The Mississippi Court of Appeals invalidated an assessment imposed on a manufacturing association’s workers compensation group by a state’s self-insurer guaranty association on Tuesday.  

The Mississippi Manufacturers Association Workers Compensation Group challenged an assessment levied by the Workers Compensation Group Self-Insurer Guaranty Association, which was created by the state’s legislature to pay workers compensation claims on behalf of any group self-insurer that becomes insolvent. The group argued that it had stopped issuing self-insured workers comp coverage and instead obtained a policy to insure and pay its liabilities from its prior periods of self-insurance in Mississippi Manufacturers Association Workers Compensation Group v. Mississippi Workers' Compensation Self-Insurer Guaranty Association.

The Mississippi Workers Compensation Commission upheld the assessment, and the manufacturers group appealed, according to court documents.

Under Mississippi’s Workers' Compensation Self-Insurer Guaranty Association Law, all group self-insurers must be members of a guaranty association. Prior to 2004, individual self-insurers and group self-insurers were required to be members of a single guaranty association, but the legislature created the workers comp association for group self-insurers.

The manufacturers group was one of 11 founding members of the association, but in May 2010, the group stopped renewing coverage or issuing new coverage. In 2014, the group purchased an insurance policy from AmFed National Insurance Co. to cover all claims and liabilities arising from prior periods of self-insurance. In November 2014, the commission approved the termination of a loan agreement between the Mississippi Manufacturers Association and the Mississippi Manufacturers Association Workers Compensation Group.

The self-insurance association notified the manufacturers group that its plan of operation provides that withdrawing members “continue to be liable for assessment for three years or until there are no liabilities outstanding under its previous self-insured pooling status …” and sent the group an invoice in March 2015 of nearly $13,000 for the 2014 calendar year. However, the group appealed to the commission. In 2015, the commission affirmed the assessment and reinstated the loan agreement between the Mississippi Manufacturers Association and the manufacturers workers comp group.

The manufacturers group challenged the assessment, arguing that because the guaranty fund balance remained in excess of $750,000, it was above the threshold listed in the state statute to impose assessments. The group also questioned whether the association had the authority to impose assessments based on a full calendar year rather than a six-month period, and further alleged that the guaranty fund lacked the authority to assess the manufacturers group’s members because the group had already withdrawn from the self-insurer guaranty association and no longer operated as a group self-insurer.

The Mississippi Court of Appeals held that the guaranty association had the authority to continue assessing the manufacturers group for at least three years after it withdrew from the group, but found that the assessment was invalid because the fund never declined to the level outlined in the statute to invoke assessment.

Although the manufacturers group withdrew from the association and obtained third-party insurance to pay its liabilities, the court found no dispute that the assessment at issue was levied within the three years of the group’s withdrawal and consistent with the guaranty association’s plan of operation. However, the court held that the statute prohibits assessment unless the guaranty association’s fund balance actually declines to $750,000 and noted that the association provided no evidence that its balance dropped to that level.

The court also held that the commission erred in reinstating the loan agreement between the manufacturers group and the nonparty Mississippi Manufacturers Association since the issue was never raised before the commission and there was no basis in the record for the commission to reinstate it.

As a result, the court reversed the commission’s decision and issued a separate order to reverse the reinstatement of the loan agreement.