Wyoming Ins. Guar. Ass'n v. Woods

• Decision Date: 20 December 1994
• Docket Number: No. 93-170,93-170
• Citation: 888 P.2d 192
• Parties: WYOMING INSURANCE GUARANTY ASSOCIATION, Appellant (Plaintiff), v. William F. WOODS, Appellee (Defendant).
• Court: Wyoming Supreme Court

Page 192

888 P.2d 192

WYOMING INSURANCE GUARANTY ASSOCIATION, Appellant (Plaintiff), v. William F. WOODS, Appellee (Defendant).

No. 93-170.

Supreme Court of Wyoming.

Dec. 20, 1994.

Bruce A. Salzburg of Herschler, Freudenthal, Salzburg, Bonds & Rideout, P.C., Cheyenne, for appellant.

Robert G. Pickering of Bailey, Pickering & Stock, Cheyenne, and Thomas H. Lambert, San Diego, CA, for appellee.

Before GOLDEN, C.J., and THOMAS, CARDINE, ^* MACY, ^** and TAYLOR, JJ.

TAYLOR, Justice.

The certified question of law before this court is a consequence of a mobile society. The State of Wyoming established an insurance guaranty association to shield resident claimants or resident insureds from loss due to insolvent insurers. Now, in an era when many persons are no longer confined to one residence, the insurance guaranty association seeks to determine whether it must indemnify a loss suffered at the hands of an insured with multiple residences, including Wyoming. We have concluded that the legislative intent of the Wyoming Insurance Guaranty Association Act requires that a single "place of residence" be established at the time the insured event occurred. As a result, the certified question must be answered in the negative.

I. QUESTION

The certified question of law from the United States District Court for the District of Wyoming inquires:

The Court notes that "residence" is not defined in the Wyoming Insurance Guaranty Association Act. WYO.STAT. §§ 26-31-101--117 (1991). The interpretation of "residence" is critical to the final disposition of this case. Specifically, did the Wyoming legislature intend for an individual claimant to be able to have multiple [residences] within the context of the Wyoming Insurance Guaranty Association Act?

II. FACTS

In early 1989, William F. Woods (Woods), a San Diego, California attorney, considered purchasing a 1986 Pitts Model S2B aerobatics biplane (hereinafter the plane) on behalf of his professional corporation. The plane was owned by Paul Entrekin (Entrekin) and based in Pensacola, Florida. Woods and Entrekin agreed that the plane would be flown to San Diego before completing the purchase. Entrekin maintained $100,000.00 in liability insurance covering any "permissive user" of the plane under a policy written by the Ohio General Casualty Company (Ohio General).

Paul Crowley (Crowley), a retired airline transport pilot, agreed to fly the plane from Pensacola to San Diego for Woods. On February 11, 1989, Crowley and Woods met with Entrekin at the Pensacola airport and inspected the plane. After completing the inspection, Crowley and Woods began the flight to San Diego. The trip started uneventfully with Crowley piloting under visual flight rules. However, about one hour and fifty minutes into the flight, the plane ran out of fuel and crashed about five miles from the community of Walker, Louisiana. Crowley admitted that during the last half-hour of the flight, he had been unable to see a fuel quantity gauge and had failed to reset another fuel control device.

Woods suffered a fractured femur and other injures in the crash. He was unable to work full-time for about one year. Crowley was not injured, but the plane was a total loss. Woods made a claim for damages with Ohio General.

On June 27, 1989, Ohio General filed a declaratory judgment action in the United States District Court for the Northern District of Florida to determine if coverage existed under its policy with Entrekin. The court determined that Ohio General had a duty to defend and indemnify Entrekin and Crowley for any liability they might have for the injuries suffered by Woods. Ohio General Ins. Co. v. Woods, No. 89-30177RV, slip op. at 16 (N.D.Fla. June 25, 1991). By the time the court issued its decision, however, the Ohio Department of Insurance had instituted proceedings to declare Ohio General insolvent. On February 15, 1991, the Department of Insurance of the State of Wyoming revoked Ohio General's Certificate of Authority to do business in Wyoming. Prior to that, Ohio General had been a member, in good standing, of the Wyoming Insurance Guaranty Association (the Association).

Before Ohio General was placed in the hands of insurance regulators, Woods filed a civil action in the Superior Court of the State of California, County of San Diego, seeking compensatory damages from Crowley and Entrekin. During pretrial proceedings, Entrekin was dismissed from the action for lack of personal jurisdiction. Before trial, Crowley agreed to pay Woods $40,000.00 for a covenant not to execute any judgment from the California proceedings against Crowley's personal assets. Furthermore, Crowley assigned any indemnification or other rights he might have held under the Ohio General policy to Woods. In a trial to the court, Woods was awarded a total of $1,396,993.56 in damages from Crowley. Woods v. Crowley, No. 620299, slip op. at 2 (Cal.Sup.Ct. Jan. 31, 1992).

One of the documents Crowley executed in conjunction with the California civil proceeding assigned to Woods the rights to any claim Crowley may have against the Association. On February 24, 1992, Woods filed a claim, individually and as the assignee of Crowley, with the agent of the Association. Woods alleged that the Association owed a statutory duty to indemnify a loss resulting from the actions of a Wyoming resident, Crowley, who was the insured of Ohio General, an insolvent insurer.

Crowley is a person with multiple residences. At the time Crowley was hired by Woods to fly the plane from Pensacola to San Diego, Crowley was living in California but was a resident of both California and Wyoming. Crowley owned a home in Malibu, California and another home in Smoot, Wyoming. Typically, Crowley spent approximately six months of the year in California, during the winter and early spring, and six months of the year in Wyoming, during the summer and fall.

As a part of his multiple residence lifestyle, Crowley had motor vehicles registered in both California and Wyoming. However, his driver's license was issued by Wyoming. Crowley maintained checking and savings accounts at financial institutions in both California and Wyoming. Because his pension income was earned while working in California, Crowley was required to pay state income taxes there. Since Crowley stayed in Wyoming during the fall hunting season, Crowley voted in Wyoming. Crowley also obtained hunting licenses in Wyoming. The pilot's license issued to Crowley listed his address, at the time of the accident, as Malibu.

On August 6, 1992, the Association filed a declaratory judgment action in the District Court for the First Judicial District of Wyoming. The Association sought a declaration from the court that Woods was judicially estopped by admissions in the prior civil actions in Florida and California from claiming Crowley was a resident of Wyoming. The action was removed to the United States District Court for the District of Wyoming. Woods filed a counterclaim seeking payment of the $100,000.00 policy limit of the Ohio General policy, pre-judgment interest, attorney's fees and costs. During the pendency of this action, the California Insurance Guaranty Association denied coverage because Ohio General had never qualified to do business in that state. After extensive pretrial proceedings and motions, the certified question was presented to this court.

III. DISCUSSION

The Association was created by the Wyoming Insurance Guaranty Association Act, Wyo.Stat. §§ 26-31-101 through 26-31-117 (1991) (hereinafter the Act). The Act, as adopted in Wyoming in 1971, is based upon the Post-Assessment Property and Liability Insurance Guaranty Association Model Act (the Model Act) prepared by the National Association of Insurance Commissioners (N.A.I.C.) in 1969. District of Columbia Ins. Guar. Ass'n v. Algernon Blair, Inc., 565 A.2d 564, 565 (D.C.App.1989); 1 N.A.I.C. Proc. 253 (1970). The Model Act was promulgated as an opposition response to federal legislation which sought to protect the public from loss due to insolvent insurers. 2 N.A.I.C. Proc. 549-52 (1969). Instead, the N.A.I.C. recommended a program in each state to establish a means to guarantee the payment of claims against insolvent insurers. Id.

The Act creates an involuntary nonprofit unincorporated legal entity, the Association, whose members are insurers qualified to transact business in Wyoming. Wyo.Stat. § 26-31-104(a) and (b). Each member contributes an assessment, based on a percentage of premiums from insurance policies written in Wyoming, to a fund which is used to pay claims. Wyo.Stat. § 26-31-107(a). When an insurance company is determined to be insolvent, the Association "steps into the shoes of the insolvent insurer." Washington Ins. Guar. Ass'n v. Mullins, 62 Wash.App. 878, 816 P.2d 61, 63 (1991). The Association is deemed the insurer to the extent of its obligation for covered claims and the Association then has all rights, duties and obligations of the insolvent insurer. Wyo.Stat. § 26-31-106(a)(ii). In addition, the Association is required to aid in the detection and prevention of insurer insolvencies. Wyo.Stat. § 26-31-112.

The purpose of the Act is to provide a mechanism for the payment of covered claims which avoids excessive delay in payment and avoids financial loss to claimants or insureds because of the insolvency of an insurer. Wyoming Ins. Guar. Ass'n v. Allstate Indem. Co., 844 P.2d 464, 466 (Wyo.1992); T & N PLC v. Pennsylvania Ins. Guar. Ass'n, 822 F.Supp. 275, 280 (E.D.Pa.1993); Algernon Blair, Inc., 565 A.2d at 565; 1 N.A.I.C. Proc. 253 (1970). The Act seeks to remedy the social consequences resulting from the insolvency of an insurer. "[E]very insurance company failure undermines public confidence in and the value of the insurance institution whose continued existence is the result of the public's desire and need to be secure from risk." Jon S. Hanson, Drafting Model Post Assessment Guaranty Fund Legislation, 1...