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even lower interest rate than that stated in the agreement with the second
insurance company that assumed the annuity under the rehabilitation plan.
The court held that the rehabilitation plan’s lower interest rate should be
applied, reasoning that the relationship with the insolvent insurer ended at
insolvency. By participating in the rehabilitation plan, the trust sought to
mitigate its losses. To award the interest rate in the original contract, or at
the statutory rate, would give the trust greater damages than if it were to
recover from the insolvent insurer directly. In the same appeal, the court
rejected the trust’s request that it be awarded attorney fees and expenses
because such an award would be punitive in nature in this context.
Gregory v. Cent. Sec. Life Ins. Co., 953 So. 2d 233 (Miss. 2007). Plaintiffs
purchased life insurance policies with “vanishing” premiums from an agent of
an insurer which became insolvent and was placed in liquidation. A second
company (“Assuming Company”) entered an assumption reinsurance
agreement with the National Organization of Life and Health Insurance
Guaranty Associations, to perform certain contractual obligations of the insurer.
Thereafter, Assuming Company notified plaintiffs that they were required to
provide additional premiums on the life insurance policies purchased from
insurer. Plaintiffs filed suit against the agent and Assuming Company, as
successor in interest to the insurer, for making false and misleading statements
in a deliberate attempt to induce them to purchase the subject “vanishing”
premium policies. The plaintiffs argued that when Assuming Company assumed
the obligations of insurer under the policies, Assuming Company also assumed
responsibility for any false and misleading statements made by the insurer. The
Supreme Court of Mississippi held that Assuming Company was not liable to the
plaintiffs because it only assumed certain “Covered Obligations” of the insurer,
which did not include any acts or omissions of the insurer or its agent.
Miss. Ins. Guar. Ass’n v. Goldin Props., Inc., 893 So. 2d 1062 (Miss. Ct. App. 2004).
The court of appeals addressed whether the Mississippi Insurance Guaranty
Association (“MIGA”) was required to pay a claim on a policy issued by a nonmember
insurer whose policies were assumed when it merged with a member
insolvent insurer. At all relevant times (including the policy issue date, the event
date, and the merger date) issuing insurer was a surplus lines company and nonmember
of MIGA. Therefore, none of its premiums were assessed to be
included into MIGA’s fund. The court held that it would be inequitable for the
claimant to recover from MIGA when no assessment from the policy issued to
him was ever collected by MIGA.
Nat’l Union Fire Ins. Co. v. Miss. Ins. Guar. Ass’n, 990 So. 2d 174 (Miss. 2008). The
U.S. Court of Appeals for the Fifth Circuit certified a question to the Supreme
Court of Mississippi of whether a solvent insurer’s coverage containing an
“other insurance” clause must be exhausted under Mississippi law prior to
initiation of the statutory coverage of the Mississippi Insurance Guaranty
Association where the “other [primary] insurance” is provided by an insurance
company that has become insolvent. The state supreme court described this
clause as providing primary insurance in excess of any other primary insurance
coverage. The court held that coverage under a solvent carrier’s insurance
policy containing an “other insurance” clause must be exhausted prior to MIGA
assuming its statutory obligation to pay.
Missouri
Johnson v. American Life and Accident Ins. Co., 145 S.W.2d 444 (Mo. App.
1941). While the court noted that a particular Missouri statute did provide for
notice to policyholders of certain reinsurance arrangements, even with notice,
the statue did not provide any remedy for correcting any problems perceived