The opinion of the court was delivered by: Mary Hannah Leavitt, Judge
AND NOW, this 17th day of May, 2010, it is hereby ORDERED that the above-captioned opinion filed September 28, 2009, shall be designated OPINION rather than MEMORANDUM OPINION, and it shall be reported.
BEFORE: HONORABLE MARY HANNAH LEAVITT, Judge.
Before the Court is a Motion for Judgment on the Pleadings filed by the Statutory Liquidator of Legion Insurance Company (In Liquidation) in an interpleader action filed by General Reinsurance Corporation (Gen Re).*fn1 Gen Re filed this action for the purpose of having the Court determine which party is owed $2,488,336.19 under a 1993 Reinsurance Agreement between Gen Re and MS Casualty Insurance Company. By the 1993 Reinsurance Agreement, Gen Re reinsured a book of workers' compensation insurance business written by MS Casualty Insurance Company, a Mississippi insurer that was later merged into American Bankers Insurance Company.*fn2 In 2000, Legion purchased this book of business from American Bankers, including the Gen Re reinsurance on that business. The Statutory Liquidator asserts that Gen Re must remit the reinsurance proceeds to the estate of Legion but the Mississippi Insurance Guaranty Association (MIGA) asserts that it is entitled to those proceeds as compensation for the claims MIGA must now pay on Legion's behalf to Mississippi claimants. The Statutory Liquidator responds that MIGA may seek reimbursement from the Legion estate by filing a proof of claim, as has every other state guaranty association affected by Legion's insolvency.
As set forth in the pleading filed by Gen Re, this matter developed from a series of agreements among Legion, American Bankers, and Gen Re. The legal question is how Legion's insolvency affected Gen Re's duties as reinsurer of business initially written by American Bankers and later assumed by Legion.
The central agreement is the 1993 Reinsurance Agreement, Reinsurance Agreement No. 7747, between Gen Re and American Bankers. Interpleader Complaint, ¶12. Under the 1993 Reinsurance Agreement, Gen Re was required to reimburse American Bankers for all claims in excess of $100,000, the amount of underwriting risk retained by American Bankers.*fn3 After the 1993 Reinsurance Agreement terminated, Gen Re continued to be responsible for claims arising from incidents that occurred prior to January 1, 1996.
Of next importance are two September 2000 Assumption Reinsurance Agreements. In one, Legion assumed the liabilities for all workers' compensation insurance policies written by American Bankers with effective dates from January 1, 1993, through December 30, 2000. In the second, Legion assumed the liabilities for workers' compensation insurance policies written by ARIC, and later acquired by American Bankers, with effective dates of October 1, 1999, through December 31, 2000. Interpleader Complaint, ¶¶10, 11. The 2000 Assumption Reinsurance Agreements made Legion the direct insurer on the policies originally written by American Bankers and by ARIC. In connection with these assumption reinsurance agreements, American Bankers assigned its rights under the 1993 Reinsurance Agreement to Legion. Interpleader Complaint, ¶13. Gen Re consented to the assignment.
The next relevant agreement is the Workers' Compensation Loss Portfolio Transfer Agreement of Reinsurance No. 8823 (Loss Portfolio Agreement) of July 1, 2000. Interpleader Complaint, ¶15. By this agreement, Legion transferred its claim liability under the policies it assumed from American Bankers and ARIC to Gen Re. The fifth relevant agreement is Run-off Agreement No. 8824 (Run-off Agreement) between Legion and Gen Re. Interpleader Complaint, ¶14. By this agreement, Legion transferred to Gen Re all of its obligations under the policies it issued on or before December 31, 2000.
On July 25, 2003, this Court declared Legion insolvent and ordered it liquidated in accordance with Article V of The Insurance Department Act of 1921.*fn4
Koken v. Legion Insurance Company, 831 A.2d 1196 (Pa. Cmwlth. 2003) (single judge decision), aff'd sub nom. Koken v. Villanova Insurance Company, 583 Pa. 400, 878 A.2d 51 (2005) (in which the Supreme Court affirmed on the basis of the Commonwealth Court's opinion in Legion). At the time, Gen Re was prepared to remit $2,488,336.19 in reinsurance proceeds to Legion pursuant to the 1993 Reinsurance Agreement, the Run-off Agreement and the Loss Portfolio Agreement (collectively, Gen Re Agreements). However, American Bankers and ARIC informed Gen Re that the funds were payable to them because they had been forced by MIGA to make payments to workers' compensation claimants under the policies they had transferred to Legion in the 2000 Assumption Reinsurance Agreements. American Bankers and ARIC paid more than $3,000,000 in claims and expenses on behalf of Legion even though these claim liabilities had been transferred to Legion.
On May 7, 2004, American Bankers and ARIC initiated a declaratory judgment action in Mississippi state court requesting that MIGA be directed (1) to reimburse plaintiffs for claims already paid on behalf of Legion and (2) to assume liability for future claims of this sort. MS Casualty Insurance Company and American Reliable Insurance Company v. General Reinsurance Corporation, American Re-Insurance Company and Mississippi Insurance Guaranty Association,(Miss. Ch., Madison Co., Cause No. 2004-337, filed May 3, 2005). On May 17, 2005, MIGA filed a third-party complaint against the reinsurers, Gen Re and American Re-Insurance Company (Am Re), requesting that in the event MIGA were held liable for the Legion claims, the court should order Gen Re and Am Re to pay MIGA, not the Legion estate.
On June 8, 2005, the Chancery Court of Madison County, Mississippi, entered judgment in favor of American Bankers and ARIC and against MIGA. The court ordered MIGA to reimburse the plaintiffs for all claims already paid on behalf of Legion and to assume responsibility for all future Legion claims. The Court did not address MIGA's third-party complaint against Gen Re and Am Re.*fn5
MIGA appealed the Chancery Court's decision to the Mississippi Supreme Court.
On October 12, 2005, Gen Re filed the instant Interpleader Complaint with this Court. The Statutory Liquidator filed an answer with new matter. MIGA also filed an answer and new matter. MIGA asserted, inter alia, that if it were held liable for the Legion claims paid by American Bankers and ARIC, then it should be entitled to the Gen Re reinsurance proceeds. On joint motion of the parties, this Court stayed Gen Re's Interpleader Complaint, pending a decision by the Mississippi Supreme Court on MIGA's appeal of the Chancery Court's decision. In addition, this Court excused Gen Re from having to participate further in the interpleader action.
On October 26, 2006, the Supreme Court of Mississippi affirmed the decision of the Chancery Court. Mississippi Insurance Guaranty Association v. MS Casualty Insurance Co. and American Reliable Insurance Co., Inc., 947 So.2d 865, 877-878 (Miss. 2006). On April 11, 2007, this Court dissolved the stay of the proceedings; granted the application of American Bankers and ARIC to withdraw; and ordered the remaining parties, MIGA and the Statutory Liquidator, to complete discovery in sixty days. When a discovery dispute developed, MIGA filed a motion to compel discovery. In oral argument thereon, the Statutory Liquidator asserted that discovery was unnecessary because the Statutory Liquidator was entitled to judgment as a matter of law. The court stayed MIGA's motion to compel, and directed the Statutory Liquidator to file a dispositive motion. On August 15, 2008, the Statutory Liquidator filed the instant motion for judgment on the pleadings, which has been briefed by the parties and is ready for disposition.
Motion for Judgment on the Pleadings
The Statutory Liquidator presents three arguments in support of his motion for judgment on the pleadings that the estate of Legion, not MIGA, is entitled to the Gen Re reinsurance proceeds. First, he contends that in light of the decision of the Mississippi Supreme Court, MIGA is collaterally estopped from pursuing an action for the Gen Re reinsurance proceeds in this liquidation proceeding. Second, he contends that there is no statute in Pennsylvania or in Mississippi that authorizes MIGA to demand the reinsurance in question on the theory that it is the "insurer" of Mississippi claims. Third, he contends that MIGA is not entitled to assert third-party beneficiary rights of Mississippi policyholders to the proceeds of the Gen Re reinsurance agreements.
A motion for judgment on the pleadings may be entered where there are no disputed issues of fact and the moving party is entitled to judgment as a matter of law. In determining whether there is a dispute as to facts, the court must confine its consideration to the pleadings and relevant documents. Bata v. Central- Penn National Bank of Philadelphia, 423 Pa. 373, 378, 224 A.2d 174, 179 (1966). The opposing party's well-pleaded allegations will be viewed as true, but only those facts that are specifically admitted by the objecting party may be weighed against him. Goldsmith v. City Council of the City of Easton, 817 A.2d 565, 568 n.3 (Pa. ...