I N T H E SUPR EM E C O UR T O F M I SS I SS I PPI NO. 2 0 0 5 - CA- 0 1 1 5 8 - S CT M I SSI SSI PPI I N SURAN CE G U A RAN T Y AS S OC I AT ION
v. M SCA S UA LT Y I

NS URANCE COM

P AN Y A ND AM ERICAN REL I

ABLE I NSURA NCE COM

PANY, I NC.
D A T E O F JU D G M E N T : 06/ 08/ 2005 TRI AL J UD GE: HO N. W I LLI AM J OSEPH LU TZ COURT F ROM W HI CH APP EAL ED: M ADI S ON COU NTY CHANCERY COURT AT T OR NE YS F OR AP P E L L ANT : J AM E S D. HOL L AND L O U IS G L A Z IE R B A IN E , J R
. RO BE RT S
. ADDI S ON T E RR Y R
. L E VY J AS ON HOO D S T RO NG A TTO RN EY S FO R A PPELL EES: K ELL Y D
. SI M PK I N S W AL T E R D
. W I L L S ON RO SEM AR Y G
. DU RFEY NATURE OF THE CAS E: CI VI L - CONTRACT D I SPO SI T I O N : A FFIRM E D - 10/ 26/ 2006 M OT I ON F OR RE HE AR I NG F I L E D: M ANDAT E I S S UE D:

B E F O R E W A L L E R , P . J. , E A SL E Y A N D C A R L SO N , JJ. CAR LS ON , J UST I CE, FOR TH E COU RT: ¶ 1
. A g g rie v e d b y th e M a d iso n C o u n ty C h a n c e ry C o u rt’s g ra n t o f su m m a ry ju d g m e n t in fa v o r o f M S C a s u a lty I n s u ra n c e C o m p a n y a n d A m e ri c a n R e lia b le In s u ra n c e C o m p a n y , In c .,

### 2

the M issi ssipp i I n su ran ce G u ara n ty A sso ciati o n ap p ea ls t o u s. F ind ing n o rev ersible e rror,
we a f f i rm. FACTS AND PROCEEDI NG S I N THE TRI AL CO URT ¶2. M S C as ual t y Insur ance C om pan y ( M S C as ual ty) i s a M i s s i s s i ppi
- bas ed i ns ur ance company. I tbegan i s s ui ng w orker s ’ compensa t i on i ns ur ance po l i ci es i n 1993. A m er i can R el i abl e I ns ur ance C om pany, I nc. (A m er i can Rel i abl e) i s an A r i zona- bas ed i ns ur ance company w hich al s o f

orm er l y i s s ued w orker s ’ compensa t i on i ns ur ance pol i ci es . G ener al R ei nsurance C orporat i on (G en R e) w as the reinsurerof M S C asual ty’s w orkers ’ compensa t i on pol i ci es f r om Janua ry 1, 1993, t o D ece m ber31, 1995. A m er i can Rei ns ur ance C om pany ( A m R e ) w a s the r e i ns ur e rof M S Cas ua l ty’ s w orke r s ’ c ompe ns a t i on po l i ci es eff ect i ve Janu ary 1, 19 96
. G en R e w as the rei nsurerof A m eri can R eli able’ s w orkers ’
com pen sat i on po l i ci es. ¶3. O n Sept ember28, 20 00 , A m eri can R el i able exi t ed the w orkers ’ com pen sat i on bus i nes s by ent er i ng an “A s s um pt i on R ei ns ur ance A gr eement ” ( A R A ) w i th L egi on I ns ur ance C om pany ( Leg i on ) , a Pe nn s yl va ni a i ns ur a nc e c ompa ny . M S Cas ua l ty f ol l owed s ui ton Sept ember29, 2000. T he A R A s w er e appr oved by the M i s s i s s i ppi D epart m entof I ns ur ance . T h e A R A b etw ee n M S C asu alty an d L e g ion retroac ti v ely tran sferred M S C asu alty ’s obl i gat i ons underthe pol i ci es t o L egi on as of Janua ry 1, 1993, thr ough D ece m ber31, 2000. A l s o, the A R A be tw een A m er i can R el i abl e and Legi on r etr oact i vel y tr ans f err ed A m er i can R e lia b le ’s o b lig a tio n s to L e g io n a s o f O c to b e r 1 , 1 9 9 9 , th ro u g h D e c e m b e r 3 1 , 2 0 0 0 . M S C as ual ty and A m er i can Rel i abl e ce ded al l out s t andi ng netl os s and vol unt ary unearned

### 3

pr emi um r es erves t o L egi on. G en R e and A m R e, the r ei ns ur er s , ent er ed i nt o as s i gnm ent agr eement s w hi ch tr ans f err ed t o L egi on al l obl i gat i ons they ow ed M S C as ual ty and A m er i can Rel i abl e. A s of J anuary 1, 2001, L egi on had sole re s pons i bi l i ty t o the po l i cyh older s and clai m ants . ¶4. L egi on s entpol i cyhol der s “C ert i f i cat es of A s s um pt i on” s t at i ng thatL egi on w oul d be
re sp o n sib le f

o r a n y cla im s u n d e r th e p o licie s. L e g io n re q u e ste d th a t all fu tu re c laim re q u e sts b e d ir ec ted to A m F ed C o m p a n ies , it s claim s ad m inistrator, and d ir ec ted th at all futu re p re m iu m s b e p a id to L e g io n . T h e c e rtifica tes a lso sta ted th a t L e g io n w o u ld b e re sp o n sib le f orany f utur e cl ai m s . L egi on di d notcont actthe cl ai m ant s w ho w er e al r eady r ece i vi ng ben efi t s und er the M S C asual ty an d A m eri can R el i able pol i ci es. ¶5
. Subse quent l y, L egi on ent er ed r eha bi l i t a t i on d ue t o cas h f l ow pr obl ems. T he Penns yl vani a I ns ur ance C om m i s s i onerpet i t i oned f orl i qui dat i on of Legi on, and on J ul y 25, 2003, l i qui dat i on w as or der ed by the C om m onw eal th C our tof Penns yl vani a. T he i ns ur ance
comm i s s i onerw as appoi nt ed as t he st atut ory l i qui dat or(Li qui dat or ) and w as r es pons i bl e f or
m aking arr ang em ents forcon t i nu ed p aym ent of cl ai m s und er Leg i on ’s po l i ci es. ¶6. T h e L iqu idato r ord ere d th at po li cy h o lders a sserti n g a righ t t o p roc ee d s o f a
re in su ra n c e a g re e m e n t to w h ich L e g io n w a s a p a rty s h o u ld file a p e tit io n to in ter v e n e w ith the court . Subse quent l y, the Li qui dat orf i l ed an em er gency appl i cat i on f ors t ay pendi ng appea l orconf

i rm at i on of

aut om at i c s t ay w i th r es pectt o the por t i on of the court ’ s O r derof L i qui dat i on al l ow i ng di r ectacce s s t o re i ns ur ance . G en R e and A m R e w er e or der ed t o pay
an y m o n ies th ey w o u ld h av e o w ed to L eg ion as re insu ran ce to the L iqu idato r.

### 4

¶7. Fol l ow i ng the court ’ s e ntry of the O r derof

Li qui dat i on, the M i ssi ssi pp i I ns ur ance G u a ra n ty A ss o c iatio n (M IG A ), b y sta tu to ry a u th o rity , ste p p e d in to th e sh o e s o f L e g io n to pr ot ectthe i nt er es t s of Legi on’ s M i s s i s s i ppi pol i cyhol der s a nd c l ai m ant s . M I G A w as
s t atut or i l y cr eat ed by the M i s s i s s i ppi L egi s l atur e t o pay “c over ed cl ai m s underdi r ect in su ra n c e ” w h e n a n in su re r b e c o m e s in so lv e n t. ¶8. A f

t er r evi ew i ng the cl ai m s m ade t o L egi on, M I G A deci ded that the cl ai m s w er e not “cove r ed cl ai m s underdi r ecti ns ur ance ” w i thi n t he m eani ng of the st atut e. M I G A r eques t ed M S C a su a lty a n d A m e ric a n R e liab le to p a y a n y c laim s m a d e u n d e r th e p o lic ies to a v o id
num er ous m ul t i party l aw s ui t s f i l ed by the cl ai m ant s . T her e w er e 181 c l ai m s a ti s s ue. R ather than havi ng t o deal w i th al l of thes e pot ent i al l aw s ui t s , M I G A r eques t ed M S C as ual ty and A m er i can Rel i abl e t o try one s ui tbe f or e a cha ncel l ort o deci de i f the cl ai m s w er e “c over ed cl ai m s underdi r ecti ns ur ance . ” M I G A agr eed t o r ei m bur s e M S C as ual ty and A m er i can R el i abl e f

ora ny c l ai m s the compani es w r ongl y pa i d i f a chanc el l oror der ed M I G A t o do s o. ¶9. M S C as ual ty and A m er i can R el i abl e ther eaf t ercom m ence d sui tagai ns tM I G A i n the Ma d i s o n C o u n ty C h a n c e ry C o u r td e m a n d i n g ( 1 ) r e i m b u r s e m e n to f c l a i m s p a i d b y MS C asual ty an d A m eri can R el i able, and ( 2) M IG A ’s ass um pti on of l i abil i ty forfuture cl ai m s. T he r ei ns ur er s , G en R e and A m R e, w er e or i gi nal par t i es t o the s ui t , butthey w er e di s m i s s ed by M S C as ual ty and A m er i can Rel i abl e becaus e G en R e and A m R e w er e or der ed t o pay their m o n ies t o the L iqu idato r.

### The c hanc el lor hel d a total of

threehearings on this matt er . 1 

### MIGA wa s ordered to reimb urse MS Ca sualt y thesum

of $3, 371,562. 30 and 2 

### AmericanReliab le the sum of $ 21 3,4 26 .89
. 5 ¶10. C hance l l orW i l l i am J
. L ut z conduct ed a hear i ng on M ay 3, 2005, on the m ot i on f or
s um m ary j udgm entf

i l ed by M S C as ual ty and A m er i can Rel i abl e. The chanc el l orconcl uded 1 that( 1) the A R A s cons t i tut ed a novat i on betw een M S C as ual ty and A m er i can Rel i abl e and L egi on, w hi ch ce ded t o L egi on a l l r es pons i bi l i t i es pr evi ous l y a s s um ed by M S C as ual ty and A m er i can Rel i abl e; ( 2) t he cl ai m s const i tut ed cover ed cl ai m s accor di ng t o the s t atut e; ( 3) the pol i ci es as s um ed by Legi on w er e di r ecti ns ur ance acc or di ng t o the st atut e; and, ( 4) the p o licy h o ld e rs, a n d n o t th e cla im a n ts th e m se lv e s, w e re the o n ly o n e s to w h o m n o tice h a d to b e g iven co n ce rnin g the A R A
. T h e c h an ce ll o r gra n ted s u m m ary jud g m en t in fav o r of M S Ca s u a l ty a n d Ame r i c a n Re l i a b l e a n d o r d e r e d M I GA t o r e i mb u r s e p a s tc l a i ms a n d t o a s s u me pay m ents of f

utur e cl ai m s. 2 ¶11. Fur ther , the chanc el l orre cogni zed thatthe r ei ns ur er s , G en R e and A m R e, w er e the in su ra n c e c o m p a n ies th a t sh o u ld b e li a b le fo r th e c laim s. T h e re in su re rs w e re o b lig a ted to pay the cl ai m s acc or di ng t o the r ei ns ur ance contr act s ; how ever, G en R e and A m R e had al r eady be en or der ed t o pay thatsum to t he L i qui dat or . G en R e and A m R e had r ef us ed M I G A ’ s demand t hatthey pay M I G A di r ect l y i nas m uch as thi s act i on w oul d have r es ul t ed in d o u b le p a y m e n t b y G e n R e an d A m R e . T h e c h a n c e llo r d e n ied M IG A ’s m o tio n to re jo in the r ei ns ur er s s i nce i tw as t he opi ni on of the cha ncel l orthatM S C as ual ty and A m er i can R el i abl e s houl d ne verha ve been part i es t o the s ui t . T he cha ncel l orur ged M I G A t o s ue G en

### Throughout thefirst hearing on thi s m atte r, thechance ll or repe at edly stre ss ed that 3 

### there ins ure rs , Gen Re and AmRe, had responsibil it y for paying thecl aims . Whe n the chance ll or grant ed summary judgm ent , he off ered to as si st

MIGA in bringing Ge n Re and Am Rebef

orethecourt i f Mi ss is sippi pol ic yholde rs and c laim ant s di d not rec eive app rop riate relief from th e Liquid ator. Insteadof a b rief report, MIG A filed a report that was n early 4 00 pag es lon g. T his 4 

### report conc er ned i ss ues beyond whe the r MI GA was li abl e f or the claims of the s eve n no nresid ents. 6 R e and A m Re i f

M I G A f el tthatthe Li qui dat orw oul d notcoverthe cl ai m s of the M i s s i s s i ppi claim an ts. T h e ch an ce ll o r al so de n ied M IG A ’s m o ti o n t o st ay th e g ran t o f su m m ary

3 j udgm en tf

orf urthe rdi s c ov e ry. The c hance l l orf ur theror der ed M I G A t o i m m edi at el y r evi ew th e c l a i m s f

i l e s t o d e t e rm i n e th e s p e c i f i c d o l l a ra m o u n to f

r e i m b u r s e m e n to w e d t o MS C as ual ty and A m er i can Rel i abl e. ¶12. M I G A di d no t i m m ediat el y s t art payi ng the cl ai m s as the chanc el l or or der ed. I n a
s ubs equenthe ar i ng on M ay 26, 2005, M I G A ar gued bef or e the cha ncel l orthats om e of the
c laim s w e re fro m c laim a n ts w h o d id n o t liv e in M iss iss ip p i a n d , th u s, M IG A w a s n o t li a b le f orthos e cl ai m s . The c hance l l ora l l ow ed M I G A extr a t i m e t o r evi ew s even c l ai m s f i l es and
or der ed M I G A t o f

i l e a br i ef

r eportconce rni ng i t s opi ni on on l i abi l i ty as t o thos e s even cl ai m s. 4 ¶13. A t the fi nal hear i ng on J une 8, 2005, the chance l l or rul ed t hat M I G A w as l i abl e f or
s i x of the s even c ont es t ed nonr es i dentcl ai m s . T he cha ncel l orm ade a det ai l ed f i ndi ng on the
r ecor d a s t o w hy M I G A w as orw as notl i abl e f ore ach cl ai m . T he chanc el l ora l s o deni ed M I G A ’ s m ot i on fora ful l account i ng of the f unds of M S C as ual ty and A m er i can Rel i abl e.

### Th ech anc e l l or str uc k page s 2- 10 of

thene arly 4 00 pager epo rt s ub m i tt e d b y M I GA 5 

### that w ent b eyo ndthe sco pe o f the subject o f the claims o f the n onresidents. 7 Fi nal l y, the cha ncel l or grant ed the mot i on t o s tr i ke port i ons of the r ecor d cons i der ed
r edundant , as f

i l ed by M S C as ual ty and A m er i can Rel i abl e. 5 ¶14. I ti s f

r om the chanc el l or ’ s gr antof s um m ary j udgm enti n f avorof M S C as ual ty and A m eri can R el i able that M IG A app eal s t o u s. DI S CU S S I ON ¶ 1 5
. T h is C o u rtre v ie w s a g ra n t o f s u m m a ry ju d g m e n t d e n o v o . R ich a rdso n v. N o rfo lk Souther n R

y. , 923 So. 2d 1002, 1007 ( M i s s . 2006) ( ci t i ng L eff ler v. Sh arp , 891 So. 2d 152, 1 5 6 (M iss . 2 0 0 4 )); Pitt

s v. W at kins , 905 So. 2d 553, 555 ( M i s s . 2005) ( ci t i ng A e tn a Ca s . & Sur. Co. v. B err

y , 669 So. 2d 56, 70 ( M i s s . 1996) )
. T hi s C our ts hal l cons i der“al l the evident i ary m att er s bef

or e i t–adm i ssi on s i n p l eadings, answ ers t o int err og at ori es, dep osi t i on s, aff i dav i t s, et c. T he ev i den ce m ustbe view ed i n the l i gh tm ostfavorabl e t o the party ag ai nst
w hom the mot i on has been made. ” McD ani el v. Shaklee U

. S. , I nc. , 807 So. 2d 393, 395 ( M i s s . 2001) ( ci t i ng Lum be rm an’s U nde r writing Allianc e v. Ci t y of Rosedale, 727 So. 2d 7 1 0 , 7 1 2 -13 (M iss. 1 9 9 8 )). “If an y tr iable issu e s o f m a ter ial fac t exist, the lo w er c o u rt ’s deci s i on t o gr ants um m ary j udgm entw i l l be r ever s ed. ” I d. ( ci t i ng B r o w n v. Cr e dit Ctr., I n c ., 4 4 4 S o .2 d 3 5 8 , 3 6 2 (M is s . 1 9 8 3 ))
. ¶16. T urni ng t o the i s s ues w i th w hi ch w e ar e conf r ont ed t oday, thi s C ourt m us t deci de ( 1)
w hetherthe A s s um pt i on R ei ns ur ance A gr eement s ( A R A ’ s ) cons t i tut ed a novat i on; ( 2)
w h e th e r th e c laim s a re “ c o v e re d c laim s u n d e r d ire c t in su ra n c e ;” ( 3 ) w h e th e r M IG A is liab le

### 8

f orc l a i ms f

r om no nr e s i de nt s ; a nd , ( 4) whethe rthe c ha nc e l l ora bu s e d hi s d i s c r e t i on i n ( a) denyi ng M I G A ’ s m ot i on t o s t ay s um m ary j udgm entt o al l ow f ur therdi s covery, ( b) denyi ng M I G A ’ s m oti on fora f ul l acc ount i ng, and ( c) gr ant i ng M S C as ual ty’ s and A m er i can R el i abl e’ s m ot i on t o s tr i ke port i ons of the r ecor d. I . W H E T H E R T H E AS S UMP T I O N RE I N S URANC E AGRE EM EN TS BE TW EE N M S CAS UAL TY AND AMERI CAN RE L I AB L E AN D L E GI ON CON S T I T UT E D A NO VA T I ON W HI CH RE LE AS ED M S CAS UALTY AND AMERI CAN R EL I A BL E F R O M LIAB I LITY U N D ER TH E W O R K ER S’ C O M PE N SA TIO N PO LICIES. ¶1 7. W e f

i r s ta dd r e s s the i s s ue o f whethe rn ov a t i on was a c c ompl i s hed by s ubs t i tut i ng L egi on f orM S C as ual ty and A m er i can R el i abl e i n the i ns ur ance pol i ci es . “[ A ] novat i on m ay
occurw her e the debtr emai ns the s ame, buta new debt ori s s ubs t i tut ed. I n s uch eve nt , the
o rig in a l d e b to r is ac q u itt e d , h is o b lig a tio n is ex tin g u ish e d , a n d the cre d ito r co n ten d s h im se lf
w i th t he obl i gat i on of the s econd de bt or . ” G r eenw ood Lef lor e Hos pital Com . v. Turner , 213 M iss . 2 0 0 , 5 6 S o .2 d 4 9 6 , 4 9 7 (1 9 5 2 ); A dam s v. P ow er , 48 M i s s . 450 ( 1873)
. T he part i es
m u s t in te n d n o v a tio n fo r n o v a tio n to b e a c c o m p lis h e d
. Mo rg a n v. J a c kso n R e a d

y -Mix Co n c re te , 2 4 7 M iss. 8 6 3 , 1 5 7 S o . 2 d 7 7 2 , 7 8 0 (19 6 3 ). ¶18. A l s o, the cr edi t orm us tas s entt o the novat i on. G r e e n w o o d L e flo r e Ho s

p ita l, 56 So. 2d at498. I n Firs t

A m er i can N

ational B ank of Iuka v. A lcorn, I

nc. , 361 So. 2d 481, 487- 88 ( M i s s . 1978) , thi s C our thel d thatas s entm ay be i m pl i ed. W e s t at ed: T he rul e i s al s o es t abl i s hed thatthe r el eas e of one debt orand the s ubs t i tut i on of another m ay b e i m pli ed fr om the cir cu m st ances ab sentan ex press s u b s titu tio n . Am e r i c an Blak e s le e M f g. Co. v. Mar tin & Son, 128 M i s s . 302, 91 So. 6 ( M i s s . 1922)
. H ow ever , thi s r equi r es s ubs t ant i al pr oof thatthe

### 9

credi t or i m pli edly accepted the n ew deb t or i n the pl ace of the old and i tm ust notappea rthatthe cr edi t ori nt ended t o hol d both new and ol d debt or forthe obl i gat i on. T hi s det erm i nat i on i s f actual and nec es s ary t o an i m pl i ed novat i on a n d re le a s e o f t h e o ld d e b to r. A m er i can B lakes lee, supra . I d. ¶1 9
. S in c e n o p a rti es sign ed no v atio n a g re e m e n ts, th e re is n o t ex p re ss a g re e m e n t. H ow ever , w e agr ee w i th the chanc el l ora nd be l i eve thatnovat i on w as acc om pl i s hed thr ough im p lied a ss e n t. L e g io n a g re e d to b e li a b le fo r an y c laim s u n d e r th e p o licie s. M S C a su a lty
a nd Am e r i c a n Rel i a bl e tr a ns f e rr e d a l l o f

the i rr e s e r ve s s e ta s i de t o pa y c l a i ms un dert he pol i ci es t o L egi on. A l l pr emi um s w er e ther eaf t erpai d t o L egi on i ns t ead of M S C as ual ty and A m er i can Rel i abl e. T her ef or e, i n acc or dance w i th G r eenw ood L ef lor e H os pital , the d ebt
r emai ned the s ame, butLegi on w as s ubs t i tut ed f orM S C as ual ty a nd A m er i can R el i abl e. A ddi t i onal l y, i n acc or dance w i th Mor gan , the part i es obviousl y i nt ended nova t i on. T he p o li cy h o lders b eg an p ay ing their p re m iu m s to L eg ion after L eg ion sen t th e p o li cy h o lders not i ce i n the f

orm of as s um pt i on cert i f

i cat es . N one of

the pol i cyhol der s pr ot es t ed; but i ns t ead, they pai d thei rpr emi um s t o L egi on, w hi ch cont i nued t o pa y a l l curr entcl ai m s that M S C as ual ty and A m er i can Rel i abl e had pr evi ous l y been pa yi ng. T hr ough thei ra ct i ons , the part i es no d ou bt i ntended forL egion t o b e l i able f or any c l ai m s. ¶20. H ow ever , M I G A cont ends that , i n acc or dance w i th Firs t Am e r i c an N ationa l Bank , the pol i cyhol der s di d noti m pl i edl y a cce ptnova t i on be caus e the l anguage of the as s um pt i on
c e rtifica tes is v a g u e . F u rth e r, M IG A arg u e s th a t th e inju re d cla im a n ts a lso h a d v e ste d rig h ts
acc or di ng t o M i s s i s s i ppi ’ s w orker s ’ compensa t i on l aw s . M I G A ther ef or e ar gues thatnot

### 10

onl y di d the p ol i c yh ol de r s n oti mpl i e dl y a s s e ntt o no va t i on , b utthe c l a i mant s ’ a s s entw as
r equi r ed as w el l
. T he chanc el l ordi s agr eed. I n hi s f i nal j udgm ente nt er ed on J une 8, 2005, the cha ncel l ors t at ed, i nt eral i a: 5. T he as s um pt i on r ei ns ur ance agr eement s , w he the ra no va t i on i s r equi r ed ornot , w er e a novat i on. T he ce r t i f i cat es of as s um pt i on s entby L egi on t o the pol i cyhol der s s peci f i cal l y s t at ed: T he ef f ectof thi s agr eementon you i s thatL egi on I ns ur ance C om pany is n o w th e in su re r o f y o u r p o licy a n d is re sp o n sib le f o r p a y in g a ll cl ai m s due underyourpol i cy. I n the C our t ’ s opi ni on, t he above l anguage w as cl earas thi s tr ans act i on does notdeal w i th cl ai m ant s w ho m ay be ve ry i gnor antof w hatthes e thi ngs m ean, b u t in ste a d w ith b u sin e ss m e n w h o are the ac tu a l in su re d s. T h e a c tu a l cla im a n ts have abs ol ut el y nothi ng t o do w i th w ho pr ovi des thes e i ns ur ance pol i ci es . The C our tf i nds thatthe i ns ur ed ( s i c) acc ept ed by notcanc el i ng the i ns ur ance or voi ci ng any conc erns af t erthey r ece i ved the not i ces . T he i ns ur eds m ade payment s di r ect l y t o L egi on and f i l ed cl ai m s w i th L egi on. W e agr ee w i th the cha ncel l or . T he l anguage of the ce r t i f

i cat es w as cl ear ; ther ef

or e, i m pl i ed
cons entf

r om the pol i cyhol der s can be as s um ed. A ddi t i onal l y, M I G A cont ends thatthe claim an ts ha v e v ested w o rke rs’ co m p en sati o n ri g h ts, b u t th e re is n o cit ati o n to statutory
a u th o rity o r c a se law to p ro v e its p o in t. W e h a v e p re v io u sly a d d re s s e d a p a rty ’s f a ilu re to
s uppor tar gum entw i th ci t at i on t o author i ty: T h is C o u rt ro u tin e ly h o ld s a n a p p e llan ts' s fa ilu re to c ite to a n y leg a l au th o rity t o s up po r t[ a n] a r gu mentwi l l p r oc e du r a l l y ba rtha ti s s ue f r om bei ng c o n s id e re d o n a p p e a l. Car terv. Mis s . D ep't of Corr . , 860 So. 2d 1187, 1193 ( M i s s . 2003) ( ci t i ng Mc Cla in v. S ta te , 6 2 5 S o . 2 d 7 7 4 , 7 8 1 (M iss. 1 9 9 3 )). B eca us e [ the appe l l ant ] f ai l ed t o s uppor tthi s a l l egat i on of e rr orw i th a ny l egal au tho ri ty, w e fi n d [th e ap p ell an t] is p roc ed u rall y b arred fro m h av ing this C o u rt c o n sid e r th is iss u e o n a p p e a l.

### 11

In re A do

p tio n o f a Min o r Ch ild , 9 31 S o. 2d 566, 578 ( M i s s . 2006)
. W e f i nd thatthe pol i cyhol der s ar e the onl y part i es w ho neede d t o as s entt o novat i on. T hus , as s entcan be i m pl i ed and nova t i on occurr ed. I I . W HETHER THE AS S U M P T I ON RE I N S URANC E AGRE EM EN TS BE TW EE N M S CAS UAL TY AND AMERI CAN RE LI AB LE AND L EGI ON CONS TI TU TE DI RE CT I NSURANCE. ¶21. W e next add res s w hetherthe as s um pt i on r ei ns ur ance agr eement s cons t i tut e di r ect i ns ur ance . A ccor di ng t o M i s s . Code A nn. Sec t i on 83- 23- 105, M I G A i s onl y r es pons i bl e f or cl ai m s s t emm i ng f

r om di r ecti ns ur ance and notr ei ns ur ance . ¶22. T he contr act s betw een L egion and M S C as ual ty and A m er i can R el i abl e w er e t i t l ed “as s um pt i on r ei ns ur ance agr eement s . ” H ow ever , thi s phr as e i s m i s l eadi ng. T her e i s no p r e c e d e n tf

r o m th i s Co u r tt h a td e f

i n e s d i r e c ti n s u r a n c e . Ho we v e r , th e Un i t e d S t a t e s S u p r e me C o u rt h a s s tate d th a t: R e in su ra n c e c o m e s in tw o b a sic ty p e s, a ss u m p tio n re in su ra n c e a n d in d e m n ity r ei ns ur ance . I n the ca s e of as s um pt i on r ei ns ur ance , the r ei ns ur ers t eps i nt o the sh o e s o f th e c e d in g c o m p a n y w ith re sp e c t to the rein su re d p o licy , as su m in g a ll i t s l i abil i t i es and it s r espon si bil i ty to m ai ntai n requir ed reserves aga i nst p o t e n t i a l c l a i ms . Th e a s s u mp t i o n r e i n s u r e rth e r e a f t e rr e c e i v e s a l l p r e mi u ms di r ect l y and becom es di r ect l y l i abl e t o the hol der s of the pol i ci es i thas r ei ns ur ed. I n i ndemni ty r ei ns ur ance , w hich i s ati s s ue i n thi s cas e, i ti s the ce di ng company t hatr emai ns di r ect l y l i abl e t o i t s pol i cy- hol der s , and thatcont i nues t o pay cl ai m s and col l ectpr emi um s . T he i ndemni ty r ei ns ur eras s um es no di r ect l i abi l i ty t o the pol i cyhol der s . I ns t ead, i tagr ees t o i ndemni f y, orr ei m bur s e, the cedi ng company f

ora s peci f

i ed per cent age of

the cl ai m s and expens es attr i but abl e t o t he r i s ks t hathave been r ei ns ur ed, and the ce di ng company turns overt o i ta l i ke per cent age of the pr emi um s gener at ed b y t he i ns ur ance of tho se r i sks.

### 12

Colonial A m . L i f e I ns. Co. v. Com m is s ioner , 491 U
. S. 244, 247, 109 S. C t . 2408, 2411, 105 L
. E d
. 2 d 1 9 9 , 2 0 7 (19 8 9 ). ¶2 3
. T h e ag ree m en ts are clea rl y d ir ec t insu ran ce . L e g io n ste p p e d into the sh o es o f M S C as ual ty and A m er i can Rel i abl e. N one of the t erm s and condi t i ons of the contr act s change d; buti ns t ead, the names of the part i es w er e s i m pl y s ubs t i tut ed. The r es erves w er e tr ans f err ed to L e g io n , an d th e p o licy h o ld e rs b e g a n p a y in g p re m iu m s to L e g io n . T h e risk w a s e n tirely up on L egion; theref

ore L egion w as d ire c tly lia b le . T h u s, w e fin d th a t th e a g re e m e n ts
cons t i tut ed di r ecti ns ur ance r atherthan r ei ns ur ance . I I I . WH E T H E R T H E C L A I MS A R E C O V E R E D C L A I MS
. ¶24. N ext , w e m us t deci de w hether the cl ai m s at i s s ue ar e “cover ed cl ai m s . ” A cover ed cl ai m i s defi ned as: “C ov ered c lai m ” m ea n s an u n p aid c lai m , inclu d ing o n e o f un ea rne d p rem ium s, w hi ch ar i s es outof

and i s w i thi n the cover age and noti n exce s s of the appl i cabl e l i m i t s of

an i ns ur ance pol i cy t o w hi ch thi s ar t i cl e appl i es i s s ued by an i ns ur er , i f

s uch insur er bec om es an i ns ol venti ns ur erand ( 1) the cl ai m ant ori ns ur ed i s a re s i dentof thi s s t at e atthe t i m e of the i ns ur ed eve nt , pr ovi ded thatf orent i t i es otherthan an i ndi vi dual , t he r es i dence of a cl ai m antori ns ur ed i s the s t at e i n w hi ch i t s pr i nci pal pl ace of bus i nes s i s l ocat ed atthe t i m e of the in su re d e v e n t; o r (2 ) th e p ro p e rty fro m w h ich the cla im aris e s is p e rm a n e n tly l ocat ed i n thi s s t at e. “ C over ed cl ai m ” s hal l noti ncl ude any a m ountaw ar ded as puni t i ve orexempl ary damages ; or s oughtas a r eturn of pr emi um underany re tro sp e c tiv e ra tin g p lan ; ordu e an y r e i ns ur e r, i ns ur e r, i ns ur an c e po ol , or u n d e rw ritin ga ss o c ia tio n , a s s u b ro g a tio n re c o v e rie s o r o th e rw ise a n d sh a ll pr eclude r ecov er

y ther eof

f r om the i ns ur ed of

any i ns ol vent c ar r i ert o the ex ten t o f th e p o licy lim its
. M iss . C o d e A n n . § 8 3 -2 3 -1 0 9 (f) (e m p h a sis a d d e d ). M IG A , b y s tatu te, is o n ly p e rm itt e d to pay “c over ed cl ai m s . ” Miss. Ins. G u ar. A ss’n v. B yars , 6 1 4 S o . 2 d 9 5 9 , 9 6 3 (M iss. 1 9 9 3 ).

### 13

M I G A ar gues that nova t i on neveroccurr ed, w hi ch r ender ed M S C as ual ty and A m er i can R el i abl e r ei ns ur er s t o L egi on bas ed upon the plai n l ang uage of the t i t l e of

the A s s um pt i on R e in su ra n c e A g re e m e n ts. M IG A a rg u e s th a t b e c a u se M S C a su a lty a n d A m e ric a n R e liab le
are sti ll so lve n t, th e y a re resp o n sible for p ay ing the c lai m s u n d er the p o li cies. F u rth er, M I G A ar gues thati tcannotpay an i ns ur ance company bas ed upon the pl ai n l anguage of M i ss. C od e A nn . § 8 3-23-10 9(f ); bu ti nst ead, i tcan o nly pay p oli cyh older s or cl ai m ants . ¶25. M I G A ’ s ar gum enti s m i s pl ace d. T he cha ncel l orcorr ect l y per cei ved the i s s ue as bei ng
w hethe rthe c l a i ms ma de t o Le gi on w e r e c ov e r e d c l a i ms s t e mm i ng f r om di r e c ti ns ur a nce. T he cl ai m s w er e m ade t o L egi on att he t i m e of i ns ol vency, and Legi on i s the di r ecti ns ur er b e c a u se n o v a tio n o c c u rre d . T h is h a s n o th in g to d o w ith M S C a su a lty an d A m e ric a n R e liab le – the cl ai m s w ere notm ade to tho se i nsurance co m pan i es, and they are notrei nsurer s. ¶26. M I G A i s att empt i ng t o avoi d r ei m bur s i ng M S C as ual ty a nd A m er i can Rel i abl e bas ed
o n a m isi n terpretati o n of th e ap p li ca b le st atute. M IG A ag ree d t o all o w th e ch an ce llo r to deci de w hetherthe cl ai m s m ade t o L egi on w er e “c over ed cl ai m s ” s t emm i ng f r om “di r ect in su ra n c e .” M IG A re q u e ste d M S C a su a lty a n d A m e ric a n R e liab le to p a y th e c laim s to a v o id
m u lti p le la w su its, an d if th e c h a n c e llo r ru led in th e ins u ra n c e co m p a n ies ’ fa v o r, th e y w o u ld be r ei m bur s ed by M I G A
. H ow ever , M I G A now cl ai m s that , a ccor di ng t o s t atut e, i tcannot
m ake a ny payment s t o i ns ur ance compani es . H ow ever , t he cha ncel l orrul ed thatM I G A w as resp o n sible for r ei m burs i ngM S Cas ual ty and A m er i can Rel i abl e f orthe cl ai m s i tw oul d have
ow ed underthe s t atut e bec aus e i tw as l i abl e f orthe cl ai m s t o L egi on. T hus , the cha ncel l or di d noterri nas m uch as hi s deci s i on does notconf l i ctw i th the s t atut e.

### 14

I V. W HE T HE R MI GA I S L I AB L E F OR CL AI M S F RO M NO NRESI DENTS
. ¶2 7. W e now a dd r e s s whethe rthe c l a i ms of n on - r e s i de nt s m ay be c over ed by s t atut e. M I G A ar gues thati ti s notl i abl e f orany cl ai m w her e the cl ai m anti s nota r es i dentof M i s s i s s i ppi , w hi l e M S C as ual ty and A m er i can R el i abl e ar gue thatt he pl ai n l anguage of the sta tu te s tate s in p a rt th a t eith e r th e c laim a n t o r th e p o licy h o ld e r m u st b e a re sid e n t. “C ov ered cl ai m ” m eans an un paid cl ai m , i ncl udi ng one of unearned p rem i um s, w hi ch ar i s es outof

and i s w i thi n the cove r age and noti n exce s s of the appl i cabl e l i m i t s of an i ns ur ance pol i cy t o w hi ch thi s art i cl e appl i es i s s ued by an insu rer, if

su ch insu re r b e c o m es a n inso lven t i n su rer an d (1) the clai m ant ori ns ur ed is a r es i dent

of this stat e atthe t i m e of

the i ns ur ed ev ent , pr ovi ded thatf orent i t i es otherthan an i ndi vi dual , t he r es i dence of a cl ai m antori ns ur ed i s the s t at e i n w hi ch i t s pr i nci pal pl ace of bus i nes s i s l ocat ed atthe t i m e of the in su re d e v e n t; o r (2 ) th e p ro p e rty fr o m w h ich th e c laim a rise s is p e rm a n e n tly l ocat ed i n thi s s t at e. M iss . C o d e A n n . § 8 3 -2 3 -1 0 9 (f) (e m p h a sis a d d e d ); see al so Mis s . I

ns. G u ar. A s s ’n. v. B yars , 614 So. 2d 959 ( M i s s . 1993)
. T he s t atut e cl ear l y s t at es thatei therthe cl ai m antorthe p o licy h o ld e r m u st b e a re sid e n t o f M iss iss ip p i. T h e re is o n e m o re ste p n o n re sid e n t cla im a n ts
m ustm ake. M i ss. C od e A nn . § 8 3-23-12 3(2) ( R ev. 19 99 ) pr ov i des: ( 2) A ny per s on ha vi ng a c l ai m w hi ch m ay be r ecove r ed undermore than one (1) i nsurance g uarant y associ at i on or i t s equival ent s hall seek recov ery f i rs t fro m th e a ss o c iatio n o f th e p lac e o f r e s id e n c e o f th e in su re d , ex c e p t th a t if it is a first p a rty c laim fo r d a m a g e to p ro p e rty w ith a p e rm a n e n t lo c a tio n , h e sh a ll s e e k re c o v e ry f

ir s t f ro m th e a s s o c ia tio n o f th e lo c a tio n o f t h e p ro p e rt y , a n d if i tis a w orkm en’s com

pens at i on clai m , he s hal ls eek recover y f i rs tf r om the as s oci at i on of

the r es i dence of

the clai m ant . A n y re c o v e ry u n d e r th is a rticle sh a ll b e re d u c e d b y th e a m o u n t o f r e c o v e ry fr o m a n y o th e r in su ra n c e g u a ra n ty a ss o c iatio n o r its e q u iv a len t.

### 15

(e m p h asis ad d ed ). T h u s, M IG A is l iable fo r claim s to L eg ion from n o n reside n t claim a n ts
w ho se poli cyh older s w ere l ocated i n M i ssi ssi pp i atthe ti m e of the insur ed ev ent i f tho se cl ai m ant s f

i r s ttr i ed t o s eek r ecove ry i n thei rhome s t at es a nd w er e deni ed. T he cha ncel l or
m ade a det ai l ed f

i ndi ng on the r ecor d of

eac h of the s even nonr es i dentcl ai m s i n di s put e. I h a v e re v ie w e d th e s e . A n d le t m e g iv e y o u m y a n a ly s is p e r c a s e . M ig u e l O liv a re s. .. . H e is a re sid e n t o f C h a m b lee , G e o rg ia. H is e m p lo y e r is A ll P o in ts C o n stru c tio n o f C a ld o n ia, M iss iss ip p i. T h e re w a s a n a p p lica tio n to the G eor gi a G uar anty Fund and i tw as deni ed. A nd, as pert he st atut e, s i nce the co m pan y, the p oli cy h olderof the insur ed, i s i n M i ssi ssi pp i , then t hat i s a c la im th a t M IG A m u s t p a y . T h e y h a v e fo llo w e d th e s ta tu to ry s c h e m e . T e rry P e lleg rin , res id e n t o f T h e o d o re , A lab a m a . H is e m p lo y e r, A & B E lec tric Co mp a n y , i s i n P a s c a g o u l a , M i s s i s s i p p i
. Th e y a p p l i e d t o t h e Al a b a ma I ns ur ance G uar anty A s s oci at i on and w er e deni ed. O nce agai n, f ol l ow i ng the statu tory sch em e sin ce A & B E lectri c is in M issi ssipp i, th en th at i s M IG A ’s r es pons i bi l i ty. C athy R yn er. N ow a res i den tof T en n essee, w e’r e con vinced. W e j ust c o u ld n ’td e te rm in e w h ic h to w n in T e n n e s s e e . J a c k ie ’s In te rn a tio n a l, a M ad ison , M issi ssipp i bu sine ss. A p p li ed to T en n esse e In su ran ce G u ara n ty As s o c i a t i o n a n d d e n i e d
. S o , th e y c o me u n d e rt h e s t a tu t o ry s c h e me a n d M I GA i s l i abl e. Phi l l i p St ockman. R es i dence , V ernon, A l abama. M as t erCra f tB ui l der s , I nc. of B oonevi l l e, M i s s i s s i ppi
. T he pol i cyhol derappli ed t o A l abama I ns ur ance G uar anty A s s ociat i on and w as deni ed. O nce a gai n, comi ng w i thi n the s t atut ory s cheme. M I G A i s l i abl e. A nthony W al l ace . R es i dence , E uf al a, A l abama. E m pl oyer , W al l ace A m us em ent C om pan y, C ol um bus , M i s s i s s i ppi
. A ppl i ed t o A l abama I ns ur ance G u ara n ty an d d en ied. O n ce ag ain, co m ing w ith in M ississi p p i st atuto ry sc h e m e . M IG A is liab le. N o w , th e re is a c o m m e n t h e re a b o u t a p o ss ib le g irlfrien d in W e st, M iss iss ip p i, bu t I d o n ’t th in k it rea lly m a tters . T h e fa c t is he w as t rea t ed as though he w as an A l abama r es i dent
. A nd thati s w hat se e m e d to b e th e c a se a n d sta tu to ry sc h e m e to o k c a re o f it.

### 16

N ow , M arvi n G onzal es. R es i dence , G r and B ay, A l abama. E m pl oyer , N ew Pal ace C as i no, B i l oxi , M i s s i s s i ppi
. A ppl i ed t o the A l abama I ns ur ance G u ara n ty A sso ciati o n an d w as d en ied. T h ere fore , co m es w ith in the statu tory s cheme and M I G A i s l i abl e. N ow , on L oui s C ur t i s M atthew s . T he vas tm aj or i ty of i nf orm at i on thatw e had on t hi s w a s tha tthi s gu y was – M r . M a t the w s w a s a r e s i de nt , i n f a c tof 1896 D ean, M emphi s , T ennes s ee. A & B E l ectr i c i s a M er i di an, M i s s i s si ppi C om pany, butther e w as neveran appl i cat i on t o T ennes s ee f orre l i ef
. So, the Co u r th o l d s th a tth e L o u i s Cu r t i s M a t th e ws c l a i m i s n o ta l i a b i l i ty o f M I GA. I ti s cl earf

r om the r ecor d thatthe cha ncel l ordi d noterri n thath e u nques t i onabl y adher ed t o the s t atut ory s cheme of r ecove ry. V. W HE T HE R T HE CH AN CE L L OR AB US E D H I S DI S CR E T I ON I N D E NY I NG M I GA ’ S M OT I ON T O S T AY CO NS I DE RA T I ON OF S UM M ARY J UDGM EN T F OR A DD I T I ON AL DI S CO VE RY . ¶2 8
. T h is C o u rt w ill re v iew a tri al j u d g e’s d ec isi o n s c o n c e rn in g m o tio n s re late d to d isc o v e ry fo r a b u se o f d isc re tio n . “[T ]he d e c isio n to .. . o rd e r f u rth e r d isc o v e ry re sts w ith in the s ound di scr et i on o f the tr i al j udge and w i l l notbe r ever s ed unl es s hi s deci s i on can be char act er i zed as an abuse of di s cr et i on. ” Ma r

x v. T r u c kR e n tin g& L e a s in gA s s o c s ., 520 So. 2d 1333, 1344 ( M i s s . 1987) ( ci t i ng Fo n te n o t v. U p jo h n Co ., 7 8 0 F
. 2 d 11 9 0 , 11 9 3 (5 C ir
. th 1986) )
. T he i s s ue bef

or e us i s w hetherthe cha ncel l orabus ed hi s dis cret i on i n denyi ng M I G A ’ s R ul e 56( f

) m ot i on t o st ay the rul i ng of s um m ary j udgm entforaddi t i onal di s covery. R ule 56(f

) s t at es: Shou l d i tap pearf

r om the af

f i davi t s of

a party oppos i ng the mot i on thathe c a n n o t fo r re a so n s s tate d p re se n t b y a ffid a v it fac ts e ss e n tial to ju stify h is o p p o sit ion , the c o u rtm ay refu se th e a p p li ca ti o n for jud g m en t or m ay o rde r a cont i nuance t o perm i taf f i davi t s t o be obt ai ned ordeposi t i ons t o be t aken or d isc o v e ry to b e h a d o r m a y m a k e su c h o rd e r a s is ju st.

### 17

M iss . R . C iv . P . 5 6 (f). M S C a su a lty a n d A m e ric a n R e liab le a rg u e tha t M IG A fil e d its R u le 56( f ) m ot i on m er el y t o del ay paymentof the j udgm ent , w hi l e M I G A ar gues thatthe chanc el l or abus ed hi s di s cr et i on i n gr ant i ng the mot i on beca us e ther e w er e mat er i al i s s ues of f acti n di spute. Speci f

i cal l y, M I G A cl ai m s thatvar i ous f act s r el at i ng t o the i s s ues of
w hethert her e w as a novat i on, w hetherthe cl ai m s w er e “c over ed cl ai m s , ” and w hetherthe pol i ci es hel d by L egi on cons t i tut ed “di recti ns ur ance ” w er e notpr es enti n the r ecor d. Fur ther , M I G A cl ai m s thatm or e f act s ar e nee ded conc erni ng dat es of cl ai m s, dat es of contr actt erm i nat i ons , and amount s of r ei ns ur ance payment s pai d fr om L egi on, G en R e, and A m R e t o M S C as ual ty and A m er i can Rel i abl e. M I G A ’ s I nt err ogat ory r es pons es ans w erthe paymentques t i on: ¶29. M S C as ual ty and A m er i can Rel i abl e cl ear l y st at ed t hat t hey had notr ece i ved any
m o n e y fr o m L e g io n o r th e re in su re rs, G e n R e a n d A m R e . T h e a m o u n ts o f p re m iu m s p a id to L e g io n b y p o lic y h o ld e rs a n d th e c laim d a tes a re sta ted in th e re c o rd . T h e c o n tra c ts betw een M S C as ual ty and A m er i can Rel i abl e ende d w i th the as s um pt i on of the pol i ci es by L egi on and w i th G en R e and A m R e ent er i ng i nt o new re i ns ur ance agr eement s w i th L egi on. ¶3 0. T he r ecor d cl e a r l y de mons tr a t e s tha t M S Cas ua l ty a nd A mer i c a n Rel i a bl e had not
r e c e i ve d pa ymen tf

r om a ny s ou r c e , a nd a l l r e l e va ntd a t e s a r e p r e s e nti n the r ecor d. T he chanc el l ordi d notabus e hi s di s cr et i on i n denyi ng the mot i on. VI . W HE T HE R T HE CH AN CE L L OR AB US E D H I S DI S CR E T I ON I N D E NY I NG M I GA ’ S M OT I ON F OR A F UL L AC CO UN T I NG .

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¶3 1. M I G A f

i l e a mot i on f

or a n a c c ou nt i ng of the f un ds of M S Cas ua l t y and A m er i can R el i abl e. M I G A pr es ent ed no evi dence thatM S C as ual ty orA m er i can R el i abl e eve r
rec eive d fun d s tha t r igh tf u ll y b elon g ed to L eg ion , as rev ea led in the a n sw ers t o Interro g atory N o s. 4 , 1 2 , an d 1 3
. F u rth erm o re, M IG A h as n o t pro d u ce d an y ev iden ce that eith er M S C a su a lty o r A m e ric a n R e liab le w e re d is h o n e s t in p re se n tin g th e ir fig u re s. T h e re c o rd is
co m p let e, a n d th e c h an ce ll o r did n o t abu se h is discreti o n in d en y ing M IG A ’s m o ti o n for a fu ll a c c o u n tin g . VI I . W HE T HE R T HE CH AN CE L L OR AB US E D H I S DI S CR E T I ON I N GRANT I NG THE M OTI ON OF M S CAS UAL TY AND AMER I CA N R E L I AB L E T O S T RI KE P OR T I ON S OF T HE RE CORD. ¶3 2
. F inally, w e m u st d ec ide w h ethe r the ch an ce ll o r erred in g ran ti n g the m o ti o n o f M S Ca s u a l ty a n d Am e r i c a n Re l i a b l e t o s tr i k e p o r t i o n s o f MI GA’ s c l a i m r e v i e w. W e r e v i e w a tr ia l ju d g e ’s d e c is io n o n w h e th e r t o s tr ik e p o rt io n s o f t h e re c o rd fo r a b u s e o f d is c re tio n . See B o w ie v. Mo n tf

o r th J o n e s Me m ’l

Ho s p ., 8 6 1 S o .2 d 1 0 3 7 , 1 0 4 2 ( M is s . 2 0 0 3 ); see al so K ilp a tr ic kv. Mis s . B a

p tis t Me d

. Ctr., 4 6 1 S o . 2 d 7 6 5 , 7 6 7 -68 (M iss. 1 9 8 9 ). ¶33. T he chanc el l or conduct ed thr ee hear i ngs i n thi s cas e. D ur i ng the s econd hear i ng, the
c h a n ce ll o r al low ed M IG A t o i n sp ec t the fil es o f sev en clai m an ts w h o se reside n cy w a s in dis pu t e. T he ch ancell or asked M IG A t o fi l e a bri ef r epo rtdetai l i ng the resi den cy o f tho se
sev en claim an ts. A t the third h ea ri n g , th e ch an ce ll o r m ad e a d etail ed fi n d ing o n the re co rd sta tin g th a t M IG A w a s lia b le f o r six o f th o se se v e n c laim a n ts b a se d u p o n th e re p o rt.

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¶34. T he chanc el l orgra nt ed the m ot i on of M S C asual t y and A m er i can R el i abl e t o s tr i ke p o rt ion s o f th e re p o rt . M S C asu alty an d A m erican R eli ab le a rgu e that tho se p o rt ion s w ere
r edundantorbr oughtup new i s s ues notr ai s ed bef or e s um m ary j udgm entw as gr ant ed. M IG A i gn ored t he ch ancell or’ s i nstruct i on s. T he ch ancell or st at ed in no u ncert ai n term s: [ W ] e’ r e notg oing t o come back her e and r ear gue anythi ng. . . . G etyourbean c o u n te rs to lo o k a t th e s e fi le s . W el l , the hea r i ng i s goi ng t o be–al l the hea r i ng i s goi ng t o be , a nd that ’ s goi ng t o b e i t , i s each o ne o f these fi l es, that you say sho u ld b e ex em pted, yo u just come i n and s how m e w hy. A nd I w ants om e pr i orno t i ce on i t . I w ant so m ethin g w ri tt en , v ery b ri ef. I ns t ead of

f ol l ow i ng the chanc el l or ’ s i ns truct i ons , M I G A f i l ed a r eportthatw as near l y 400 p a g e s lo n g . T h e rep o rt co n tain e d inf o rm a tio n tha t, a s M IG A ad m its in its b rie f to th is C o u rt,
conce rned i s s ues otherthan det erm i ni ng w hetherM I G A w as l i able f orthe cl ai m s of

the
seven n on res i den t s. “O ur tri al j ud ges . . . hav e a ri gh tt o ex pect com pli ance w i th thei r or ders, and w hen p art i es and/or att orneys fai l t o ad here t o the provis i on s of these orders, they do so atthei row n per i l
. ” B o w ie , 8 6 1 S o . 2 d a t1 0 4 2
. M I GA d i s o b e y e d th e c h a n c e l l o r . M I GA gave redu nd antans w er s and more i nf orm at i on than the cha ncel l ors ai d w oul d be al l ow ed. T h e re fo re , M IG A a c ted a t it s o w n p e ril, a n d th e c h a n c e llo r d id n o t ab u se h is d isc re tio n in
s tr i ki ng the r ecor d. CO NC L US I ON ¶ 3 5
. T h e c h a n c e llo r d id n o t e rr in fin d in g th a t th e A s s u m p tio n R e in su ra n c e A g re e m e n ts cl ear l y cons t i tut ed a nova t i on, ther eby tr ans f err i ng a l l r i s k f

r om M S C as ual ty and A m er i can R el i abl e t o L egi on. T he cha ncel l orl i kew i s e di d no terri n f i ndi ng thatthe cl ai m s ati s s ue

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w er e “c over ed cl ai m s underdi r ecti ns ur ance , ” and that , t her ef or e, M I G A w as r es pons i bl e f or payi ng thos e cl ai m s and w as r equi r ed t o r ei m bur s e M S C as ual ty and A m er i can Rel i abl e. Ad d i t i o n a l l y th e c h a n c e l l o rd i d n o te rri n f i n d i n g t h a tM I GA w a s r e s p o n s i b l e f o rth e c l a i ms
o f six o f th e se v e n n o n re sid e n ts. F in a lly , the c h a n c e llo r d id n o t ab u se h is d isc re tio n in denyi ng M I G A ’ s m ot i on t o s t ay s um m ary j udgm entf orad dit i onal di s covery, denyi ng M I G A ’ s m ot i on f

ora f ul l a ccount i ng, orgr ant i ng the mot i on of M S C as ual ty and A m er i can R el i abl e t o s tr i ke port i ons of the r ecor d. ¶36. Forthe r eas ons s t at ed, w e af f i r m the f i nal j udgm entof the C hance ry C our tof M adi s on C ounty. ¶37. AF F I RM ED . S M I TH, C. J . , W AL LE R, P . J . , DI AZ , E AS LE Y, GRAVE S , DI CKI NS ON AND R A N D O L P H , J J ., C O N C U R . C O B B , P .J ., N O T P A R T I C I P A T I N G .