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under the Issuer’s financial guaranty bonds without regard to whether Issuer
could have cured if not insolvent.
La. Ins. Guar. Ass’n v. Johnson Controls, Inc., 905 So. 2d 444 (La. Ct. App. 2005).
The appellate court addressed a challenge to the Louisiana Insurance Guaranty
Association’s (“LIGA”) denial of a claim based on the net worth exclusion in the
guaranty association statute. The court explained that the “Powers and duties
of the association” section of the statute, La. R.S. § 1382, contains a
typographical error in referring to the net worth exclusion as applying to any
claimant with a net worth of $25 million or greater in the year “immediately
preceding the determination of insolvency of the insured.” The court of appeals
held that the statute, properly written, should be read with “insurer” replacing
“insured.” With that explanation, the court of appeals denied the appeal of the
insured of the insolvent insurer.
La. Safety Ass’n of Timberman–Self‐Insurers Fund v. La. Ins. Guar. Ass’n, 998 So.
2d 817 (La. Ct. App. 2008). The court of appeals rejected both arguments
presented by the Louisiana Insurance Guaranty Fund (“LIGA”) in asserting that
it was not liable for claims made to it by a self‐insurance fund. First, LIGA’s
argument that any amount due a self‐insurance fund is not a “covered claim”
under La. R.S. 22:1379(3)(b), was without merit. The court reasoned that, where
the self‐insured fund makes a claim to LIGA that would otherwise be covered by
its insolvent excess of loss insurance carrier, such claim is a “covered claim”
made by the insured of an insolvent insurer for purposes of the Louisiana
statute. In explaining its reasoning, the court distinguished between claims
made by a self‐insurer to LIGA, which may be allowed in some cases, and claims
that are excluded because they fall within the coverage provided by selfinsurance.
Second, the court of appeals rejected LIGA’s argument that
members of a self‐insurance fund are “affiliates” whose aggregate net worth
excludes guaranty fund coverage for purposes of application of the statutory
$25 million net worth exclusion. In rejecting the second argument, the appellate
court reasoned that the members of the self‐insurance fund were not
“affiliates,” because they were not a single economic unit for accounting
purposes, and because the fund is a separate trust that is required to file its own
financial statements and reports with the Department of Insurance.
Massachusetts Commissioner of Insurance v. Massachusetts Accident Co., 318 Mass. 238, 61
N.E.2d 137 (1945). The court held that the value of non‐cancellable accident
and health policies with level premiums was the value at the date of the
liquidation decree of the total estimated benefits which policyholders would
have received had their policies been continued, minus the total present value
of future gross premiums. If no equivalent insurance coverage could be
obtained as of the date of the decree, the cost of obtaining other policies
would not be the method of evaluating the amount of the policyholders'
claims. The calculation of dividends on proved claims must include the value of
the company's cancellable policies, the agency organization, and good will.
Minnesota Smith v. National Credit Ins., 65 Minn. 283, 68 N.W. 28 (1896). The case
involved five different claims under various credit insurance policies. The first
claim involved an annual policy which had expired several months before the
insurance company failed. The court found that the losses incurred after
application of the 15% deductible during the full year were to be paid from the
insolvent insurance company's assets. The policy in the second claim had run
only for ten months and seven days before the insurer failed. The court held
that the insolvency of the insurer had the effect of cancelling the policy, and
the policyholder was only entitled to a return of its unearned premium. The
third policy had run ten months and twenty‐two days when the insurer failed.
The court held that the policyholder was not entitled to recover for losses
which occurred after the company's insolvency. The fourth policy at issue had