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

Transcription

1 E-Filed Document Jun :18: CA Pages: 34 IN THE SUPREME COURT OF THE STATE OF MISSISSIPPI THE FORMER BOARD OF TRUSTEES AND MEMBERS OF MISSISSIPPI COMP CHOICE SELF-INSURERS FUND VS. MISSISSIPPI WORKERS COMPENSATION GROUP SELF-INSURER GUARANTY ASSOCIATION AND JOHN DOES 1-10 APPELLANTS/PLAINTIFFS CASE NO CA 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# ) WISE CARTER CHILD & CARAWAY, P.A. 600 Heritage Building 401 East Capitol Street Jackson, MS T: (601) F: (601) Attorneys for the Appellee, Mississippi Workers Compensation Commission Group Self-Insurer Guaranty Association

2 IN THE SUPREME COURT OF THE STATE OF MISSISSIPPI THE FORMER BOARD OF TRUSTEES AND MEMBERS OF MISSISSIPPI COMP CHOICE SELF-INSURERS FUND VS. MISSISSIPPI WORKERS COMPENSATION GROUP SELF-INSURER GUARANTY ASSOCIATION AND JOHN DOES 1-10 APPELLANTS/PLAINTIFFS CASE NO CA 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, s\jennifer H. Scott ANDREW D. SWEAT (MSB# 8100) JOHN D. PRICE (MSB# 4495) JENNIFER H. SCOTT (MSB# ) Attorneys for Defendant/Appellee 2

3 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 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. III. Plaintiffs claim against the Guaranty Association for Conversion fails as a matter of law...21 Plaintiffs claim against the Guaranty Association relating to premium audits fails as a matter of law

4 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 (1) The Guaranty Association neither based nor was required to base an assessment request on or Article XI(A)(2) of its Plan of Operation.27 (2) Section 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 Conclusion. 32 Certificate of Service. 34 4

5 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 IA 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 (1)(d) 7, 10, 13, 16, 23, 24, (3) (3) , (1)(e) (2)(a)....12, 13, (2)(c) 13, 18, (2)(d)..17, (1).8 5

6 (2) (2)(d) (4) (2)(a) (c) (d) (e) , 14, 26, 27, 28, 29, Administrative Rules Miss. Work. Comp. Comm n Gen. R , 14, 15, 26, 28, 30, 31, 32 6

7 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 (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 (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, 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 (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 7

8 workers compensation group self-insurer, operating under a Certificate of Authority granted by the Mississippi Workers Compensation Commission ( Commission ) pursuant to Mississippi Code Annotated (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 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 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 (1)(e); (1), (2), (4); (2)(a); (c), (d), (e); On January 20, 2009, the Commission entered an Order ending Comp Choice s authority to act as a self-insurer. R 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 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. 8

9 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 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 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 9

10 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, R 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 IA SCT.) After remand, the Guaranty Association filed a motion for summary judgment as to all claims asserted in Plaintiffs Second Amended Complaint. R 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 (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). 10

11 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 (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 11

12 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, R 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 (2)(a) (the Guaranty Association may... employ or retain such persons as are necessary to handle claims ); 12

13 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 (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 (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 (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 13

14 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 or Article XI(A)(2) of its Plan of Operation when requesting the assessment from the Commission in April Indeed, the Guaranty Association was not seeking a special assessment of the remaining solvent group self-insurers as contemplated by and Article XI(A)(2) of its Plan, and it did not reference 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, and Article XI(A)(2) were inapplicable. Furthermore, the Guaranty Association did 14

15 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 , 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 selfinsured 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 In their collateral attack on the Commission s assessment, Plaintiffs contend the sole 15

16 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 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 (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 (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 (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 In Brantley, the Court quoted with approval from Miss. Transp. Comm n v. Montgomery: 16

17 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 (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 (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 (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: 17

18 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 (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 (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 18

19 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 19

20 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 (3). Remember that all compromise settlements of workers compensation claims receive approval from the Commission in accordance with 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 (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 20

21 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 at 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 21

22 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 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 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 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 22

23 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 (2)(d) provides the Guaranty Association may perform such other acts as are necessary to effectuate the purpose of through (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 The premium audits were prepared as other acts as are necessary pursuant to (2)(d). Therefore, the premium audits were discretionary under (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). 23

24 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 (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, R The Commission also ended all rights of the 24

25 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 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 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. 25

26 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 Plaintiffs contend the Guaranty Association did not comply with Mississippi Code Annotated in requesting the assessment ordered by the Commission on April 19, 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 ; and (2) that, even if applicable, 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. 26

27 (1) The Guaranty Association neither based nor was required to base an assessment request on or Article XI(A)(2) of its Plan of Operation. Section 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 selfinsurer 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 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 and Article XI(A)(2) of its Plan, and it did not reference or Article XI(A)(2) in its letter to the Commission requesting the assessment. R 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, and Article XI(A)(2) were inapplicable. Importantly, the Guaranty Association was not required to rely on the special assessment mechanism in to fund the claims deficit left by the Comp Choice default. Nothing in 27

28 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 or Article XI(A)(2) of the Plan. R 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 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 Pursuant to its statutory authority and the rules and regulations of the Mississippi Workers Compensation Commission, the Commission then ordered the assessment... of former 28

29 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 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 or Article XI(A)(2). (2) Section 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 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 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 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 29