California Insurance Guarantee Association, Oklahoma Property and Casualty Insurance Guaranty Association, and Texas Property and Casualty Insurance Guaranty Association v. Hill Brothers Transportation, Inc.
03-15-00314-CV
Tex. App.Sep 28, 2015Background
- Legion Insurance issued a workers’ compensation policy to Hill Brothers that included deductible reimbursement obligations from the insured to the carrier.
- Legion became impaired/insolvent; three state guaranty associations (CIGA, OPCIGA, TPCIGA) paid “covered claims” within the policy deductibles for claims from March 3, 2003 to April 28, 2009.
- The guaranty associations sued Hill Bros. to recover deductible amounts they paid; the trial court granted summary judgment against the guaranty associations on statute-of-limitations grounds.
- Legion had canceled the policy for nonpayment of premium effective June 6, 2002, but the guaranty associations argue cancellation did not terminate coverage or the parties’ continuing obligations for injuries occurring during the policy period.
- The guaranty associations rely on their enabling statutes (CA, OK, TX) and receiver/insolvency law (PA) to claim they possess the insurer’s rights and may sue insureds to recover deductibles; they ask the appellate court to reverse summary judgment.
Issues
| Issue | Plaintiff's Argument (Guaranty Assns.) | Defendant's Argument (Hill Bros.) | Held (trial-court posture / relief sought) |
|---|---|---|---|
| When did the statute of limitations accrue for deductible-reimbursement claims? | The policy is a continuing contract; limitations did not run until the guaranty associations paid deductibles and Hill Bros. refused reimbursement (demand + repudiation). | Accrual occurred when Hill Bros. stopped paying premium (April 1, 2002) or when Legion canceled the policy (June 2002), so suit filed in 2009 is time-barred. | Trial court granted summary judgment for Hill Bros. on limitations; appellants seek reversal, arguing accrual was later (after payments/demand). |
| Did Legion’s cancellation for nonpayment repudiate or terminate the insurer’s ongoing obligations (and thus trigger accrual)? | Cancellation per policy/statute is permitted and does not repudiate or extinguish insurer liability for injuries occurring during the policy period or the insured’s reimbursement duty for deductibles. | Cancellation/repudiation ended the contract and triggered accrual as of the cancellation or nonpayment date. | Trial court treated claims as time-barred; appellants argue cancellation was not repudiation and so did not start limitations. |
| Do the guaranty associations have standing / privity to sue Hill Bros. for deductibles? | Their enabling statutes make them the insurer as to covered claims and give them the same rights (including suit to recover deductibles); Pennsylvania receivership law treats such recoveries as guaranty-association assets. | Hill Bros. contends guaranty associations lack privity or standing analogous to reinsurance (citing reinsurance cases). | Trial court dismissed on limitations; appellants press that they are proper parties with statutory rights to sue and seek reversal. |
Key Cases Cited
- In re Imperial Ins. Co., 157 Cal. App. 3d 290 (Cal. Ct. App. 1984) (California appellate recognition that guaranty association rights to adjust and pay claims entail entitlement to policy deductibles)
- Group Life & Health Ins. Co. v. Turner, 620 S.W.2d 670 (Tex. App. Dallas 1981) (definition of repudiation requires fixed intention to abandon performance)
- Moore v. Jenkins, 211 S.W. 975 (Tex. 1919) (classic authority on repudiation and contractual abandonment)
- Texas Workers’ Compensation Comm’n v. Garcia, 893 S.W.2d 504 (Tex. 1995) (workers’ compensation law provides lifetime medical benefits and scope of carrier obligations)
- Wyoming Medical Ctr., Inc. v. Wyoming Ins. Guar. Ass’n, 225 P.3d 1061 (Wyo. 2010) (Wyo. Supreme Court: guaranty association may recover deductibles because it has the insolvent insurer’s rights to the extent of paid covered claims)
- Va. Prop. & Cas. Ins. Guar. Ass’n v. Int’l Ins. Co., 385 S.E.2d 614 (Va. 1989) (insolvency creates legal relationship between insured and guaranty association reflecting policy terms to extent not limited by statute)
- General Reinsurance Corp. v. Am. Bankers Ins. Co., 996 A.2d 26 (Pa. Commw. Ct. 2009) (reinsurance recoveries are general assets of the insurer’s estate; distinguishes reinsurance context from guaranty-association deductible recoveries)
- Hudson Envtl. Servs., Inc. v. N.J. Prop.-Liab. Ins. Guar. Ass’n, 858 A.2d 39 (N.J. Super. Ct. App. Div. 2004) (discusses privity and guaranty-association obligations under the state act)