Self-insurer guaranty association not entitled to reimbursement

In Mississippi, the insurance guaranty association is not obligated to step in for an insolvent insurer and reimburse the self-insurer guaranty association for payments it made to an injured worker on behalf of his insolvent self-insured employer.

Case name: Mississippi Insurance Guaranty Association a/k/a MIGA v. Mississippi Workers' Compensation Individual Self-insurer Guaranty Association f/k/a Mississippi Workers' Compensation Self-insurer Guaranty, No. 2010-CA-01615-SCT (Miss. 04/19/12).

Ruling: In a case of first impression, the Mississippi Supreme Court held that the Mississippi Insurance Guaranty Association was not obligated to reimburse the self-insured guaranty association for its payments to an injured worker.

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What it means: In Mississippi, the insurance guaranty association is not obligated to step in for an insolvent insurer and reimburse the self-insurer guaranty association for payments it made to an injured worker on behalf of his insolvent self-insured employer.

Summary: After a worker was injured, his self-insured employer paid him benefits and then turned the claim over to its excess insurance carrier. The insurer paid some benefits but became insolvent. The employer was required to assume responsibility for the claim. Subsequently, the employer also became insolvent and ceased paying the claim. The self-insurer guaranty association, which pays workers' compensation benefits on behalf of self-insured employers that become insolvent, stepped in to pay the worker's claim.

The self-insurer guaranty association suggested that the Mississippi Insurance Guaranty Association, which pays benefits due under insurance policies issued by insurers that become insolvent, step in to pay the amount the insurer should have paid. The Mississippi Supreme Court held that the Mississippi Insurance Guaranty Association was not obligated to reimburse the self-insurer guaranty association.

The court explained that to obligate the Mississippi Insurance Guaranty Association to pay the self-insured guaranty association, the self-insured guaranty association must be a "claimant or policyholder with an unpaid claim." The Mississippi Insurance Guaranty Association's laws define a "claimant" as an insured making a first-party claim or person instituting a liability claim. Here, the employer was the named insurer, not the self-insured guaranty association.

The court explained that, if the employer were not insolvent, it would have no right to reimbursement for the self-insured guaranty association's payments to the worker. Also, no evidence existed that the employer or insurer agreed to substitute the self-insured guaranty association for the employer in its contract with the insurer.

A dissenting judge opined that the self-insured guaranty association should be able to enforce whatever rights the employer had. Since the insurer would have been obligated to pay the employer, the judge said that the Mississippi Insurance Guaranty Association should be obligated to pay the self-insured guaranty association.

Read more at the WorkersComp Forum homepage.

June 18, 2012

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