IN THE SUPREME COURT OF THE STATE OF MISSISSIPPI

THE FORMER BOARD OF TRUSTEES AND MEMBERS OF MISSISSIPPI COMP CHOICE SELF-INSURERS FUND

APPELLANTS/PLAINTIFFS

VS. CASE NO. 2015-CA-01555

MISSISSIPPI WORKERS’ COMPENSATION GROUP SELF-INSURER GUARANTY ASSOCIATION AND JOHN DOES 1-10

APPELLEE/DEFENDANT

On Appeal from the Circuit Court of Madison County

RESPONSE BRIEF OF DEFENDANT/APPELLEE MISSISSIPPI WORKERS’ COMPENSATION GROUP SELF-INSURER GUARANTY ASSOCIATION

ORAL ARGUMENT REQUESTED

OF COUNSEL:

ANDREW D. SWEAT (MSB# 8100) JOHN D. PRICE (MSB# 4495) JENNIFER H. SCOTT (MSB# 101553) WISE CARTER CHILD & CARAWAY, P.A. 600 Heritage Building 401 East Capitol Street Jackson, MS 39201 T: (601) 968-5500 F: (601) 968-5593 Attorneys for the Appellee, Mississippi Workers’ Compensation Commission Group Self-Insurer Guaranty Association

E-Filed Document Jun 17 2016 15:18:08 2015-CA-01555 Pages: 34

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IN THE SUPREME COURT OF THE STATE OF MISSISSIPPI

THE FORMER BOARD OF TRUSTEES AND MEMBERS OF MISSISSIPPI COMP CHOICE SELF-INSURERS FUND

APPELLANTS/PLAINTIFFS

VS. CASE NO. 2015-CA-01555

MISSISSIPPI WORKERS’ COMPENSATION GROUP SELF-INSURER GUARANTY ASSOCIATION AND JOHN DOES 1-10

APPELLEE/DEFENDANT

CERTIFICATE OF INTERESTED PERSONS

The undersigned counsel of record certifies that the following listed persons have an

interest in the outcome of the case. These representations are made in order that the Judges of

this Court may evaluate possible disqualification or recusal.

1. Former Board of Trustees and Members of Mississippi Comp Choice Self-Insurers Fund, Plaintiffs/Appellants;

2. James D. Shannon, Kathryn L. White, Bennett L. Wilson, and the Shannon Law

Firm, PLLC, Attorneys for Plaintiffs/Appellants; 3. Mississippi Workers’ Compensation Group Self-Insurer Guaranty Association,

Defendant/Appellee; 4. Andrew D. Sweat, John D. Price, Jennifer H. Scott, and Wise Carter Child &

Caraway, P.A., Attorneys for Defendant/Appellee; 5. The Honorable John A. Emfinger, Madison County Circuit Court Judge.

This the 17th day of June, 2016. s\Jennifer H. Scott ANDREW D. SWEAT (MSB# 8100) JOHN D. PRICE (MSB# 4495) JENNIFER H. SCOTT (MSB# 101553) Attorneys for Defendant/Appellee

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TABLE OF CONTENTS

Certificate of Interested Persons ………………………………………………………………….2 Table of Contents …………………………………………………………………………………3 Table of Authorities ………...…………………………………………………………………….5 Statement in Support of Request for Oral Argument ……………………………………………. 7 Statement of the Issue ……………………………………………………………………………..7 Statement of the Case ……………………………………………………………………………..7 Statement of Facts ………………………………………………………………………………...7 Summary of the Argument ………………………………………………………………………12 Argument ....……………………………………………………………………………………...15

I. Plaintiffs’ claim against the Guaranty Association for alleged negligent wasting of Fund assets fails as a matter of law.……………………….15 A. Application of discretionary function immunity to functions

prescribed in the Self-Insurer Guaranty Association Law………………..16

B. Application of discretionary function immunity to Plaintiffs’ specific monetary claims for alleged wasting of the Fund’s assets………18 (1) Plaintiffs’ claim against the Guaranty Association for allegedly negligently overpaying AmFed for its claim services fails as a matter of law…………………………………18 (2) Plaintiffs’ claim against the Guaranty Association

for allegedly negligently overpaying workers’ compensation claims fails as a matter of law…………………………………..19

(3) Plaintiffs’ have abandoned their claim that the Guaranty Association negligently sold certain assets of the Fund…………21

II. Plaintiffs’ claim against the Guaranty Association for Conversion

fails as a matter of law………………………………………….………………..21

III. Plaintiffs’ claim against the Guaranty Association relating to premium audits fails as a matter of law………………………………….………..23

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IV. Plaintiffs’ claim against the Guaranty Association for an accounting fails as a matter of law…………………….……………………………………24 V. In handling the Comp Choice Fund and claims, the Guaranty Association

complied with all applicable statutory and regulatory provisions and with its own Plan of Operation………………………………………….……………26 A. The Guaranty Association did not violate Miss. Code Ann. § 71-3-174..26 (1) The Guaranty Association neither based nor was

required to base an assessment request on § 71-3-174 or Article XI(A)(2) of its Plan of Operation…………………….27

(2) Section 71-3-174 does not impose a 60-day time limit for requesting a special assessment………………….…………..29 B. The Guaranty Association did not violate the Commission’s General Rule 7…………………………………………….……………..30

Conclusion .………………………………………………………………………………………32 Certificate of Service .……………………………………………………………………………34

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TABLE OF AUTHORITIES

Cases Brantley v. City of Horn Lake, 152 So. 3d 1106 (Miss. 2014)…………………………16, 17, 23 Burgess v. Bankplus, 830 So. 2d 1223 (Miss. 2002)…………………………………………..25 Little v. Mississippi Dept. of Transportation, 129 So. 3d 132 (Miss. 2014) ………………16, 17 Miss. Transp. Comm’n v. Montgomery, 80 So. 3d 789 (Miss. 1012) ……………………..16, 17 The Former Board of Trustees and Members of Mississippi Comp Choice Self-Insurers Fund v. Miss. Workers’ Compensation Group Self-Insurer Guaranty Association, No. 2013-IA-00666-SCT .……………………………………………..10 Travis v. Stewart, 680 So. 2d 214 (Miss. 1996)…………………………………………………24 Union National Life Ins. Co. v. Crosby, 870 So. 2d 1175 (Miss. 2004)…………………………25 Statutes 11-46-9(1)(d)………………………………………………………………7, 10, 13, 16, 23, 24, 33 71-3-1(3)…………………………………………………………………………………………20 71-3-29…………………………………………………………………………………………..20 71-3-75(3) ………………………………………………………………………………………..8 71-3-151 – 7-3-181 ……………………………………………………………………………..23 71-3-153……………………………………………………………………………………..22, 25 71-3-159 ………………………………………………………………………………………….8 71-3-163(1)(e) ……………………………………………………………………………………8 71-3-163(2)(a)…………………………………………………..………………………..12, 13, 18 71-3-163(2)(c)……………………………………………………………………………13, 18, 20 71-3-163(2)(d)………………………………………………………………………………..17, 23 71-3-165(1) ……………………………………………………………………………………….8

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71-3-165(2) ……………………………………………………………………………………….8 71-3-165(2)(d)……………………………………………………………………………………17 71-3-165 (4)……………………………………………………………………………………….8 71-3-167(2)(a)……………………………………………………………………………………..8 71-3-173(c) ……………………………………………………………………………………….8 71-3-173(d)………………………………………………………………………………………..8 71-3-173(e)………………………………………………………………………………………..8 71-3-174…………………………………………………………………...8, 14, 26, 27, 28, 29, 30 71-3-175 …………………………………………………………………………………………..8 Administrative Rules Miss. Work. Comp. Comm’n Gen. R. 7 ……………………………...8, 14, 15, 26, 28, 30, 31, 32

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STATEMENT IN SUPPORT OF REQUEST FOR ORAL ARGUMENT

This case raises an issue of first impression for this Court relating to whether certain

functions of the Mississippi Workers’ Compensation Group Self-Insurer Guaranty Association

(“Guaranty Association”) are discretionary functions entitled to immunity pursuant to

Mississippi Code Annotated § 11-46-9(1)(d). The procedural history and facts of the case are

complex, and the Guaranty Association believes that oral argument would assist the Court in

analyzing the issue presented.

STATEMENT OF THE ISSUES

Did the trial court correctly determine that the functions of the Guaranty Association

complained of in Plaintiffs’ Second Amended Complaint were discretionary rather than

ministerial and that the Guaranty Association therefore has statutory immunity as provided in

Mississippi Code Annotated § 11-46-9(1)(d)?

STATEMENT OF THE CASE

This case is an appeal from a Judgment of Dismissal of the Defendant Guaranty

Association entered by the Circuit Court of Madison County on September 9, 2015. After

considering the Guaranty Association’s motion for summary judgment, the court determined

(and the parties agreed) that the Mississippi Tort Claims Act (MTCA) was applicable to the

claims made in Plaintiffs’ lawsuit. The court further determined that the Guaranty Association’s

functions complained of in that lawsuit were discretionary functions rather than ministerial ones,

thereby giving the Guaranty Association immunity for the actions pursuant to Mississippi Code

Annotated § 11-46-9(1)(d). Accordingly, the court dismissed the action with prejudice.

STATEMENT OF THE RELEVANT FACTS

Mississippi Comp Choice Self-Insurers Fund (“Comp Choice” or “the Fund”) was a

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workers’ compensation group self-insurer, operating under a Certificate of Authority granted by

the Mississippi Workers’ Compensation Commission (“Commission”) pursuant to Mississippi

Code Annotated § 71-3-75(3) and the Commission’s General Rule 7. The Guaranty Association

is a “nonprofit unincorporated legal entity” that has responsibility for workers’ compensation

group self-insurers throughout the State. Miss. Code Ann. § 71-3-159. The Mississippi Workers’

Compensation Group Self-Insurer Guaranty Association Law (“Self-Insurer Guaranty

Association Law”) includes a general mandate subjecting the Guaranty Association to

“examination and regulation by the commission.” Miss. Code Ann. § 71-3-175. In setting forth

the particular powers, duties, and obligations of the Guaranty Association, the law in many

instances requires the Association to make specific reports to the Commission and makes the

Association’s decisions subject to Commission approval. See, e.g., Miss. Code Ann. §§ 71-3-

163(1)(e); 71-3-165(1), (2), (4); 71-3-167(2)(a); 71-3-173(c), (d), (e); 71-3-174.

On January 20, 2009, the Commission entered an Order ending Comp Choice’s authority

to act as a self-insurer. R. 84-87. That Order followed the Fund’s voluntary surrender of its

Certificate of Authority. R. 84. Pursuant to the Commission’s Order, all rights, duties, and

obligations flowing between Comp Choice and the former Board of Directors terminated

immediately with the entry of the Order. R. 84-85. Moreover, the Commission stated that the

Fund in default would be operated by and under the direction and control of the Commission

itself. R. 85.

On February 24, 2009, the Commission entered a second order relative to the operation of

Comp Choice in default, designating the Guaranty Association “to administer and assume

responsibility for the operation of Mississippi Comp Choice” in default, pursuant to the

Commission’s January 20, 2009 Order and the Self-Insurance Guaranty Association Law. R.

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104-106. In that Order, the Commission instructed the Guaranty Association to look to

enforcement of the indemnity agreements, which made the former Comp Choice members

jointly and severally liable for outstanding workers’ compensation liabilities of the Fund in

default, in the event the Fund’s remaining assets were insufficient to pay those liabilities. R. 106.

As of February 24, 2009, the Guaranty Association began administering the Fund in default, in

accordance with the Self-Insurer Guaranty Association Law and with the Commission orders.

In the case at bar, Plaintiffs base all their claims on actions undertaken by the Guaranty

Association and its alleged agent AmFed in the course of carrying out the Association’s duties

under the Self-Insurer Guaranty Association Law and the relevant orders of the Commission.

For example, Plaintiffs complain about the agreement between the Guaranty Association and

AmFed, the means and extent of the investigation into the wrongdoings of the Fund’s former

Trustees and the service/administration entities hired by those Trustees, and various audits of the

Fund. R. 10-17. These and other alleged acts all flow from the response of the Guaranty

Association and AmFed to the Commission’s termination of Comp Choice’s Certificate of

Authority and from the efforts of the Guaranty Association and AmFed to assess and collect fees

from the former members of the Fund, which were needed to fund Comp Choice’s claims deficit.

Plaintiffs initially brought this action pursuant to the MTCA, but after the Guaranty

Association raised immunity defenses under the MTCA in response to the complaint, they

changed their strategy, filing an amended complaint denying the applicability of the Act and

alleging claims solely under Mississippi common law. The Guaranty Association moved to

dismiss Plaintiffs’ amended complaint, based on various immunities granted to the Association

by both the MTCA and the Self-Insurer Guaranty Association Law. The circuit court granted the

motion to dismiss, ruling only that the Guaranty Association was a covered entity under the

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MTCA and that the MTCA therefore provided the exclusive means for bringing this lawsuit

against the Association. The circuit court permitted Plaintiffs to re-file their complaint to allege

claims under the MTCA. Plaintiffs filed another amended complaint (“Second Amended

Complaint”) on April 22, 2013. R. 10-26.

Thereafter, the circuit court stayed the proceedings before it, pending the resolution of a

petition for interlocutory review of the circuit court’s dismissal order, which was filed by

Plaintiffs in this Court. By Order dated November 20, 2014, this Court reversed the circuit

court’s order of dismissal and remanded the case for further proceedings. (See, The Former

Board of Trustees and Members of Mississippi Comp Choice Self-Insurers Fund v. Miss.

Workers’ Compensation Group Self-Insurer Guaranty Association, No. 2013-IA-00666-SCT.)

After remand, the Guaranty Association filed a motion for summary judgment as to all claims

asserted in Plaintiffs’ Second Amended Complaint. R. 27-35.

At the hearing on the Guaranty Association’s motion for summary judgment on June 30,

2015, the parties agreed that Plaintiffs’ Second Amended Complaint was before the court and

that the MTCA applied to this lawsuit. Tr. 4 (06/30/15).1 Thus, the issue before the Court was

whether the discretionary function immunity granted by Mississippi Code Annotated § 11-46-

9(1)(d) applied to the functions that formed the basis for the Plaintiffs’ Second Amended

Complaint.

Specifically, Plaintiffs based their claims on five allegations, each of which was

addressed at the summary judgment hearing: (1) the Guaranty Association allegedly overpaid

AmFed to provide claims administration for the Fund in default (Tr. 8 (06/30/15)); (2) AmFed,

1 During a telephonic hearing on July 23, 2015, in which Judge Emfinger announced the court’s decision on the motion, Plaintiffs’ counsel confirmed that Plaintiffs agreed that the MTCA applied to these claims. R. 5:8-20 (07/23/15).

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as third-party administrator for the Guaranty Association, allegedly overpaid benefits on

workers’ compensation claims of the Fund in default (Tr. 17 (06/30/15)); (3) AmFed allegedly

negligently prepared premium audits that resulted in increased premiums for former members of

Comp Choice after the Fund defaulted (Tr. 28 (06/30/15)); (4) the Guaranty Association

allegedly was negligent in selling certain assets held by Comp Choice prior to default (Tr. 30

(06/30/15)); and (5) the Guaranty Association allegedly committed the tort of conversion in

keeping premium deposits paid to Comp Choice by its members and using those funds to pay

claims after its default (Tr. 32 (06/30/15)). Plaintiffs also contended that the Commission’s April

2009 assessment was improper because of these acts of the Guaranty Association and because

the Association did not comply with certain statutory and regulatory provisions.

Counsel for Plaintiffs conceded at the hearing that conducting the premium audits

(allegation No. 3, above) involved a discretionary function. Tr. 30:13-16 (06/30/15). Plaintiffs’

counsel also conceded that the Guaranty Association had not, in fact, sold the assets of Comp

Choice (allegation No. 4, above), that the Association instead still held the assets at issue, and

that the allegation was, therefore, not part of Plaintiffs’ claim against the Guaranty Association.

Tr. 31-32 (06/30/15). With regard to the claim that the Guaranty Association improperly

converted the premium deposits rather than returning those to the former Comp Choice members

as a “surplus” (allegation No. 5, above), Plaintiffs’ counsel acknowledged that, because the Fund

had workers’ compensation claims that remained open, it had not yet been determined whether

there would be a “surplus” to return to Plaintiffs. Tr. 34 (06/30/15).

At the conclusion of the hearing, Judge Emfinger took the matter under advisement. He

held a telephonic hearing with the counsel for the parties on July 23, 2015, in which he

announced his ruling. Judge Emfinger ruled that the discretionary function immunity did apply to

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the Guaranty Association’s functions underlying Plaintiffs’ three remaining allegations (Nos. 1,

2, and 3, above) and that dismissal of all of Plaintiffs’ claims was therefore warranted. Tr. 6

(07/23/15). The instant appeal followed the Judgment of Dismissal entered by the trial court on

September 9, 2015. R. 316.

SUMMARY OF THE ARGUMENT

This Court should affirm the trial court’s grant of summary judgment in favor of the

Guaranty Association on all asserted claims because each claim fails as a matter of law and

Plaintiffs have failed to demonstrate the existence of a genuine issue of material fact on any of

their claims.

First, Plaintiffs’ claims against the Guaranty Association for negligence or gross

negligence are premised on the allegation that the Commission’s assessment of the former

members occurred because the Comp Choice Fund’s assets that existed at the time the

Commission directed the Guaranty Association to assume management of the assets were “spent

unnecessarily and wasted by the Guaranty Association.” R. 8. Specifically, Plaintiffs claim that

the Guaranty Association overpaid AmFed for its services, that AmFed overpaid benefits and

settlements to the defaulted Fund’s workers’ compensation claimants, and that the Guaranty

Association sold certain assets of the Fund for less than their value. Plaintiffs have conceded

there is no merit to one of these allegations, having admitted the Guaranty Association has not

actually sold the certain assets of Comp Choice at issue. The other two allegations fail as a

matter of law because both fall squarely within discretionary functions granted to the Guaranty

Association by the Self-Insurance Guaranty Association Law. The employment of AmFed to

handle claims is specifically within the discretionary authority granted in § 71-3-163(2)(a) (the

Guaranty Association “may.... employ or retain such persons as are necessary to handle claims”);

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moreover, negotiation of the fee to be paid to AmFed under that contract for its claims handling

services is within the discretionary authority granted in § 71-3-163(2)(c) (the Guaranty

Association “may negotiate and become a party to such contracts as are necessary”). Likewise,

the agreement to settle a workers’ compensation claim is, by its nature, a negotiated contract, and

it is within the discretionary functions granted to the Guaranty Association under §71-3-

163(2)(a) and (c) to negotiate and pay such settlements and to authorize AmFed to act on its

behalf in the course of such dealings.

Second, Plaintiffs’ claim for the tort of conversion relative to the premium deposits fails

as a matter of law. Plaintiffs have acknowledged that the Guaranty Association continues to be

responsible for open workers’ compensation of Comp Choice in default and that, as a result, it is

not known whether there will be a surplus of Comp Choice assets to be returned to the Fund’s

former members. Thus, Plaintiffs have no factual basis to allege that the Guaranty Association

has impermissibly converted a surplus that would be due to the former members. In addition,

Plaintiffs’ Second Amended Complaint does not allege that the Guaranty Association used the

premium deposits for any use not authorized by the Commission’s Order or the Self-Insurer

Guaranty Association Law. Since no surplus currently exists and since the funds have been, or

will be used, pursuant to the Guaranty Association’s statutory authority, the Guaranty

Association has not committed the tort of conversion.

Third, Plaintiffs’ claim relating to the premium audits fails for any one of several reasons.

The premium audits were, by statute, discretionary and, therefore, entitled to immunity under §

11-46-9(1)(d). At hearings on motion for summary judgment, Plaintiffs acknowledged that the

premium audits were discretionary and agreed that they were not proceeding on the premium

audit claim. Furthermore, no damages resulted from the premium audits because they were not

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used to increase premiums and were, in fact, conducted only after the Fund’s default—i.e.,

during a time period when Plaintiffs’ were not paying premiums to Comp Choice.

Fourth, Plaintiffs’ claim for an accounting from the Guaranty Association fails as a

matter of law because there is no relationship between the parties that would impose a duty on

the Guaranty Association to provide an accounting. The former members of Comp Choice never

had a contractual relationship with the Guaranty Association. Moreover, the Guaranty

Association had no fiduciary relationship with the former members. Neither does the legislation

creating the Guaranty Association impose any duty on the Guaranty Association to account to

former members of the defunct fund.

Finally, there is no merit to Plaintiffs’ claims that the Guaranty Association has been

“grossly negligent” in handing the Comp Choice Fund by not adhering to statutory and

regulatory requirements and by violating the Commission’s General Rule 7. These claims are

based on inaccurate readings of the relevant statutory or regulatory provisions and are not

supported by any facts. The Guaranty Association did not violate Mississippi Code Annotated §

71-3-174 or Article XI(A)(2) of its Plan of Operation when requesting the assessment from the

Commission in April 2010. Indeed, the Guaranty Association was not seeking a special

assessment of the remaining solvent group self-insurers as contemplated by § 71-3-174 and

Article XI(A)(2) of its Plan, and it did not reference § 71-3-174 or Article XI(A)(2) in its letter to

the Commission requesting the assessment; the Association instead sought to assess the former

members of Comp Choice and requested the Commission to levy an assessment based upon the

member indemnity agreements. Because the Guaranty Association sought to assess the members

of a defaulted group self-insurer and not the Association’s solvent member group-self insurers,

§71-3-174 and Article XI(A)(2) were inapplicable. Furthermore, the Guaranty Association did

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not violate the Commission’s General Rule 7(B)(6)(a) because that provision was not applicable

in the context of engaging AmFed to provide claims-related services after the Comp Choice

default and because the Commission expressly stated that it had no objection to the Association’s

retaining AmFed to provide such services.

ARGUMENT

I. PLAINTIFFS’ CLAIM AGAINST THE GUARANTY ASSOCIATION FOR ALLEGED NEGLIGENT WASTING OF FUND ASSETS FAILS AS A MATTER OF LAW

The heart of Plaintiffs’ case is set out in Paragraph 13 of the Second Amended

Complaint. It states:

[O]n April 19, 2010, the Commission ordered an assessment totaling $1,948,463, to be divided proportionately between members who have paid premiums for the past four years that showed losses. The Commission alleges, contrary to the existing facts and law, that this assessment is necessary to fund the projected deficit for closing the remaining claims of the Fund. AmFed sent this order to each member on April 21, 2010, along with invoices detailing the assessments for each member. However, the sole reason for the exhaustion of Fund assets and the resulting assessments was that the money which had been left to handle claims was spent unnecessarily and wasted by the Guaranty Association, individually and through AmFed.

R. 42-43, emphasis added.

This lawsuit is, in essence, a collateral attack on the $1,948,463 assessment ordered by

the Commission, based on that administrative body’s determination that the Comp Choice self-

insured fund had inadequate reserves to pay pending claims. The monetary damages that

Plaintiffs have allegedly sustained are their proportionate shares of the Commission’s

assessment. The Commission determined that the assessment would be calculated based upon

each member’s share of the total premiums earned, both paid and due, for each of the last four

fund years that had shown a loss. R. 114-115.

In their collateral attack on the Commission’s assessment, Plaintiffs contend the sole

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reason for the “assessments was that the money which had been left to handle claims was spent

unnecessarily and wasted by the Guaranty Association, individually, and through Amfed.” R. 42-

43 at ¶ 13. Amfed was the third party administrator that the Guaranty Association hired to

administer the workers’ compensation claims against the Fund. Plaintiffs allege that the assets of

the Fund were wasted in three ways. First, they claim that the Guaranty Association

“negligently” overpaid AmFed for its claims adjusting services. Second, Plaintiffs allege that

Amfed negligently overpaid workers’ claims. Third, Plaintiffs claim that the Guaranty

Association negligently sold the Fund’s interest in two limited liability companies, Miss Petro

LLC and Petro Source Ventures LLC, for less than their value. Before we address these three

claims for monetary damages, we will first examine the applicable law.

A. APPLICATION OF DISCRETIONARY FUNCTION IMMUNITY TO FUNCTIONS PRESCRIBED IN THE MISSISSIPPI WORKERS’ COMPENSATION SELF-INSURER GUARANTY ASSOCIATION LAW

Section 11-46-9(1)(d) of the Mississippi Tort Claims Act (MTCA) provides: “A

governmental entity and its employees acting within the course and scope of their employment or

duties shall not be liable for any claims. . . . [b]ased upon the exercise or performance or the

failure to exercise or perform any discretionary duty function or duty on the part of the

governmental entity or employee thereof.” Miss. Code Ann. § 11-46-9(1)(d) (Rev. 2012). In

Little v. Mississippi Dept. of Transportation and in Brantley v. City of Horn Lake, this Court

applied a new test to determine whether immunity under § 11-46-9(1)(d) applies. In Brantley, the

Court states: “[W]hile one statute may render a broad function ministerial, another statue or

regulation may render a duty involved with that function discretionary, thus allowing the

performance of such a duty to enjoy immunity.” Brantley, 152 So. 3d at 1113. In Brantley, the

Court quoted with approval from Miss. Transp. Comm’n v. Montgomery:

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Occasionally … the Legislature will mandate that a political subdivision fulfill some particular function, but then specifically set forth that some portion or aspect of that function is discretionary. When that happens, acts fulfilling the discretionary portion of the governmental function enjoy immunity. Miss. Transp. Comm’n v. Montgomery, 80 So. 3d 789, 798 (¶ 31) (Miss. 2012) (emphasis added).

Brantley, 152 So. 3d at 1113, n.3.

The Self-Insurer Guaranty Association Law states the Guaranty Association “may....

employ or retain such persons as are necessary to handle claims.” Miss. Code Ann. § 71-3-

163(2)(a) (emphasis added). By use of the permissive verb “may” instead of the mandatory

“shall,” the Legislature determined that the hiring of persons to administer claims is a

discretionary portion of a governmental function. The Self-Insurer Guaranty Association Law

also provides that, the Guaranty Association “may…. negotiate and become a party to such

contracts as are necessary.” § 71-3-165(2)(d). By use of the permissive verb “may” the

Legislature determined that negotiation of contracts is discretionary.

As noted by the Supreme Court in Little and Brantley, the Legislature may set forth that

some aspect of a function is discretionary. In the Self-Insurer Guaranty Association Law, the

Legislature specifically made employment of claims handlers and negotiation of contracts

discretionary. Miss. Code Ann. § 71-3-163(2)(a) & (d).

Plaintiffs’ claims against the Guaranty Association for negligence or gross negligence are

premised on the allegation that the Commission’s assessment of them occurred because the

Comp Choice Fund assets that existed at the time the Commission directed the Guaranty

Association to assume management of the assets were “spent unnecessarily and wasted by the

Guaranty Association.” R. 8. In particular, Plaintiffs claim the Fund’s assets were wasted in the

following ways:

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1. The Guaranty Association “negligently” overpaid AmFed to serve as Third Party Administrator;

2. AmFed negligently overpaid workers’ compensation claims; and

3. The Guaranty Association negligently sold the Comp Choice fund’s interest in two limited liability companies for less than their value.

In the next section, we will address the application of the law to each of Plaintiffs’ so called

“negligent spending and wasting claims.”

B. APPLICATION OF DISCRETIONARY FUNCTION IMMUNITY TO PLAINTIFFS’ SPECIFIC MONETARY CLAIMS FOR ALLEGED WASTING OF THE FUNDS ASSETS (1) Plaintiffs’ claim against the Guaranty Association for allegedly negligently

overpaying AmFed for its claim services fails as a matter of law.

Plaintiffs allege that the Guaranty Association paid AmFed an “exorbitant fee” for its

services. R. 44 at ¶ 23(a). The Self-Insurer Guaranty Association Law states that the Guaranty

Association may employ persons to handle claims. Pursuant to that provision, AmFed was hired

to handle claims. The employment of AmFed to handle claims is specifically within the

discretionary authority granted in § 71-3-163(2)(a).

The Guaranty Association negotiated a contract with AmFed, which included the fee to

be paid to AmFed for its handling claims and performing other duties. Section 71-3-163(2)(c)

specially states the Guaranty Association may “negotiate and become a party to such contracts as

are necessary or proper.” The Guaranty Association was exercising its discretionary function

when it negotiated its contract with AmFed. Elemental to the negotiation of a service contract is

the negotiation of the fee to be paid for those services. Having been given the discretionary

authority to negotiate a contract with AmFed, the Guaranty Association is immune from liability

for the alleged “negligent” negotiation—that is, allegedly agreeing to pay too much for AmFed’s

services. Consequently, the trial court’s dismissal of claims for the alleged negligent

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overpayment of AmFed should be affirmed.

(2) Plaintiffs’ claim against the Guaranty Association for allegedly negligently overpaying workers’ compensation claims fails as a matter of law.

Next, Plaintiffs contend that AmFed, as the Guaranty Association’s third party

administrator, improperly wasted the Fund’s money by overpaying claims filed by injured

workers. At the time the Guaranty Association assumed Comp Choice’s claims portfolio, there

were 62 claims pending. R. 95. The evaluation of workers’ compensation claims, which have

disputed issues of fact and law, is a discretionary endeavor. If immunity does not attach to the

discretionary function of evaluating and adjusting workers’ compensation claims, the trial of this

case would require scores of mini-trials within the trial. It would require that the merits of each

workers’ compensation claim adjusted by AmFed be scrutinized to determine if the information

regarding the cause, extent and duration of each worker’s injury justified the amount of any

negotiated settlement. The circuit court would be required to analyze each of the 62 workers’

compensation claims files, including the depositions of claimants, employers, medical providers

and expert witnesses and medical records, bills and employment records, to determine the

compensability and potential liability exposure for each claim. Keep in mind that the trier of fact

would also have to consider that a key element of every settlement is the cost of “buying peace.”

That cost is money paid to eliminate the risk of a less favorable outcome as well as future

defense costs that would be incurred if the claim were defended through the administrative

hearing and appeals process.

Allowing the former members to seek damages against the Guaranty Association for the

alleged overpayment of workers’ compensation claims would be contrary to public policy. It is

in the interest of justice and judicial economy that the Guaranty Association and its third party

administrator have discretion in negotiating settlements. Consider the alternative. If the Guaranty

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Association does not have that discretionary authority to negotiate settlements, should the

Guaranty Association be required to controvert every worker’s compensation claim, and take

every claim to an administrative hearing to have an administrative judge adjudicate the

compensability and award for each claim? Without discretionary authority to negotiate

settlement of workers’ compensation claims, the Guaranty Association would always be open to

lawsuits such as this one, which second guess the claims assessment. Denying the Guaranty

Association this discretionary authority to negotiate settlements and requiring it to controvert

every claim would also be contrary to the purpose of the Mississippi Workers’ Compensation

Law as stated in Miss. Code Ann. § 71-3-1(3).

Remember that all compromise settlements of workers’ compensation claims receive

approval from the Commission in accordance with § 71-3-29. That statute allows

“[c]ommutation and lump sum settlement payments” only “when determined to be in the best

interest of the injured worker or his dependents” and gives the Commission “final authority in

such questions.” In this action, Plaintiffs attempt to relitigate the reasonableness of workers’

compensation settlements that have been approved by the Commission.

The Self-Insurer Guaranty Association Law specifically grants the Guaranty Association

authority to negotiate contracts. Miss. Code Ann. § 71-3-163(2)(c). The Legislature made that

aspect of the Guaranty Association’s authority discretionary when it provided that the Guaranty

Association “may negotiate contracts.” The agreement to settle a workers’ compensation claim

is, by its nature, a negotiated contract. As members of this Court well know, there are few things

more vigorously negotiated than settlements of contested claims in our adversarial legal system.

Although some functions of the Guaranty Association may be ministerial, the Legislature has

carved out the negotiation of contracts to make that a discretionary function. Id. Therefore, the

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trial court’s dismissal of Plaintiffs’ claim for damages resulting from alleged overpayment of

workers’ compensation claims should be affirmed.

(3) Plaintiffs have abandoned their claim that the Guaranty Association negligently sold certain assets of the Fund.

The Second Amended Complaint alleges the Guaranty Association negligently liquidated

the Fund’s ownership interest in two limited liability companies, Miss. Petro Investors, LLC and

PetroSource Ventures, LLC at a time when it was not necessary to do so. R. 45 at ¶ 23(c). In

fact, the Guaranty Association never sold the Fund’s interest in these two limited liability

companies.

At the hearing on the Motion for Summary Judgment, counsel for Plaintiffs admitted “it

has come to light, your Honor, that those assets have not been sold.” Tr. 31 (06/30/15). In light

of the facts, Plaintiffs abandoned this element of their claim.

The Court: …because it has not been sold, that’s not part of your claim then?

Counsel for Plaintiffs: Correct. And, factually, there’s no proof that those have been sold.

Tr. 32 (06/30/15). Consequently, the dismissal of Plaintiffs’ claim that the Guaranty Association

wasted the assets of the Fund by selling the ownership interests in the limited liability companies

should be affirmed.

II. PLAINTIFFS’ CLAIM AGAINST THE GUARANTY ASSOCIATION FOR CONVERSION FAILS AS A MATTER OF LAW.

In Count V of the Second Amended Complaint, Plaintiffs assert a claim for the

intentional tort of conversion. Plaintiffs allege that the Guaranty Association has refused to

refund to them approximately $300,000 in premium deposits. R. 50-51 at ¶37-39. In their

lawsuit, Plaintiffs not only seek to avoid the consequences of the Commission’s assessment

against them, but they also seek reimbursement of premium deposits from the limited funds that

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remained at the time Comp Choice surrendered its Certificate of Authority.

On January 20, 2009, the Commission entered an Order accepting the voluntary surrender

of Comp Choice’s Certificate of Authority. In the Order, the Commission stated:

All members of the Fund whose membership is being terminated under this Order no later than February 19, 2009 shall remain jointly and severally liable with other Fund members for the obligations of the Fund and its members which were incurred or accrued during the members’ period of membership.

R. 86. The Commission’s Order reflects the gravity of the situation. It illustrates that the former

members were to remain liable for the obligations of the Fund.

The Commission authorized the Guaranty Association to receive and manage the

remaining assets of the defunct Fund. R. 104-106. The premium deposits were assets of the

defunct Fund which were available to pay workers’ compensation claims. As the statutory entity

appointed by the Commission to receive the assets of the Fund, the Guaranty Association had no

legal authority to deplete the limited assets by returning deposits to former members.

The Commission’s April 2010 Order states the “Commission and all concerned were, or

reasonably should have been, aware Comp Choice was insolvent.” R. 115. Given the fact the

Fund was insolvent, Plaintiffs’ claim for reimbursement of premium deposits is audacious. The

request of these former members-Plaintiffs for the return of their deposits is similar to a borrower

in default seeking a return of his collateral.

The Guaranty Association’s statutory mission is to “avoid financial loss to claimants

because of the insolvency of a self-insurer.” Miss. Code Ann. § 71-3-153. The Guaranty

Association has no authority to give the funds available to pay workers’ compensation claimants

back to the former members who are the same individuals who underfunded the reserves to pay

claims.

Plaintiffs’ Second Amended Complaint does not allege that the Guaranty Association

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used the premium deposits for any use not authorized by the Commission’s Order or the Self-

Insurer Guaranty Association Law. Since the funds have been, or will be used, pursuant to the

Guaranty Association’s statutory authority, the Guaranty Association has not committed the tort

of conversion. Therefore, Plaintiffs’ claim that the Guaranty Association wrongfully converted

the premium deposits fails as a matter of law. The trial court’s dismissal of Plaintiffs’ claim for

conversion should be affirmed.

III. PLAINTIFFS’ CLAIM AGAINST THE GUARANTY ASSOCIATION RELATING TO PREMIUM AUDITS FAILS AS A MATTER OF LAW.

Plaintiffs allege that the Guaranty Association, “individually and through AmFed,

prepared premium audits for Plaintiffs which covered the last three years of the Fund.” R. 42 at ¶

12. Plaintiffs claim that the audit “findings are improper and inaccurate, and resulted in increases

in premiums owed by Plaintiffs for the three-year period.” R. 42 at ¶ 12.

There is no statute that requires the Guaranty Association to perform premium audits.

Section 71-3-163(2)(d) provides the Guaranty Association “may perform such other acts as are

necessary to effectuate the purpose of §§ 71-3-151 through 71-3-181.” (Emphasis added). This is

another example of the Legislature designating that “some portion or some aspect” of a function

be discretionary. Brantley, 152 So. 3d at 1113. The premium audits were prepared as “other acts

as are necessary” pursuant to § 71-3-163(2)(d). Therefore, the premium audits were discretionary

under § 11-46-9(1)(d). Moreover, at the hearing on the Motion for Summary Judgment, counsel

for Plaintiffs admitted that the premium audit was a discretionary function:

The Court: So as it relates to the claims of premium audits, you would agree then that that would be a discretionary function?

Counsel for Plaintiffs: Yes, Sir.

Tr. 30 (06/30/15).

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The claim arising out of alleged negligent performance of premium audits is barred under

discretionary function immunity. In a telephonic conference with the trial court on July 23, 2015,

Plaintiffs’ counsel agreed that Plaintiffs were not proceeding on the claim relating to the

premium audits. Tr. 6 (07/23/15).

The Second Amended Complaint alleges that the premium audits “resulted in increases of

premiums owed by Plaintiffs.” R. 42 at ¶ 12. Plaintiffs have not offered an affidavit or other

evidence supporting this allegation. Travis v. Stewart, 680 So. 2d 214 (Miss. 1996). In fact, no

premium increases resulted from premium audit. Since there were no increases in premiums,

Plaintiffs could not have been damaged by the premium audits.

In summary, Plaintiffs’ claim relating to the premium audits fails for any one of three

reasons. First, the premium audits were, by statute, discretionary and, therefore, entitled to

immunity under § 11-46-9(1)(d). Second, no damages resulted from the premium audits because

they were not used to increase premiums. Third, at the hearing of the Motion for Summary

Judgment, counsel for Plaintiffs agreed they were not proceeding on the premium audit claim.

Tr. 6 (07/23/15). Therefore, the dismissal of Plaintiffs’ claims based upon alleged negligent

performance of premium audits should be affirmed.

IV. PLAINTIFFS’ CLAIM AGAINST THE GUARANTY ASSOCIATION FOR AN ACCOUNTING FAILS AS A MATTER OF LAW. In Count III, Plaintiffs ask for an accounting of monies paid by the Guaranty Association

“for the period starting January 20, 2009 to present date.” R. 47 at ¶ 29. January 20, 2009 is the

date of the Commission’s Order accepting Comp Choice’s voluntary surrender of its Certificate

of Authority. In the January 20, 2009 Order accepting the voluntary surrender of Comp Choice’s

Certificate of Authority, the Commission required membership for all employers in the Fund to

terminate no later than February 19, 2009. R. 228. The Commission also ended all rights of the

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Comp Choice’s Board of Trustees to manage the Fund: “Effective upon the date of this Order,

the members of the current Board of Trustees for the Fund shall be immediately relieved of any

further duty, responsibility and obligation to the Fund going forward, other than in a cooperative

capacity as set forth below.” R. 228-29. In other words, the former members are requesting an

accounting of disbursements made after they were no longer members and after responsibility

for Fund management had been removed from its board of trustees.

An accounting implies that one is responsible to another for money either by contract or a

fiduciary relationship. Union National Life Ins. Co. v. Crosby, 870 So. 2d 1175 (Miss. 2004).

Neither of these elements exist here. The former members never had a contractual relationship

with the Guaranty Association. Moreover, the Guaranty Association had no fiduciary

relationship with the former members. A fiduciary relationship arises only if the activities of

both parties goes beyond their operating on their own behalf and the activity is for the benefit of

both. Burgess v. Bankplus, 830 So. 2d 1223 (Miss. 2002). There is no legal relationship between

the Guaranty Association and the former members of Comp Choice upon which to premise a

claim for an accounting.

As a statutorily created entity, the Guaranty Association’s purpose, as stated by the

Legislature, “is to provide a mechanism for the payment of the covered claims under the

Workers’ Compensation Law, to avoid excessive delay in payment and to avoid financial loss to

claimants because of the insolvency of a self-insurer.” Miss. Code Ann. § 71-3-153. By statute,

the Guaranty Association’s duties are to protect claimants from self-insurers such as Plaintiffs’

self-insured fund, which had inadequate reserves to pay the claims of the injured workers. The

legislation which created the Guaranty Association does not impose any duty on the Guaranty

Association to account to former members of the defunct fund.

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The Guaranty Association owes no contractual, statutory, or fiduciary duty to the former

members of the defunct fund. Plaintiffs’ claim for an accounting has no basis in fact or law. The

trial court’s dismissal of the claim for account should be affirmed.

V. IN HANDLING THE COMP CHOICE FUND AND CLAIMS, THE GUARANTY ASSOCIATION COMPLIED WITH ALL APPLICABLE STATUTORY AND REGULATORY PROVISIONS AND WITH ITS OWN PLAN OF OPERATION.

In Sections II and III of their Argument, Plaintiffs allege that the Guaranty Association

has been “grossly negligent” in handing the Comp Choice Fund and claims by not adhering to

statutory and regulatory requirements and by violating the Commission’s General Rule 7.

Plaintiffs’ allegations fail because they are based on inaccurate readings of the relevant statutory

or regulatory provisions and because they are not supported by any facts. Each allegation is

discussed in turn in the following sections.

A. THE GUARANTY ASSOCIATION DID NOT VIOLATE MISS. CODE ANN. § 71-3-174.

Plaintiffs contend the Guaranty Association did not comply with Mississippi Code

Annotated § 71-3-174 in requesting the assessment ordered by the Commission on April 19,

2010. This contention is based on at least two faulty assumptions: (1) that the Guaranty

Association was required to and did base the assessment request on § 71-3-174; and (2) that,

even if applicable, § 71-3-174 would require the Guaranty Association to request a special

assessment no more than sixty-days after the Association’s assets had been exceeded. Moreover,

Plaintiffs’ arguments serve only as a collateral attack on the Commission’s April 2010

assessment Order. In essence, Plaintiffs argue that the Order is invalid because it was not

requested and issued consistent with certain statutory and regulatory rules. However, the

Commission—and not the Guaranty Association—issued that assessment Order, and the validity

of the Order is not on appeal in this matter.

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(1) The Guaranty Association neither based nor was required to base an assessment request on § 71-3-174 or Article XI(A)(2) of its Plan of Operation.

Section 71-3-174 provides a mechanism for the Guaranty Association to request a

“special assessment plan” of its solvent member group self-insurers when the liabilities on

covered claims of a defaulted group self-insurer must be paid out of the Guaranty Association’s

statutory fund and payment of such liabilities would exceed the assets of that fund:

If an association [the Individual Guaranty Association or the Group Guaranty Association] assumes any obligations of an individual self-insurer or group self-insurer under this chapter, and payment of such obligations exceed the assets of such association, such association shall within not less than sixty (60) days thereafter submit for approval by the commission a plan for special assessment of each individual self-insurer and group self-insurer who may be responsible for payment of such obligations in excess of the assets of such association.

(emphasis added). Article XI(A)(2) of the Guaranty Association’s Plan of Operation is intended

to incorporate this statutory mechanism by providing for a special assessment “[i]f the

Association assumes obligations of a Member and this obligation exceeds the assets of the

Association.” R. 221. When the Guaranty Association requested an assessment in April 2010, it

was not seeking a special assessment of the remaining solvent group self-insurers as

contemplated by § 71-3-174 and Article XI(A)(2) of its Plan, and it did not reference § 71-3-174

or Article XI(A)(2) in its letter to the Commission requesting the assessment. R. 95-100. The

Guaranty Association instead sought to assess the former members of Comp Choice and

requested the Commission to levy “an assessment based upon the member indemnity

agreements.” R. 96. Because the Guaranty Association sought to assess the members of a

defaulted group self-insurer and not the Association’s solvent member group-self insurers, §71-

3-174 and Article XI(A)(2) were inapplicable.

Importantly, the Guaranty Association was not required to rely on the special assessment

mechanism in § 71-3-174 to fund the claims deficit left by the Comp Choice default. Nothing in

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the text of that section indicates that a special assessment of solvent group self-insurers is the

only way to fund a deficit left by another group. General Rule 7(B)(11) provides other options

for funding such a deficit, including “assessments of the [group’s] membership, if ordered by the

group self-insurer or the Commission.” MWCC Gen. R. 7(B)(11)(b)(3). Rather than assessing

the solvent member group self-insurers to make up the short fall left by Comp Choice’s default,

the Guaranty Association could, and did, elect to request that the Commission assess the former

members of Comp Choice based on the indemnity agreements signed by those former members

as a condition of their membership in Comp Choice. The Commission levied such an assessment

in its April 19, 2010 Order.

In the April 19, 2010 assessment Order, the Commission unquestionably recognized that

the Guaranty Association was requesting an assessment of former Comp Choice members “based

upon the member indemnity agreements” and was not seeking an assessment of the

Association’s own members pursuant to §71-3-174 or Article XI(A)(2) of the Plan. R. 242. The

Commission even cited language from its February 24, 2009 Order, in which it had expressly

recognized that “the indemnity agreements required by Commission General Rule 7, which

jointly and severally bind all of the members of Mississippi Comp Choice to meet the workers’

compensation obligations of each and every other member, are valid and enforceable.” R. 241. In

the April 2010 assessment Order, the Commission found that “the remaining assets available to

satisfy the projected claim payout [were] insufficient to pay the workers’ compensation liabilities

and other obligations . . . and that an assessment under these circumstances [was] necessary.” R.

243. “Pursuant to its statutory authority and the rules and regulations of the Mississippi Workers’

Compensation Commission,” the Commission then ordered “the assessment . . . of former

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members of Comp Choice” as had been requested by the Guaranty Association. R. 244 (emphasis

added).

Plaintiffs’ argument boils down to this: The Guaranty Association was negligent because

it did not follow rules that did not apply to the assessment at issue. The argument fails as a matter

of law. The assessment requested and ordered here was not a “special assessment” of the

Guaranty Association’s own members which would be governed by § 71-3-174 or Article

XI(A)(2) of the Plan. The Guaranty Association instead requested and the Commission ordered

an assessment of the former Comp Choice members pursuant to liabilities assumed by those

former members under indemnity agreements executed as a condition of membership in Comp

Choice—an assessment that is not governed by the provisions of § 71-3-174 or Article XI(A)(2).

(2) Section 71-3-174 does not impose a 60-day time limit for requesting a special assessment.

Plaintiffs also claim that the Guaranty Association violated Article XI(A)(2) of its Plan of

Operation by not timely requesting an assessment within sixty days. Article XI(A)(2) cites

Mississippi Code Annotated § 71-3-174 as authority, and the Article is intended to incorporate

and restate the statutory provisions for a “special assessment” of the Association’s own

members. As discussed previously in this Brief, the Guaranty Association neither sought nor was

required to seek a special assessment of its members under § 71-3-174. But even if that statutory

provision were applicable to the assessment at issue, there is no merit to Plaintiffs’ claim that the

Plan of Operation imposes a sixty-day time limit on such an assessment and that the Guaranty

Association’s assessment request was untimely because it was made too late.

Section 71-3-174 does not impose a sixty-day minimum time period for the Guaranty

Association to request a special assessment, but instead instructs that, where the defaulting group

self-insurer’s obligations exceed the Guaranty Association’s assets, a special assessment plan is

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to be submitted “within not less than sixty (60) days thereafter . . . for approval by the

commission.” (emphasis added) The phrase “within not less than sixty (60) days” does not mean

“within no more than sixty days.” Rather than imposing a maximum time period in which the

Guaranty Association must submit a special assessment plan, this phrase creates a sixty-day

moratorium on such a submission by the Guaranty Association. Because a special assessment

plan must be submitted within a time period that is “within not less than sixty (60) days” after the

obligations of a defaulting group self-insurer have exceeded the fund assets of the Guaranty

Association, the assessment request at issue would not be untimely under § 71-3-174 by virtue of

being submitted more than sixty days after the Guaranty Association determined that payment of

Comp Choice’s workers’ compensation obligations could exceed the Association’s fund assets,

as alleged by Plaintiffs. Finding merit in such claim would require this Court essentially to hold

that the Plan of Operation trumps the statute and thereby permits the Court to ignore the sixty-

day assessment moratorium imposed by statute.

B. THE GUARANTY ASSOCIATION DID NOT VIOLATE THE COMMISSION’S GENERAL RULE 7.

Plaintiffs claim that the Guaranty Association violated the Commission’s General Rule

7(B)(6) by contracting with AmFed to serve as “administrator” of the Comp Choice Fund in

default and as a service company to adjust the remaining Comp Choice claims. Plaintiffs base

their contentions on a fundamental misunderstanding of General Rule 7 and its application to this

situation.

To begin, Plaintiffs are incorrect in claiming that the Guaranty Association was acting as

a group self-insurer in handling the Comp Choice claims after that group self-insurer defaulted.

Rather than functioning as a group self-insurer, the Guaranty Association was functioning as a

guaranty fund to ensure that the workers’ compensation liabilities of Comp Choice would not go

31

unpaid despite Comp Choice’s default. This function is established for the Guaranty Association

by statute and is not the same as operating as a group self-insurer. Because the Guaranty

Association does not transform into a group self-insurer in performing its statutory functions in

the event of a group’s default, General Rule 7’s regulatory oversight of group self-insurers,

including the prohibition in General Rule 7(B)(6), does not apply to the Association.

In addition, AmFed was not retained to function as an “administrator” of Comp Choice in

default as contemplated by General Rule 7, which defines “administrator” as an entity “engaged

by a workers’ compensation group self-insurer’s board of trustees to carry out the policies

established by the group self-insurer’s board of trustees and to provide day to day management

of the group self-insurer.” MWCC Gen. R. 7(B)(13)(a). AmFed’s role in acting as an

“administrator” of Comp Choice in default falls outside this definition for several reasons. First,

AmFed was not engaged by the Comp Choice’s board of trustees as required by General Rule 7’s

definition. Indeed, Plaintiffs here include former members of Comp Choice’s board of trustees,

and they have made clear that they disagreed with the decision to engage AmFed to provide

services as an “administrator” of the Comp Choice Fund in default. Second, AmFed was not

designated to carry out the policies set by board of trustees of Comp Choice. At the time AmFed

was engaged to provide services as an “administrator” of the Comp Choice Fund in default, that

Fund’s board of trustees had been relieved of all rights and obligations as to the Fund as stated in

the Commission’s January 20, 2009 Order. R. 84-85. Moreover, the Guaranty Association had no

intention or desire to continue carrying out the policies of Comp Choice’s former board of

trustees as those policies had resulted in a self-insurance fund that had defaulted on its workers’

compensation obligations and had left a claims deficit of approximately $1.9 million. Because

AmFed was neither engaged by Comp Choice’s board of trustees nor charged with carrying out

32

policies set by that board, it does not constitute an “administrator” as defined in General Rule

7(B)(13)(a) and is not subject to the prohibition stated in General Rule 7(B)(6)(a).

Finally, in presenting arguments that the Guaranty Association violated this provision of

General Rule 7, Plaintiffs conveniently omit a key fact that shows their claim is without merit:

the Commission knew that a single entity was providing both administrative and claims servicing

functions for Comp Choice in default and expressly stated that it had no objection to the same.

The Guaranty Association wrote to the Commission on March 24, 2009 about having a single

entity perform administrative and claims servicing functions and the Association’s position that

General Rule 7(B)(6)(A) did not apply to the Association in handling the Comp Choice Fund and

claims in default. R. 92-93. By letter dated March 25, 2009, the Commission advised the

Guaranty Association that it had no objection to the Association’s using the same entity to

provide both administrative and claims handling functions in connection with running off the

claims of Comp Choice in default. R. 94. In arguing the Guaranty Association was grossly

negligent in violating General Rule 7, Plaintiffs omit any mention of this “no objection” letter

from the Commission. The letter nonetheless establishes that the Guaranty Association was not

“grossly negligent” in violating General Rule 7 as alleged because the Association had fully

disclosed its decision to retain AmFed to the Commission and had been assured that the

Commission did not object to that decision.2

CONCLUSION

Based on the foregoing arguments and authorities, the Guaranty Association respectfully

requests this Court to affirm the September 9, 2015 Judgment of Dismissal entered by the Circuit

2 Plaintiffs also fail to acknowledge that on the path to default, Comp Choice had itself violated the General Rule 7(B)(6)(a) prohibition against shared control/financial interests between a group self-insurer’s administrator and its service company. See Tr. 16 (06/30/15).

33

Court of Madison County, granting summary judgment in favor of the Association and

dismissing all Plaintiffs’ claims based on the immunity granted by Mississippi Code Annotated §

11-46-9(1)(d). The Guaranty Association prays for such other relief as may be warranted under

the circumstances.

RESPECTFULLY SUBMITTED, this the 17th day of June, 2016. MISSISSIPPI WORKERS’ COMPENSATION GROUP SELF-INSURER GUARANTY ASSOCIATION By: /s/Jennifer H. Scott . ANDREW D. SWEAT (MSB# 8100) JOHN D. PRICE (MSB# 4495) JENNIFER H. SCOTT (MSB# 101553) Its Attorneys OF COUNSEL: WISE CARTER CHILD & CARAWAY, P.A. 600 Heritage Building 401 East Capitol Street P.O. Box 651 Jackson, MS 39205-0651 P: (601) 968-5500; F: (601) 968-5519

34

CERTIFICATE OF SERVICE I, the undersigned, hereby certify that on this date I served a copy of the foregoing document, via the Court’s electronic filing system, to the following counsel of record:

James D. Shannon, Esq. Kathryn L. White, Esq. Bennett L. Wilson, Esq. Shannon Law Firm 100 W. Gallatin Street Hazlehurst, MS 39083-0869

and that I served a copy of the foregoing by United States mail, postage prepaid, to the following:

Honorable John H. Emfinger Madison County Circuit Court Judge P.O. Box 1885 Brandon, MS 39043

THIS, the 17th day of June, 2016.

/s/Jennifer H. Scott . ANDREW D. SWEAT JOHN D. PRICE JENNIFER H. SCOTT