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Oklahoma Property and Casualty Insurance v. Classic Fire and Marine Insurance Co.5/5/1998
Mandate Issued: October 1, 1998
Court of Appeals of Oklahoma
OKLAHOMA PROPERTY AND CASUALTY INSURANCE GUARANTY ASSOCIATION, Plaintiff/Appellee, v. CLASSIC FIRE AND MARINE INSURANCE COMPANY, an Indiana Insurer, formerly known as FIRST HORIZON INSURANCE COMPANY, a Minnesota corporation; NAPOLEON SERVICES, INC., a Delaware corporation,Defendants/Appellants.
APPEAL FROM THE DISTRICT COURT OF OKLAHOMA COUNTY, OKLAHOMA
HONORABLE JAMES BLEVINS, TRIAL JUDGE
REVERSED AND REMANDED
MEMORANDUM
Appellants, Classic Fire and Marine Insurance Company (Classic) and Napoleon Services, Inc. (Napoleon)(collectively Appellants), seek review of the trial court's judgment, granted on a jury verdict, in favor of Oklahoma Property and Casualty Insurance Guaranty Association (Guaranty Association). Classic was added as a party defendant during the pendency of this action when it became the successor to First Horizon Insurance Company (First Horizon), initially named as defendant.
From mid-1984 until early 1987, First Horizon participated in an insurance program in Oklahoma with Great Global Assurance Company (Great Global). American Excess Underwriters (AMEX) was the managing general agent for the program. First Horizon was domiciled in Minnesota. Great Global was and is domiciled in Arizona. AMEX's principal place of business was in Louisiana.
Great Global was licensed to sell workers' compensation insurance in Oklahoma. First Horizon was licensed to sell liability insurance, but not workers' compensation. AMEX issued insurance packages containing a Great Global workers' compensation policy and a First Horizon automobile and general liability policy. Under what is commonly known in the insurance industry as a "fronting" arrangement, First Horizon agreed to accept 100% of Great Global's risk of loss under the workers' compensation coverage. As the policy issuing company, Great Global received 5% of the workers' compensation premiums as a "fronting fee". Great Global's workers' compensation policies contained an endorsement providing they were subject to the provisions of First Horizon's accompanying liability policy, particularly those pertaining to premiums due or losses paid.
Both AMEX and Great Global became insolvent. First Horizon's parent company formed Napoleon to, inter alia, take over AMEX's responsibilities in administering the Oklahoma insurance packages. There was no corporate relationship between AMEX and First Horizon, but First Horizon, having security interests in AMEX's assets, placed Napoleon in AMEX's business quarters and retained some of AMEX's officers and staff.
In February 1986, Great Global went into receivership in Arizona. In January 1987, the Oklahoma Insurance Commissioner was appointed as Oklahoma receiver by court order, and was directed to liquidate Great Global's Oklahoma claims by presentment to Guaranty Association. Guaranty Association began paying the workers' compensation claims in February 1987.
In October 1987, Guaranty Association received a letter from the Arizona receiver which called into question Great Global's liability on the workers' compensation claims. Guaranty Association began an investigation into the Great Global-First Horizon relationship, but decided to continue paying claims because of the court order and to avoid hardship on claimants. At the time of trial, Guaranty Association's claims payments, expenses and reserves for future claims exceeded $1,200,000.00.
In May 1988, Guaranty Association made demand by letter upon AMEX, Napoleon and First Horizon to determine which of them was responsi
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