Turbulence in the Mississippi Windpool Association

Turbulence in the Mississippi Wind Pool Underwriting Association propelled its way into federal court in Hattiesburg last week.  The suit is over the Wind Pool Board’s decisions about 2005 reinsurance coverage.

Plaintiffs bringing suit are Association Casualty Insurance Company; Benchmark Insurance Company; Georgia Casualty & Surety Company; and National Security Fire and Casualty Company.

Allstate Insurance Company; Mississippi Farm Bureau Mutual Insurance Company; Nationwide Mutual Fire Insurance Company d/b/a Nationwide Insurance Companies; State Farm Fire and Casualty Company; and St. Paul Travelers Companies are the Defendants.

The case was filed September 15, 2006 in federal court, Southern District Mississippi.  Here’s the docket report, the Complaint, and Amended Complaint.  The background quoted below is from the Plaintiff’s Opposition to Defendant’s Motive for Summary Judgment:

On August 29, 2005, Hurricane Katrina caused widespread damage to life and property when it made landfall on the Gulf Coast of Mississippi. Many of the most vulnerable properties on the Gulf Coast were insured by the Mississippi Windstorm Underwriting Association (―the Association or ―MWUA). The Association is a mandatory, unincorporated association formed by the Mississippi Legislature to provide windstorm insurance for the highest-risk properties in Mississippi and purchase reinsurance to protect the Association‘s members, who are responsible for its losses. As a condition of writing property insurance in the state, each member was re-quired under Article XIII of the Plan of Operations to authorize ―the Board . . . to act as its agent in . . . ceding reinsurance on behalf of the Member.‖ But Defendants—the insurer members of the Association‘s Board—failed to procure what they themselves deemed to be ―a responsible level of protection‖ on behalf of the members. Indeed, they failed to determine how reinsurance was necessary to protect the members for 2005 or even how much money was available to pur-chase such reinsurance. The Association‘s non-director members, including Plaintiffs, therefore bore the lion‘s share of approximately $525 million in unreinsured losses.

Plaintiff’s summarized their opposition to the Motion for Summary Judgment in their Response in Opposition as stated below:

Given Plaintiffs‘ liability for unreinsured losses, the Plan requires the Board to purchase reinsurance on behalf of members. Defendants have flouted that obligation. Their papers describe a complicated balancing act—never communicated to the membership—in which they in essence tried to force members to make voluntary writings or face potentially catastrophic losses. (See, e.g., Defs.‘ Br. at 5-6, 10, 22-23.) They likewise state that they had ―no shared goals‖ with a membership they describe as consisting of ―almost 200 competitors.‖ (Id. at 26). But Mississippi law is plain that fiduciaries ―assume[] the responsibility to act in the best interest of [those to whom they owe a duty], even to the detriment and peril of the best interests of the [fiduciary].‖ Morrison, 905 So.2d at 1239; Omnibank of Mantee, 607 So.2d at 790 (fiduciaries are ―held to something stricter than the morals of the market place‖) (quotation omitted). In this respect, Defendants‘ own words provide some of the best evidence of their wrongdoing. The Court therefore should deny Defendants‘ motion and entrust this matter to the jury where it belongs.

Here is the Defendant’s Memorandum in support of their motion for summary judgment.  I have several more documents that I’ll link later.

Updated with Selected Case Documents

Defendants’ unopposed motion for pre-voir dire juror questionnaire incorporating questionnaire as exhibit

pages-from-jury-questionaire(list continues on the next page)

Plaintiffs’ response to Defendants’ motion in limine concerning Greg Copeland’s and Rebecca Blunden’s representation of the MWUA

Plaintiffs’ response to Defendant’s motion in limine concerning insurance industry’s response to Hurricane Katrina and Katrina-related claims handling practices

In recent briefing, argument, and pretrial submissions to the Court, Defendants have argued that the fact they wrote policies on the Gulf Coast should insulate them from liability for their various breaches of the duties of care and loyalty…This view is carried through to Defendants’ exhibits. For example, they have listed documents that show substantial amounts paid on their voluntary writings, but they withhold information relating to denied or disputed claims…Defendants therefore appear to be asking the Court to exclude only evidence that might portray their voluntary writings in a poor light while simultaneously seeking to admit evidence of those writings that is helpful to Defendants’ cause. Thus, Defendants have moved the Court to exclude “criticism” of the very same voluntary writings that they seek to use as a defense in this case.

Plaintiffs’ memorandum in support of motion in limine to exclude evidence concerning reinsurance practices

Defendants’ actions indicate they may seek to improperly compare individual company reinsurance practices with the noncomparable
duties, responsibilities and conduct of Defendants as MWUA board members.  Any attempt to argue mitigation of damages based on Plaintiffs’ individual reinsurance practices would violate the collateral source rule. Such evidence would also be irrelevant for other purposes;
and even if arguably relevant, its marginal probative value would not warrant its introduction. Therefore, evidence of such individual reinsurance practices should be excluded from trial pursuant to Federal Rules ofEvidence 402, 403 and 411.

This controversy is not about what non-director MWUA members did or should have done concerning reinsurance for their individual company portfolios. Any reference to and evidence addressing such reinsurance practices should therefore be excluded from trial.

Defendants’ response in opposition to motion in limine to exclue evidence concerning reinsurance practices for individually underwritten insurance coverage

The topic of reinsurance is at the heart of this case. Plaintiffs allege that the Board of the Mississippi Windstorm Underwriting Association (MWUA) owed them a duty to buy a certain amount of reinsurance to protect the Plaintiffs and other member companies against exposure for large losses to the MWUA. Plaintiffs allege that Defendants owed a fiduciary duty to them because, in part, “Plaintiffs justifiably trusted in Defendants,”  that Defendants breached that duty, and that the breach caused them to suffer large un-reinsured losses.

Yet Defendants will show at trial that many members of the MWUA, including three of the Plaintiffs, purchased their own reinsurance to cover all or part of MWUA exposures. That evidence is probative of several key issues to be tried, including: (1) whether a fiduciary duty was owed; (2) whether in fact Plaintiffs justifiably relied on the Board to protect them against MWUA exposures; (3) whether the Board’s decision-making was the proximate cause of any harm to Plaintiffs; and (4) whether or not the Board’s decision with respect to the amount of reinsurance purchased was rational.

2 thoughts on “Turbulence in the Mississippi Windpool Association”

  1. I haven’t had time to read the documents, but I see three interesting issues here.
    1. It seems the companies who were not writing wind policies on the Coast assumed that the insurer reps on the wind pool board would look out for the industry as a whole and they did not.
    2. We need to know the level of involvement of the companies represented on the board in the decisions to give very generous credits reducing pool assessments to their own companies who wrote wind coverage, and then not insist on more reinsurance to limit the exposure of other companies to pool assessments.
    3. I am even more convinced that this system will never work because any way you remedy it is a choice between cheating some parties upfront in the premiums and reinsurance or after a disaster in the claims and assessments.
    Every plaintiff company should endorse H.R. 1264 and stop letting the bad guys and the reinsurers control the industry agenda.

  2. At least three, Brian! There is a lot more – some I’ll be posting later today but with jury trial underway, I’ll do more updating if/as information becomes available.

    You can search the MID website and come up with list of the MID board – much less one by year.

    As to the level of involvement of the companies on the board, something I read suggested they may have had someone represent them – an attorney for example.

    There is also interesting change in the windpool legislation that fits in all of this.

    Bottom line is this is most compelling evidence possible on merits of HR 1264.

    Your #3 seems like variation of standard warning to those contemplating an affair – “if he cheats with you, he’ll cheat on you” –

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