Opinion ID: 865021
Heading Depth: 2
Heading Rank: 3

Heading: whether the claims are covered claims.

Text: ¶24. Next, we must decide whether the claims at issue are “covered claims.” A covered claim is defined as: “Covered claim” means an unpaid claim, including one of unearned premiums, which arises out of and is within the coverage and not in excess of the applicable limits of an insurance policy to which this article applies issued by an insurer, if such insurer becomes an insolvent insurer and (1) the claimant or insured is a resident of this state at the time of the insured event, provided that for entities other than an individual, the residence of a claimant or insured is the state in which its principal place of business is located at the time of the insured event; or (2) the property from which the claim arises is permanently located in this state. “Covered claim” shall not include any amount awarded as punitive or exemplary damages; or sought as a return of premium under any retrospective rating plan; or due any reinsurer, insurer, insurance pool, or underwriting association, as subrogation recoveries or otherwise and shall preclude recovery thereof from the insured of any insolvent carrier to the extent of the policy limits. Miss. Code Ann. § 83-23-109(f) (emphasis added). MIGA, by statute, is only permitted to pay “covered claims.” Miss. Ins. Guar. Ass’n v. Byars, 614 So.2d 959, 963 (Miss. 1993). 12 MIGA argues that novation never occurred, which rendered MS Casualty and American Reliable reinsurers to Legion based upon the plain language of the title of the Assumption Reinsurance Agreements. MIGA argues that because MS Casualty and American Reliable are still solvent, they are responsible for paying the claims under the policies. Further, MIGA argues that it cannot pay an insurance company based upon the plain language of Miss. Code Ann. § 83-23-109(f); but instead, it can only pay policyholders or claimants. ¶25. MIGA’s argument is misplaced. The chancellor correctly perceived the issue as being whether the claims made to Legion were covered claims stemming from direct insurance. The claims were made to Legion at the time of insolvency, and Legion is the direct insurer because novation occurred. This has nothing to do with MS Casualty and American Reliable – the claims were not made to those insurance companies, and they are not reinsurers. ¶26. MIGA is attempting to avoid reimbursing MS Casualty and American Reliable based on a misinterpretation of the applicable statute. MIGA agreed to allow the chancellor to decide whether the claims made to Legion were “covered claims” stemming from “direct insurance.” MIGA requested MS Casualty and American Reliable to pay the claims to avoid multiple lawsuits, and if the chancellor ruled in the insurance companies’ favor, they would be reimbursed by MIGA. However, MIGA now claims that, according to statute, it cannot make any payments to insurance companies. However, the chancellor ruled that MIGA was responsible for reimbursing MS Casualty and American Reliable for the claims it would have owed under the statute because it was liable for the claims to Legion. Thus, the chancellor did not err inasmuch as his decision does not conflict with the statute. 13