Memphis, TN, for appellee.

Before PRATHER, P.J., and PITTMAN and SMITH, JJ.

PITTMAN, Justice, for the Court:

This is an appeal from the Circuit Court of Hinds County, wherein the appellee, Donna Lee Byars, guardian of Russell Byars, NCM, was awarded summary judgment in a suit seeking coverage under the Mississippi Insurance Guaranty Association (MIGA) Law. The lower court found that Byars's insurance claim was within the coverage of the appellant MIGA, and Byars was awarded the statutory maximum coverage of $300,000 plus 8% pre-judgment interest. We find that MIGA had a duty to defend as though it were Mission National Insurance Company or pay the policy proceeds on behalf of Mission National Insurance Company, and having decided not to defend, is liable for the $300,000 policy coverage to the appellee Byars. The lower court is hereby affirmed.

I.

The facts in this case are not in dispute. While enlisted in the Navy and stationed in Virginia, Russell Byars was involved in a near fatal motorcycle accident on October 3, 1983, in Virginia Beach, Virginia. At that time, the nineteen year old Byars was a passenger on the back of a motorcycle being driven by his friend, Christopher Grieves, who was also in the Navy. Apparently both Grieves and Byars had been drinking earlier that evening and while driving, decided to pass a line of cars on a turn. When Grieves attempted to get back into the proper lane after passing the cars, he lost control of the motorcycle, sending both Grieves and Byars off the motorcycle. Byars's helmet was shattered upon impact, resulting in severe damage to the frontal region of Byars's brain. This injury reduced Byars's IQ from 98 to 78. Byars has subsequently been diagnosed as 100% disabled by the Navy and presently receives a $1,230 monthly check from the Veteran's Administration.

The extent of Byars's injury was so significant that doctors initially diagnosed him as having a one percent chance of surviving. Following his coming out of a coma, Byars has endured constant rehabilitation, re-learning how to walk, talk, eat, read and groom himself. Presently, Byars lives by himself in a trailer in Walls, Mississippi, a few miles from his mother's home in Horn Lake, Mississippi. Although Russell lives alone, he requires supervision, since he can neither cook his own meals nor perform other housekeeping tasks. Russell is attempting to take some college courses at Northwest Junior College, but is experiencing difficulty in completing classes. Mrs. Byars stated that Russell continues to experience difficulty with his memory, and walks with a limp. In conjunction with his recovery, a plate was put in Russell's forehead for protective as well as cosmetic purposes.

Following the accident, a guardianship was opened for Russell Byars and suit was filed on his behalf in Wayne County, Michigan, naming Land Tool Company, the manufacturer of the helmet, and A.C.O., the retailer of the helmet, as defendants in a products liability action. Land Tool Company, a Kansas Corporation, had two insurance policies in place at the time of the accident. The first was a $1,000,000 liability policy and the other a $10,000,000 umbrella policy. These policies were written through two different insurance carriers. Unfortunately for Byars, when the suit was filed, Land Tool Company was no longer in existence, having been closed by the Internal Revenue Service and having a net worth of minus $4,000,000. To further complicate things, both insurance companies which had issued policies to Land Tool Company had become insolvent. Therefore, Byars looked to the Kansas Insurance Guaranty Association (KIGA) for payment of benefits. KIGA accepted the defense of Land Tool Company, and settled the claim by paying Byars the statutory maximum of $300,000 for each of the two insurance policies. Byars claim against Land Tool was settled by KIGA for a total of $600,000.

A.C.O., the Michigan hardware store where the motorcycle helmet was purchased, was covered by a $500,000 liability policy issued by Mission National Insurance Company. As fate would have it, Mission National also became insolvent. A.C.O. called upon the Michigan Property & Casualty Insurance Guaranty Association (MP & CIGA) to come to its rescue. However, after evaluating the claim, the MP & CIGA denied coverage, citing a Michigan statute which excludes coverage for any claim submitted by a party if that party had a net worth greater than 1/10 of 1% of the premiums written during the prior calendar year by the insurance companies that are members of the MP & CIGA. See Mich.Comp.Laws Sec. 500.7925(3). At the time of the claim, A.C.O.'s net worth was $7,262,697.00 which exceeded the limit permissible under Michigan law. Therefore, A.C.O. was left to defend the action and pay any claims that might result from the accident without any help from the MP & CIGA.

Following MP & CIGA's denial to defend A.C.O. in this suit, Byars made a written demand on MP & CIGA to pay benefits owed as a result of the accident. MP & CIGA again denied coverage, claiming that since Byars was not a Michigan resident, the guaranty association was not liable to him. Byars's attorney notified the Virginia Insurance Guaranty Association (VIGA) of the pending suit in Michigan and of the insolvent insurance carriers. Although the accident occurred in Virginia, VIGA denied coverage on the grounds that Byars was not a Virginia resident, and therefore excluded from that state's guaranty coverage. Next, both Byars and A.C.O. notified the Mississippi Insurance Guaranty Association about its possible exposure due to the insolvency of Mission National. A.C.O. demanded that MIGA assume its defense to the Michigan action and Byars requested that MIGA assume responsibility on behalf of Mission National and participate in upcoming settlement negotiations.

MIGA denied both requests, stating that this was not a "covered claim." Byars then settled with A.C.O. for $375,000. The terms of this consent judgment were that A.C.O. would pay Byars $75,000 cash and assign its rights against MIGA to Byars in exchange for an agreement by Byars not to execute or enforce the $300,000 balance of the judgment against A.C.O. This agreement specifically reserved the right for Byars to collect the $300,000 balance from MIGA.

Following Byars's initial notification to MIGA of the claim, Byars's attorneys were constantly supplying MIGA with additional information for use in evaluating the claim. After informing MIGA of the upcoming settlement conference scheduled for April in Detroit, Michigan, counsel for Byars notified MIGA that if they had not responded to the claim by the time of the scheduled conference, he would have no other alternative but to settle with A.C.O. Counsel for MIGA responded with more requests for information to help evaluate the claim. On May 16, 1988, MIGA sent separate letters to Byars and A.C.O. rejecting their claims after determining that neither claim was a "covered claim" within the meaning of the guaranty law. MIGA contended that they had no information indicating that Byars had a legally enforceable "unpaid claim." In other words, MIGA said until a judgment was rendered, it was not an unpaid claim.

After settling with A.C.O., Byars sent MIGA copies of the Agreement and Release between Byars and A.C.O., the Order Authorizing Settlement of Doubtful Claim, the Consent Judgment and a copy of the transcript of the hearing on the Petition for Settlement Approval. On September 26, 1988, MIGA's counsel wrote Byars's counsel, giving the following new reasons for denial of the claim:

1) That the Consent Judgment of June 13, 1988, did not exist prior to the determination of insolvency nor did it arise within 30 days after the determination of insolvency as provided for by Miss.Code Ann. Sec. 83-23-115(1)(a) (1972).

2) That it was their opinion that Mr. Byars's claim came within the scope of the Michigan Property & Casualty Guaranty Association law, even though MP & CGA had denied coverage.

3) That Byars entered into a release of A.C.O. and Land Tool Company without the permission of the MIGA and under the terms of the settlement agreement did not assign to MIGA any rights that he might have against A.C.O. and Land Tool Company.

As a result of MIGA's denial of the claim, Byars filed suit alleging that MIGA had improperly denied coverage. Both sides moved for summary judgment and the trial judge granted summary judgment to Byars, specifically finding that Byars, as a Mississippi resident, was entitled to coverage under the guaranty statutes. From this ruling MIGA appeals, alleging the following assignments of error:

I. THE TRIAL COURT HAS MISCONSTRUED Sec. 83-23-109(c) OF THE GUARANTY LAW AND ERRED WHEN IT FOUND THAT BYARS'S CLAIM WAS A "COVERED CLAIM" WITHIN THE MEANING OF THAT TERM.

II. THE TRIAL COURT HAS MISCONSTRUED THE EXHAUSTION REQUIREMENT OF Sec. 83-23-123(2) WHEN IT FOUND THAT BYARS DID NOT HAVE TO FILE A LEGAL ACTION AGAINST THE MICHIGAN PROPERTY & CASUALTY INSURANCE GUARANTY ASSOCIATION CHALLENGING ITS DENIAL OF HIS ADMINISTRATIVE

CLAIM BEFORE HE FILED AN ACTION AGAINST MIGA CHALLENGING ITS DENIAL OF HIS ADMINISTRATIVE CLAIM.

II.

This Court employs a de novo standard in reviewing a lower court's grant of a summary judgment motion. Short v. Columbus Rubber & Gasket Co., Inc., 535 So.2d 61, 63 (Miss.1988). This entails reviewing all the evidentiary matters in the record: affidavits, depositions, admissions, interrogatories, etc. The evidence must be viewed in the light most favorable to Byars, the non-moving party, and Byars is to be given the benefit of every...

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