Opinion ID: 2126473
Heading Depth: 1
Heading Rank: 5

Heading: application of guaranty association act

Text: Before addressing the legal issues presented in this appeal, it is necessary to set forth the relevant provisions of the Act. The Act applies to all kinds of direct insurance [8] and its purpose is to provide a method for the payment of certain claims against insolvent insurance companies . . . to avoid unnecessary delay in payment of such claims, to avoid financial loss to claimants or to policyholders, to assist in the detection and prevention of insurer insolvencies, and to provide an association of insurers against which the cost of such protection may be assessed in an equitable manner. [9] The Act further states that [t]he association shall be obligated only to the extent of the covered claims existing prior to the date a member company becomes an insolvent insurer . . . [10] A covered claim is defined in § 44-2403(4)(a) of the Act as an unpaid claim which has been timely filed with the liquidator as provided for in the Nebraska Insurers Supervision, Rehabilitation, and Liquidation Act and which arises out of and is within the coverage of an insurance policy to which [this Act] applies issued by a member insurer that becomes insolvent . . . . Section 44-2403(4)(b) explains that a Iclovered claim shall not include any amount due any . . . insurer . . . as subrogation recoveries or otherwise . . . . Section 44-2403(4)(b) further provides that this section shall not prevent a person from presenting the excluded claim to the insolvent insurer or its liquidator, but the claim shall not be asserted against any other person, including the person to whom benefits were paid or the insured of the insolvent insurer, except to the extent that the claim is outside the coverage or is in excess of the limits of the policy issued by the insolvent insurer[.] Given these provisions and the undisputed evidence that Alsobrook did not file his claim with the liquidator, it is clear that Alsobrook's claim is not a covered claim as that term is defined in the Act. Alsobrook argues that because his claim is not a covered claim, the entire Act is inapplicable. Specifically, Alsobrook contends that § 44-2403(4)(b) cannot be used by Earp as a defense to Alsobrook's subrogation claim. We disagree. The plain language of the Act reveals that the Legislature intended the Act to protect not only the claimants making claims on the Association, but also the insureds of an insolvent insurance company. One of the stated purposes of the Act is to avoid financial loss to policyholders. [11] And one of the ways in which the Legislature has accomplished this purpose is by prohibiting excluded claims from being asserted against the insured, except to the extent that a claim is outside the policy coverage or is in excess of the policy limits. [12] [3] In construing a statute, a court must look to the statutory objective to be accomplished, the evils and mischiefs sought to be remedied, and the purpose to be served, and then must place a sensible construction upon the statute to effectuate the object of the legislation, rather than a construction that defeats the purpose of the statute. [13] To conclude that the claim must first be a covered claim before an insured is entitled to the defense granted in § 44-2403(4)(b), as urged by Alsobrook, would provide an insured the protection guaranteed by the Act only when the claimant has filed his or her claim with the liquidator. Alsobrook's interpretation of the Act would give claimants the authority to determine if and when an insured is entitled to the protection of the Act. Alsobrook's interpretation is not dictated by the plain language of the Act and would circumvent one of the Act's express purposes, which is to protect policyholders of insolvent insurers. Accordingly, we conclude that a claim need not be a covered claim as defined by § 44-2403(4)(a) to be barred by § 44-2403(4)(b). Here, Alsobrook's claim against Earp is a subrogation claim and, therefore, pursuant to § 44-2403(4)(b), cannot be asserted against Earp, except to the extent that Alsobrook's claim is outside of or in excess of the insurance policy issued by Earp's insolvent insurer. [14]