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Mississippi Manufacturers Association Workers' Compensation Group v. Mississippi Workers' Compensation Group Self-Insurer Guaranty Association

Court of Appeals of Mississippi

January 29, 2019

MISSISSIPPI MANUFACTURERS ASSOCIATION WORKERS' COMPENSATION GROUP APPELLANT
v.
MISSISSIPPI WORKERS' COMPENSATION GROUP SELF-INSURER GUARANTY ASSOCIATION APPELLEE MISSISSIPPI MANUFACTURERS ASSOCIATION WORKERS' COMPENSATION GROUP APPELLANT
v.
MISSISSIPPI WORKERS' COMPENSATION GROUP SELF-INSURER GUARANTY ASSOCIATION APPELLEE MISSISSIPPI MANUFACTURERS ASSOCIATION WORKERS' COMPENSATION GROUP APPELLANT
v.
MISSISSIPPI WORKERS' COMPENSATION GROUP SELF-INSURER GUARANTY ASSOCIATION APPELLEE

          DATE OF JUDGMENT: 10/06/2015, 03/10/2017, 07/28/2017

          MISSISSIPPI WORKERS' COMPENSATION COMMISSION

          ATTORNEYS FOR APPELLANT: R. ANDREW TAGGART, MONA PATEL GRAHAM, DAVID GLYN PORTER SARAH LINDSEY OTT

          ATTORNEYS FOR APPELLEE: ANDREW D. SWEAT JENNIFER HUGHES SCOTT

          BEFORE GRIFFIS, C.J., WILSON AND WESTBROOKS, JJ.

          WILSON, J., FOR THE COURT

         ¶1. This appeal involves an assessment levied by the Workers' Compensation Group Self- Insurer Guaranty Association (the Group Guaranty Association or "GGA"), an association established by the Legislature to pay workers' compensation claims on behalf of any group self-insurer that becomes insolvent. Miss. Code Ann. §§ 71-3-153 & -159 (Rev. 2011). The dispute in this case arises out of the cessation of operations and withdrawal of one of the GGA's members, the Mississippi Manufacturers Association Workers' Compensation Group (MMAWCG). The MMAWCG stopped issuing self-insured workers' compensation coverage and later obtained an insurance policy to insure and pay all of its liabilities arising from its prior periods of self-insurance. Thereafter, the GGA imposed an assessment on all of its members, including the MMAWCG. The MMAWCG challenged the assessment, arguing that the GGA lacked authority to impose it because the balance of the GGA's guaranty fund never declined to the level at which the applicable statute, Miss. Code Ann. § 71-3-163(1)(c) (Rev. 2011), authorizes assessments. The MMAWCG also argued that the GGA lacked authority to assess the MMAWCG because it had withdrawn from the GGA and ceased to operate as a group self-insurer. Finally, the MMAWCG argued that the GGA's method of calculating the assessment violated section 71-3-163(1)(c). The Mississippi Workers' Compensation Commission (the Commission) ultimately upheld the assessment, ruling in favor of the GGA on all issues. On appeal, the MMAWCG challenges the Commission's rulings on all three issues.

         ¶2. We hold that GGA had continuing authority to assess the MMAWCG for at least three years after it withdrew from the GGA. However, based on the plain language of section 71-3-163(1)(c), we hold that the assessment at issue in this appeal was invalid because the balance of the GGA's guaranty fund never declined to the level at which the controlling statute authorizes the GGA to make additional assessments. Therefore, we reverse and render the judgment of the Commission upholding the assessment. Because we reverse and render the assessment in its entirety, we need not address the MMAWCG's contention that the assessment was calculated improperly. We also reverse and render a separate order of the Commission reinstating a loan agreement between the MMAWCG and a nonparty.

         FACTS AND PROCEDURAL HISTORY

         ¶3. An employer covered by the Mississippi Workers' Compensation Act has two options: obtain an insurance policy to pay workers' compensation claims and benefits or, subject to approval by the Commission, self-insure its workers' compensation liabilities. With respect to self-insurance, an employer may either self-insure its own obligations or, with the approval of the Commission, join with a group of employers to pool and self-insure the group's liabilities. Under the Workers' Compensation Self-insurer Guaranty Association Law, Miss. Code Ann. §§ 71-3-151 to -181 (Rev. 2011), all group self-insurers must be members of a guaranty association. Id. § 71-3-159 (Rev. 2011). Prior to 2004, individual self-insurers and group self-insurers were required to be members of a single guaranty association. In 2004, the Legislature created the GGA for group self-insurers. Individual self-insurers remained members of the original guaranty association, which was renamed the Mississippi Workers' Compensation Individual Self-Insurer Association.

         ¶4. The primary purpose of the GGA is to pay workers' compensation claims and benefits on behalf of any group self-insurer that becomes insolvent. Id. The GGA's guaranty fund and operations are funded by assessments levied on its members pursuant to statute. Id. § 71-3-163(1)(c). As required by statute, upon its creation, the GGA established its Plan of Operation-essentially, its bylaws-which became effective upon approval by the Commission. Id. § 71-3-165 (Rev. 2011).

         ¶5. The MMAWCG was one of eleven founding members of the GGA. However, in 2010 the MMAWCG began the process of ceasing operations as a group self-insurer. The MMAWCG continued to pay all obligations and claims under self-insured coverage issued to its member employers for prior periods, but as of May 2010 it stopped renewing coverage or issuing new coverage. Finally, in 2014 the MMAWCG purchased an insurance policy from AmFed National Insurance Company (the AmFed policy) to cover all claims and liabilities arising from prior periods of self-insurance.

         ¶6. On November 19, 2014, the Commission entered an order approving the termination of a loan agreement between the Mississippi Manufacturers Association and the MMAWCG. The order provided that, as a condition of the Commission's approval, the MMAWCG was required to obtain an insurance policy that would cover all of the MMAWCG's workers' compensation obligations (i.e., the AmFed policy).

         ¶7. On November 21, 2014, the director of the MMAWCG, Foster Welburn, notified the GGA that the MMAWCG had ceased operations as a group self-insurer and that the AmFed policy would cover all remaining claims and any future claims arising from prior periods of self-insurance. Welburn acknowledged that the MMAWCG could be liable for additional assessments until November 20, 2017. Welburn's letter cited section II.F of the GGA's Plan of Operation, which provides that a withdrawing member "will continue to be liable for assessment for three (3) years or until there are no liabilities outstanding under its previous self-insured pooling status, which [sic] is greater."

         ¶8. On March 13, 2015, the GGA invoiced the MMAWCG for an assessment of $12, 767.99 for the 2014 calendar year. The invoice stated that the assessment was equal to two percent of all "[g]ross compensation and medical services" reported as paid by the MMAWCG for the 2014 calendar year.

         ¶9. In response to the invoice, the MMAWCG, through Welburn, sent two letters to the GGA and a letter to the Commission's director of self-insurance. Welburn raised a series of issues related to the GGA's authority to impose the assessment and its method of calculating the assessment. Among other things, Welburn questioned the GGA's authority to impose the assessment given that the GGA's guaranty fund balance apparently remained in excess of $750, 000. See Miss. Code Ann. § 71-3-163(1)(c). Welburn also questioned whether the GGA had the authority to impose assessments based on a full calendar year period rather than a single six-month period. See id.

         ¶10. The GGA's chairman, Michael Callahan, responded to Welburn's letters. Callahan stated that the assessment was authorized by section XI.A.3 of the GGA's Plan of Operation, which authorizes the GGA to impose assessments whenever "payment by the [GGA] of its obligations will reduce the level of the Fund below [$750, 000]." According to Callahan, the GGA's February 2015 bank statements showed that the GGA's operating and investment accounts had a combined balance of $787, 148.47. Callahan stated that the GGA's directors and officers liability policy was up for renewal at an anticipated cost of approximately $46, 000. Callahan also stated that the GGA's insurer, Lloyd's of London, had sent a notice of nonrenewal based on the decline in the GGA's assets between 2009 and 2014. Callahan stated that renewal of the Lloyd's policy or the purchase of a replacement policy "would drop the [GGA's] assets below the mandatory assessment amount of $750, 000."

         ¶11. The Commission subsequently notified the MMAWCG that the GGA would issue an amended invoice for the same amount as the original invoice ($12, 767.99) but with minor changes. The GGA issued the amended invoice on April 7, 2015.

         ¶12. On April 13, 2015, the MMAWCG filed an appeal of the assessment with the Commission. The MMAWCG argued that Mississippi Code Annotated section 71-3-163(1)(c) did not permit an assessment until the GGA's guaranty fund balance actually declined to $750, 000. The MMAWCG also argued that the GGA's assessment based on a full calendar year was invalid because the statute permitted assessments based on six-month periods only. In response to the appeal, the GGA argued that the assessment was authorized under section XI.A.3 of its Plan of Operation. The GGA also argued that the statute permitted assessments based on multiple six-month periods. Finally, ...


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