Mississippi Ins. Guaranty Ass'n v. Gandy

• Decision Date: 03 December 1973
• Docket Number: No. 47358,47358
• Citation: 289 So.2d 677
• Parties: MISSISSIPPI INSURANCE GUARANTY ASSOCIATION v. Evelyn GANDY, Commissioner of Insurance.
• Court: Mississippi Supreme Court

Page 677

289 So.2d 677

MISSISSIPPI INSURANCE GUARANTY ASSOCIATION v. Evelyn GANDY, Commissioner of Insurance.

No. 47358.

Supreme Court of Mississippi.

Dec. 3, 1973.

Rehearing Denied Feb. 25, 1974.

Wells, Gerald, Brand, Watters & Cox, Frank T. Moore, Jr., Eugene A. Simmons, Jackson, for appellant.

A. F. Summer, Atty. Gen. by Maurice R. Black, Asst. Atty. Gen., Jackson, for appellee.

INZER, Justice:

The principal question to be determined in this case is whether the Mississippi Insurance Guaranty Association Act, Chapter 446, Laws of 1970, effective April 6, 1970, now Mississippi Code Annotated, Section 83-23-101 through Section 83-23-135 (1972), applies to claims against an insolvent insuere where such claims existed prior to the effective date of the act and where the insurance company was adjudicated to be insolvent on August 28, 1970, after the effective date of the act. We hold that it does.

On September 10, 1971, Walter Dell Davis, Insurance Commissioner, brought this suit on behalf of certain claimants in the Chancery Court of the First Judicial District of Hinds County against the Mississippi Insurance Guaranty Association seeking to require the association to pay the claims under the provisions of Mississippi Insurance Guaranty Association Act.

The bill of complaint alleged that the Liberty Universal Insurance Company was declared to be insolvent by a Texas court and placed in receivership in that state on August 28, 1970. The bill of complaint also alleged that at the time it became insolvent the claimants on whose behalf the suit was brought were all residents of the State of Mississippi and held valid existing claims against the Liberty Universal Insurance Company, and under the terms of the Mississippi Insurance Guaranty Act, the association was obligated to pay said claims.

It was alleged that Marie M. Moran was a policyholder of the Liberty Universal Insurance Company, and while the policy was in full force and effect, she suffered a loss due to Hurricane Camille on August 17, 1969. Thereafter, the insurance company adjusted the loss and issued its check in the amount of $2,116.15 to cover the said loss, but due to the insolvency of the insurance company, the check was not paid.

On August 17, 1969, claimant Charles T. Pace likewise suffered a loss in the amount of $905.92, covered by a policy issued by said insurance company and that at the time of the loss the policy was in full force and effect. The insurance company issued its check to cover this loss, but due to its insolvency, the check was not paid.

On April 1, 1967, the company issued a policy to T. V. Garroway, and while this policy was in full force and effect, the holder suffered a loss due to Hurricane Camille in the amount of $386.16. The insurance company acknowledged the claim and adjusted the loss but before the loss was paid, the insurance company was determined to be insolvent.

On January 2, 1970, Juanita Camp was injured in an automobile accident with Woodrow Cooper who had a liability policy with Liberty Universal Insurance Company which had been issued on August 1, 1969, and was in full force and effect. After said injury, it was agreed between Juanita Camp and Liberty Universal Insurance Company that the insurance company would pay her $2,000 as damages in settlement of her claim. However, before the claim was paid, the insurance company was determined to be insolvent.

The bill of complaint alleged that all of these claims were 'covered claims' under the provisions of the Mississippi Insurance Guaranty Association Act, that Liberty Universal Insurance Company became insolvent and was so adjudicated, and that the association was obligated to pay said claims under the terms of the act.

The association answered the bill of complaint and admitted that the claimants had valid claims against Liberty Universal Insurance Company at the time it became insolvent but denied it was liable for said claims. The association alleged that all the claims arose prior to the effective date of the act, and any payment thereunder would cause the act to operate retroactively where there is no declaration in the act that it so operate. It also alleged that it was not liable for the payment of any claims which arose out of a policy issued by the insolvent insurer after the last day of February 1969, because after that date Liberty Universal Insurance Company was not licensed to transact insurance in the State of Mississippi. The association also alleged that the act relied upon was unconstitutional for several reasons, not necessary to set out here.

The term of office of Walter Dell Davis as Insurance Commissioner expired on January 17, 1972, and Evelyn Gandy succeeded him in that office. Upon proper motion the cause was revived in the name of Evelyn Gandy.

The principal factual issue developed before the trial court concerned the claim of Juanita Camp which arose under a policy issued by Liberty Universal Insurance Company after March 1, 1969. Walter Dell Davis testified that Liberty Universal Insurance Company had been authorized and licensed to do business in the State of Mississippi for many years. When the insurance company applied for the renewal of its license which would expire on March 1, 1969, he held up the renewal for the reason that it was determined that the company held certain securities which did not meet the requirements of Mississippi law. Mr. Davis said he made a trip to Texas where the company was incorporated and learned that the securities were acceptable under Texas law. He then held up the issuance of the license while negotiating with the company to furnish securities which would comply with the Mississippi requirements. After the expiration of its license, the company continued to do business in the State of Mississippi by servicing its policyholders and paying claims. Mr. Davis said he was under the impression that they were not going to write any new business in the state until their license was renewed. He also has testified that he knew that Liberty Universal was continuing to do business in Mississippi and doing so at the time the Mississippi Insurance Guaranty Act became effective. He further stated that he had no proof of insolvency during the period he was negotiating with the company and that no action was taken to stop the company from doing business in this state until it was adjudicated to be insolvent on August 28, 1970.

The chancellor found that the Mississippi Insurance Guaranty Act requires the association to be obligated 'to the extent of covered claims existing prior to the determination of insolvency-' and that all the claims here involved were covered claims including the claim of Juanita Camp that arose under a policy issued after March 1, 1969. He found that Liberty Universal Insurance Company was permitted to continue its operation in this state. It was authorized to do business in this state, and such authority was not revoked as required by law. He was of the opinion that the essence of the act is to deal with claims that were unpaid at the time of insolvency, and in order to properly understand or deal with a matter in the present, it is often necessary to take into consideration antecedent facts. It was his opinion that had the legislature intended that only those claims which arose after the effective date of the act would be covered, it would have so provided. A decree was entered finding the association liable for payment of all the claims.

On appeal the association argues two principal propositions. First, the Mississippi Insurance Guaranty Act is not retrospective in application and 'covered claims' are limited to those claims arising after the effective date of the act. Second, the Mississippi Insurance Guaranty Act is unconstitutional for several reasons.

In regard to the question of the constitutionality of the Mississippi Insurance Guaranty Act, we are confronted with the question of whether appellant has standing or is in a position to raise this question. Appellee points out that what we have in this case is a novel situation of an agency created and set up by statute seeking to have the very law that created it declared unconstitutional. It has long been the law of this state that this Court does not pass upon the constitutionality of statutes at the instance of parties not in a position to question them. Certainly, the Mississippi Insurance Guaranty Association is not in a position to raise the constitutionality of the very statute upon which it depends for its existence. Quin v. State, 82 Miss. 75, 33 So. 839 (1903). It is likewise well settled that one not harmed or injured by statute may not question its constitutionality. Adams v. Bd. of Supervisors, 177 Miss. 403, 170 So. 684 (1936). One who is not prejudiced by the enforcement of an act of the legislature cannot question its constitutionality or obtain a decision as to its constitutionality on the ground that it impairs the rights of others. What the association is attempting to do in this case is to obtain a decision by this Court not to protect its rights, but the rights of the insurance companies who are members of the association. None of these companies saw fit to intervene in this cause in order to raise the constitutional question. Gully v. Mutual Casualty Co., 176 Miss. 388, 166 So. 541 (1936). Although we are inclined to think that the Mississippi Insurance Guaranty Act is constitutional, we do not reach the issue on this appeal, since we are forced to the conclusion that appellant does not have standing to raise the constitutionality of the very act that created it.

The decisive question to be determined in this case is whether the claims involved are 'covered claims' within the meaning of the act. Appellant urges that the association is only obligated to pay claims if such claims arise after the effective date of the act and if the insurer becomes insolvent after the effective date of the...