COURT HOLDS THAT REINSURANCE TRUST FUND WAS NOT AN “INSURER” THAT OBTAINED “REINSURANCE” FOR ITS MEMBERS
The Alabama Supreme Court has held that the Alabama Reinsurance Trust Fund, established by several self-insured employer groups to provide workers compensation coverage in excess of the members’ self-insured levels, is not an “insurer” and thus could not have obtained “reinsurance” for its members. The issue arose when the Reinsurance Trust Fund procured an excess coverage policy from a carrier that later became insolvent. The Reinsurance Trust Fund submitted a claim on behalf its member to the Alabama Insurance Guaranty Association (the “AIGA”). The AIGA denied coverage, arguing that the definition of a “covered claim” under the Guaranty Act excluded payments to an “insurer.” The court held that the Reinsurance Trust Fund did not act as an “insurer” because it was not in the business of entering into insurance contracts and that the Reinsurance Trust Fund had not obtained “reinsurance” for its members because, among other reasons, “reinsurance” is defined as “insurance for insurance companies.” Ala. Ins. Guar. Ass’n v. Ass’n of Gen. Contractors Self-Insurer’s Fund, No. 05-450 (Ala. Nov. 24, 2010)
This post written by Ben Seessel.
