Summary 2010 WY 21

Summary of Decision issued February 26, 2010

Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court.

Case Name: Wyo. Med. Ctr., Inc. v. Wyo. Ins. Guar. Assn.

Citation: 2010 WY 21

Docket Number: S-09-0109

Appeal from the District Court of Natrona County, the Honorable David B. Park, Judge.

Representing Appellant Wyoming Medical Center, Inc.: Stephenson D. Emery of Williams, Porter, Day & Neville, PC, Casper, Wyoming.

Representing Appellee Wyoming Insurance Guaranty Association: James R. Bell of Murane & Bostwick, LLC, Casper, Wyoming.

Facts/Discussion: After the Wyoming Medical Center’s (WMC) insurer became insolvent, the Wyoming Insurance Guaranty Assoc. (WIGA) paid claims made against WMC. WIGA then filed a complaint against WMC claiming that it was obligated to pay the deductibles for each claim. Asserting that WIGA stood in the shoes of the insurer (PHICO), WMC argued that WIGA’s claim was barred by an earlier district court ruling that WMC was not obligated to pay the deductibles to its insolvent insurer. WIGA filed a summary judgment motion which the district court granted, ruling that WMC was obligated to pay the deductibles.

Res judicata: For res judicata to apply, the parties, the subject matter, the issues and the capacities of the persons must be identical. WMC contended that the requirement that the parties be identical was satisfied because PHICO and WIGA were in privity with each other. WMC asserted that WIGA authorized PHICO to demand payment from WMC of the deductible amounts on WIGA’s behalf. Pursuant to the plain language of § 26-31-106(a)(i), WIGA is obligated to pay “covered claims” which are those claims the insurer would have been obligated to pay but for its insolvency. The Court stated the legislature appeared to intend WIGA pay only what an insurer would have paid had it remained solvent. A solvent insurer would have been obligated to pay the claim amount less the deductible. There is wide support for construing insurance guaranty association statutes to mean that the rights and duties of such associations are limited to those explicitly set forth in the statutes. Res judicata does not apply to bar WIGA’s claim.
Set-off for attorneys’ fees: After PHICO’s insolvency, WMC paid the attorney fees at issue directly to the law firm for services it provided in defending WMC against claims covered under the policy. WMC asserted that PHICO, and therefore WIGA, would have been required to reimburse WMC for attorney fees and that a set-off against the judgment was an appropriate way to accomplish that. The Court stated that the Act reflected that the legislature drew the line between what is covered and what is not. Section 26-31-106(a)(i) makes it clear that WIGA was obligated to pay covered claims arising out of and within the coverage of an insurance policy. Section 26-31-103(a)(ii)(D) excludes supplementary payment obligations including attorney fees.

Conclusion: WIGA and PHICO were not identical and not in privity so as to make it appropriate to apply the default judgment in the breach of contract action against WIGA to bar its claim under the Insurance Guaranty Act. The definition of “covered claims” the legislature adopted expressly excludes attorney fees. The Court concluded that WIGA was not responsible for WMC’s attorney fees.

Affirmed.

J. Kite delivered the decision.

Link: http://tinyurl.com/y98qyyv .

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