The DEF's of LIGA: An Update to the ABC's of LIGA
| Author | Stephanie B. Laborde - James E. Moore, Jr. - Heather Landry |
| Position | Stephanie B. Laborde is a Partner with the firm of Milling Benson Woodward L.L.P. and has served as General Counsel for the Louisiana Insurance Guaranty Association for approximately 13 years. James E. Moore, Jr. was an Income Partner and Heather L. Landry was an Associate with the firm of Milling Benson Woodward L.L.P. at the time this Article... |
| Pages | 997-1044 |
The DEF’s of LIGA: An Update to the ABC’s of
LIGA
Stephanie B. Laborde, James E. Moore, Jr.,
and Heather Landry
INTRODUCTION
More than 20 years ago, Carey J. Guglielmo and Daniel J. Balhoff
authored an article in the Louisiana Law Review entitled, “The ABC’s of
LIGA,”1 which has served as an excellent guide for practitioners and
laymen alike in interpreting and understanding the law applicable to the
Louisiana Insurance Guaranty Association (“LIGA”). There have been
numerous legislative changes to LIGA Law, Louisiana Revised Statutes
section 22:2051 and the following,2 and many important decisions by the
courts since Guglielmo and Balhoff’s original article. The purpose of this
Article is to discuss developments in LIGA Law. This Article endeavors
to set forth the current state of the settled law and to discuss the areas that
remain subject to conflict or judicial interpretation. This Article first
discusses the character and purpose of LIGA and then the applicable
procedures for suing and defending cases involving LIGA. A substantive
discussion of the defenses and statutory limits to LIGA’s obligation to pay
claims will be followed by an analysis of the application of LIGA Law to
the insured. Finally, this Article concludes with a discussion of settlements
and judgments in the context of these cases and which version of LIGA
Law applies to a specific claim.
I. BACKGROUND
Before 1970, if a Louisiana property or casualty insurer were declared
insolvent, claimants and policyholders would be relegated to filing a claim
Copyright 2017, by STEPHANIE B. LABORDE, JAMES E. MOORE, JR., AND
HEATHER LANDRY.
Stephanie B. Laborde is a Partner with the firm of Milling Benson
Woodward L.L.P. and has served as General Counsel for the Louisiana Insurance
Guaranty Associatio n for approxi mately 13 years. James E. Moore, Jr. was an
Income Partner and Heather L. Landry was an Associate with the firm of Milling
Benson Woodward L.L.P. at the time this Article was drafted.
1. Carey J. Guglielmo & Daniel J. Balhoff, The ABC’s of LIGA, 53 LA. L.
REV. 1759 (1993).
2. In 2008, title 22 was renumbered pursuant to Act No. 415. Act No. 415,
2008 La. Acts 1846–1922. Before January 1, 2009, LIGA Law was found in
sections 1375 through 1393 of title 22 of the Louisiana Revised Statutes.
998 LOUISIANA LAW REVIEW [Vol. 77
in the liquidation proceedings of the insolvent insurer.3 Any assets of the
insolvent insurer were divided among creditors and claimants according
to their respective ranks.4 The process typically took years and rarely
resulted in significant payment of claims. In 1969, the National
Association of Insurance Commissioners (“NAIC”) drafted a model post-
insolvency assessment fund bill (the “Model Act”) in response to federal
congressional efforts to address and regulate insurer insolvencies.5
Variations of the Model Act were quickly adopted by most states,
including Louisiana, which adopted its version of the Model Act in 1970.6
Today, every state, the District of Columbia, Puerto Rico, and the Virgin
Islands have active property and casualty guaranty funds.7 Since the early
1970s, there have been over 550 property and casualty insurer insolvencies
with overall guaranty fund payouts of more than $27 billion.8 By the end
of 2014, LIGA had successfully paid and closed 143,749 claims from 163
insolvent companies, totaling over $923 million.9
II. WHAT IS LIGA?
LIGA is a sui generis entity created by the Louisiana Legislature,10
and as a legislative creation, LIGA must operate within legislative
3. LA. REV. STAT. §§ 22:732–22:763 (1969), renumbered as LA. REV. STAT.
§§ 22:2001–22:2044 by Act No. 415, 2008 La. Acts 1846.
4. Id. § 22:746 (1969), renumbered as LA. REV. STAT. § 22:2025 by Act No.
415, 2008 La. Acts 1846.
(La. Ct. App. 2009) (first citing Linda M. Lasley et al., Insura nce Gua ranty
Funds: The New “Money Pit”?, 416 COM. L. & PRAC. COURSE HANDBOOK
SERIES 113, 115–19 (1987), and then citing Davis J. Howard, Uncle Sam vs. The
Insuran ce Commissioners: A Multi-Level Approach to Defining the “Business of
Insurance” under the McCarran–Fer guson Act, 25 WILLAMETTE L. REV. 1, 14
(1989)).
6. Act No. 81, 1970 La. Acts 237 (codified at LA. REV. STAT. §§ 22:1375–
22:1394 (1971)). Louisiana adopted much of the Model Act almost verbatim.
Hopkins v. Howard, 930 So. 2d 999, 1002 (La. Ct. App. 2006).
7. La. Workers’ Comp. Corp., 20 So. 3d at 1052; The Prop erty and Casualty
Guara nty Fund System At-A-Glance, NAT’L CONF. OF INS. GUARANTY FUNDS,
http://ncigf.org/media-facts [https://perma.cc/M3TD-PVM3] (last visited Feb. 11,
2017).
8. The Pr operty and Casualty Guar anty Fund System At-A-Glance, supr a
note 7.
9. About LIGA: Accomplishing Our Mission, LA. INS. GUARANTY ASS’N,
http://www.laiga.org/history/ [https://perma.cc/FG7L-VVVE] (last visited Feb.
11, 2017).
10. La. Ins. Guar. Ass’n v. Gegenheimer, 636 So. 2d 209, 210 (La. 1994).
2017] THE DEF’S OF LIGA 999
parameters.11 LIGA was established by the legislature as the administrator
of the Louisiana Insurance Guaranty Association Law (“LIGA Law”).12
A. The Association
LIGA is an association of member insurers whose purpose is to ameliorate
some of the losses that would otherwise accrue to claimants and policyholders
because of insurance insolvencies and, more generally, to provide stability and
safety in the insurance environment.13 Louisiana Revised Statutes section
22:2056(A) provides,
There is created a private non-profit unincorporated legal entity to
be known as the “Louisiana Insurance Guaranty Association.” All
member insurers defined in R.S. 22:2055 shall be and remain
members of the association as a condition of their authority to
transact insurance in this state. The association shall perform its
functions under a plan of operation established and approved
under R.S. 22:2059 and shall exercise its powers through a board
of directors established under R.S. 22:2057.14
Louisiana Revised Statutes section 22:2055(9) provides,
(a) “Member insurer” means any person who meets both of the
following criteria:
(i) Is licensed and authorized to transact insurance in this state.
(ii) Since September 1, 1970, has written at least one policy of
insurance to which this Part applies.
(b) An insurer shall cease to be a member insurer effective on the
day following the termination or expiration of its license to
transact the kinds of insurance to which this Part applies; however,
the insurer shall remain liable as a member insurer for any and all
obligations, including obligations for assessments levied prior to
the termination or expiration of the insurer’s license.15
Louisiana Revised Statutes section 22:2057(A) provides,
The Board of Directors of the Association shall consist of nine
11. Id.
12. LA. REV. STAT. §§ 22:2051−22:2070 (2017). Louisiana Revised Statutes
section 22:2051 provides, “This Par t shall be known and ma y be cited as the
Louisiana Insurance Guaranty Association Law.” Id. § 22:2051.
13. Id. § 22:2052.
14. Id. § 22:2056(A).
15. Id. § 22:2055(9).
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