Opinion ID: 2551511
Heading Depth: 2
Heading Rank: 2

Heading: Is the AGCSF or the Reinsurance Trust Fund an Insurer or an Insurance Pool?

Text: Section 27-42-5(4) of the Guaranty Act defines covered claim so as to exclude any amount due any ... insurer [or] insurance pool ... as subrogation recoveries or otherwise. The AIGA argues that both the AGCSF and the Reinsurance Trust Fund are insurers or insurance pools, whose claims are excluded from coverage under the Guaranty Act. We note, however, that the AIGA does not attempt to define the term insurance pool; it cites no legal authority in support of a specific argument relating to an insurance pool; [20] and its arguments in regard to that term consist only of conclusory statements. We have unequivocally stated that it is not the function of this Court to do a party's legal research or to make and address legal arguments for a party based on undelineated general propositions not supported by sufficient authority or argument. Dykes v. Lane Trucking, Inc., 652 So.2d 248, 251 (Ala.1994). Thus, we will not consider whether the AGCSF or the Reinsurance Trust Fund might be an insurance pool. Instead, we will confine our analysis to whether the entities at issue are insurers as that term is used in the Guaranty Act. We conclude that they are not. The Guaranty Act does not define the term insurer. The Guaranty Act is included within Title 27, however, and § 27-1-2, Ala.Code 1975, states:  For the purposes of this title, the following terms shall have the meanings respectively ascribed to them by this section. .... (2) INSURER. Every person engaged as indemnitor, surety or contractor in the business of entering into contracts of insurance.  (Emphasis added.) See also Ala.Code 1975, § 27-1-2(3) (defining person as [a]n individual, insurer, company, association, organization, ... partnership, syndicate, business trust, corporation, and every legal entity). Section 27-1-2(1), Ala.Code 1975, defines insurance as [a] contract whereby one undertakes to indemnify another or pay or provide a specified amount or benefit upon determinable contingencies. The broadly worded definition of insurance and the use of the above-emphasized restrictive language in the definition of insurer compel us to conclude that not all persons who enter into an insurance contract, i.e., who undertake to indemnify another or provide a specified amount or benefit upon determinable contingencies, are considered insurers for purposes of Title 27. In other words, not all persons who contract to insure another person's obligation are in the business of entering into contracts of insurance for purposes of § 27-1-2(2). See Coates v. MS Dealer Serv. Corp., 747 So.2d 341 (Ala.Civ.App. 1999) (recognizing that a contract might be considered insurance for purposes of the tort of bad faith without the defendant's being subject to the provisions of Title 27). In fact, it appears that the legislature has recognized as much in regard to the type of entities involved in the present case. Section 27-4A-2(6), Ala.Code 1975, which defines insurer for purposes of the chapter on the Insurance Premium Tax, states that  self-insurance programs utilizing a trust fund or similar entity providing workers' compensation, health, and other insurance-like coverage shall not be included within this definition of insurer. (Emphasis added.) Compare Fla. Stat. § 624.4621(7) (providing that [p]remiums, contributions, and assessments received by a group self-insurer's fund under Florida's worker's compensation statutes are subject to the premium tax applicable to insurance companies, but the tax rate shall be 1.6 percent of the gross amount of such premiums, contributions, and assessments). Also, enforcement of Title 27, of which the Guaranty Act is a part, falls to the Department of Insurance. See Ala.Code 1975, § 27-2-7. As noted in David Parsons's affidavit, the Department of Insurance does not consider [s]elf-insured workers' compensation groups [to be] `insurers' under the laws pertaining to insurance in the State of Alabama and these groups are not regulated by the Alabama Department of Insurance. [I]t is well established that in interpreting a statute, a court accepts an administrative interpretation of the statute by the agency charged with its administration, if the interpretation is reasonable.... Absent a compelling reason not to do so, a court will give great weight to an agency's interpretations of a statute and will consider them persuasive. Ex parte State Dep't of Revenue, 683 So.2d 980, 983 (Ala.1996); see also, e.g., Hulcher v. Taunton, 388 So.2d 1203, 1206 (Ala. 1980). Under the circumstances presented, the Department of Insurance's interpretation that a self-insured-employer group is not an insurer within the meaning provided in Title 27 is a reasonable one. It certainly is not unreasonable to conclude that a group formed for the purpose of allowing its members to qualify as self-insurers under the workers' compensation law (in lieu of their having to obtain insurance from an insurance company regulated by the Department of Insurance) and that is subject to regulation by the Department of Industrial Relations, is not in the business of entering into contracts of insurance. As this Court has recognized, self-insurance really is not insurance at all; it is the antithesis of insurance as that term is commonly used. Universal Underwriters Ins. Co. v. Marriott Homes, Inc., 286 Ala. 231, 232, 238 So.2d 730, 732 (1970). [21] Furthermore, the conclusion that groups like the AGCSF and the Reinsurance Trust Fund are not insurers is consistent with the position of the framers of the model act upon which the Guaranty Act is based. As this Court has noted, the Guaranty Act was modeled after the Post-Assessment Property and Liability Guaranty Model Act, Air Tuskegee, Ltd., 883 So.2d at 195, which was promulgated by the National Association of Insurance Commissioners (the NAIC). As the Connecticut Supreme Court observed in Doucette v. Pomes, 247 Conn. 442, 461-62, 724 A.2d 481, 491-92 (1999), a case involving the issue whether a self-insured employer was an insurer for purposes of Connecticut's insurance-guaranty-association act, [i]n 1983, an NAIC study committee submitted a report to the NAIC concerning self-insured workers' compensation groups. 2 NAIC Proceedings (1983) p. 742. While such groups are not identical to an individual [self-insured] employer ..., they do self-insure, as a group. We therefore find the report instructive. The report states in two different places that if a self-insured workers' compensation group's excess insurance carrier becomes insolvent, the group should be able to turn to the state's insurance guaranty association fund for protection. See 2 NAIC Proceedings, supra, p. 770 (`[i]f the excess insurance company is not able to deliver on its contractual promises, the insurance guaranty fund can be called upon if the excess company is a licensed company'); id., p. 783 (`[l]icensed excess insurance companies not only are subject to closer regulatory supervision than unlicensed companies, but also provide workers' compensation groups with the additional protection afforded by state insolvency funds'). Therefore, the NAIC report demonstrates the intent of the NAIC that self-insurers are not insurers for purposes of state guaranty acts.  (Emphasis added; footnote omitted.) Accord Iowa Contractors, 437 N.W.2d at 916 (relying, in part, on the NAIC study committee, which unequivocally noted the availability of insurance guaranty association fund protection if a [self-insured] group's excess carrier were to become insolvent, and concluding that such groups are simply not `insurers' for purposes of Iowa law). See also, e.g., MGM Mirage v. Nevada Ins. Guar. Ass'n, 209 P.3d 766, 772 (Nev.2009) (interpreting the Nevada insurance-guaranty-association act: [B]ecause the plain meaning of `insurer' necessarily denotes a person or entity that is in the insurance business, self-insured employers are not insurers.... This conclusion is supported by a majority of jurisdictions' interpretations of their guaranty acts and is in harmony with Nevada's workers' compensation laws.); Stamp v. Department of Labor & Indus., 122 Wash.2d 536, 543-44, 859 P.2d 597, 601 (1993) (In keeping with a majority of jurisdictions which have considered the status of self-insurers under an insurance guaranty act, we hold that employers which self-insure their workers' compensation obligations in Washington are not reinsurers, insurers, insurance pools or underwriting associations for purposes of either the Oregon guaranty act, or its nearly identical Washington counterpart.). [22] Even if the Department of Insurance had taken no position on this matter, however, we note that in Schoepflin v. Tender Loving Care Corp., supra , this Court stated: `Whether a corporation or association is engaged in the insurance business must be determined by the particular objects which it has in view, and not by abstract declarations of general purposes; the business which the organization is actually carrying on, rather than the mere form of the organization, is the test for determining whether it is carrying on an insurance business.' 631 So.2d at 911 (quoting 43 Am.Jur.2d Insurance § 4 (1982) (emphasis added)). After considering the purpose of the AGCSF and the Reinsurance Trust Fund, and the particular objects which [they have] in view, we are compelled to conclude that neither is an insurer for purposes of Title 27, including the Guaranty Act. First, the sole purpose of the AGCSF is to facilitate self-insurance by a select group of employers who meet the requirements set forth in the bylaws. [23] As noted above, self-insurance is the antithesis of insurance. See Marriott Homes, Inc., 286 Ala. at 232, 238 So.2d at 732. Second, this Court has no basis upon which to decide that a self-insured-employer group might be considered an insurer for purposes of a part of Title 27, namely the Guaranty Act, but not for purposes of the remainder of Title 27. Such a group either is in the business of entering into contracts of insurance, § 27-1-2(2), within the meaning of Title 27 and is thus required to meet the requirements of Title 27 governing casualty insurers, or it is not. See Ala.Code 1975, § 27-3-1(a) (No person shall act as an insurer and no insurer shall transact insurance in this state unless so authorized by a subsisting certificate of authority issued to it by the commissioner, except as to such transactions as are expressly otherwise provided for in this title [ i.e., Title 27].); Ala.Code 1975, § 27-5-6(a)(3) (explaining that workers' compensation insurance is a type of casualty insurance). Further, in deciding whether a self-insured-employer group might be an insurer governed by Title 27, we cannot ignore the specific statutory scheme in the Workers' Compensation Act concerning such groups. Crawford v. Springle, 631 So.2d 880, 882 (Ala.1993) (Where statutes in pari materia are general and specific, the more specific statute controls the more general statute.). As explained hereinafter, it is clear that to accept the AIGA's argument would turn the workers' compensation insurance scheme on its head so far as self-insured employers are concerned. Section 25-5-8(a), Ala.Code 1975, provides that an employer who is subject to the Alabama Workers' Compensation Act may secure the payment of compensation under this chapter by insuring and keeping insured his or her liability in some insurance corporation, association, organization, insurance association, corporation, or association formed of employers and workers or formed by a group of employers to insure the risks under this chapter, operating by mutual assessment or other plans or otherwise. Notwithstanding the foregoing, the insurance association, organization, or corporation shall have first had its contract and plan of business approved in writing by the Commissioner of the Department of Insurance of Alabama and have been authorized by the Department of Insurance to transact the business of workers' compensation insurance in this state and under the plan. Section 25-5-8(b), Ala.Code 1975, provides that an employer may elect[ ] not to insure his or her liability... [and] furnish satisfactory proof to the director [of the Department of Industrial Relations] of his or her financial ability to pay directly compensation in the amount and manner and when due as provided by this chapter. Upon receiving satisfactory proof, the director shall authorize the employer to operate as a self-insurer. The director may prescribe other reasonable rules and regulations for the purpose of protecting the injured employee or the employee's dependents and set reasonable fees to accompany self-insurance applications. With respect to an employer who chooses to self-insure, § 25-5-9(a) provides that [t]he Director of Industrial Relations may, under such rules and regulations as he may prescribe, permit two or more employers ... to enter into agreements to pool their liabilities under this chapter for the purpose of qualifying as self-insurers under this chapter. Each employer member of such approved group shall be authorized to operate as a self-insurer under this chapter. (Emphasis added). The AGCSF is such an approved group. Section 25-5-9(b) provides that [t]wo or more employer groups as described in (a) above may enter into agreements to pool their liabilities under this chapter for the purpose of providing excess coverage above the self-insured retention levels maintained by the individual employer groups. The Reinsurance Trust Fund constitutes such a group. The foregoing provisions clearly contemplate that, if an employer chooses to purchase insurance to cover its liability under the Workers Compensation Act, rather than self-insuring that liability, the insurance it will purchase for that purpose will be insurance provided by an insurer regulated by the Department of Insurance. See Ala.Code 1975, § 27-3-1(a). As to self-insured employers, however, it is equally clear that such employers and the groups contemplated by § 25-5-9(a) and (b) in order to enable employers to self-insure are regulated by the Department of Industrial Relations, see § 25-5-8(b), not the Department of Insurance. [24] Based on the foregoing, we conclude that the AGCSF and the Reinsurance Trust Fund [25] are not insurers for purposes of the Guaranty Act.