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Liberty Mutual v. Superintendent
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MAINE SUPREME JUDICIAL COURT					Reporter of Decisions
Decision: 1997 ME 22 
Docket:  KEN-96-453
Argued  January 7, 1997
Decided  February 5, 1997






	[¶1]  Liberty Mutual Insurance Company, Liberty Mutual Fire Insurance
Company and Liberty Insurance Corporation (Liberty Mutual) appeal from the
judgment entered in the Superior Court (Kennebec County, Atwood, J.)
affirming the decision of the Bureau of Insurance ordering Liberty Mutual to
pay an assessment made pursuant to the Maine Insurance Guaranty
Association Act ("the Act"), 24-A M.R.S.A. §§ 4431-4452, as amended by
P.L. 1989, ch. 67.  Liberty Mutual contends that the Bureau of Insurance
applied the 1989 amendments to the Act retroactively and that the
application of the 1989 amendments to Liberty Mutual is unconstitutional. 
We conclude that the 1989 amendments were not applied retroactively to
Liberty Mutual and affirm the judgment. 
	[¶2]  The purpose of the Maine Insurance Guaranty Association Act,
inter alia, is to provide a mechanism for the payment of covered claims
pursuant to certain insurance policies, to avoid financial loss to claimants or
policyholders because of the insolvency of an insurer, and to provide an
association to assess the cost of such protection among insurers.  24-A
M.R.S.A. § 4432 (1990).  The Act also created the Maine Insurance GuarantyAssociation (MIGA) to effectuate the purposes of the Act.  Id. at §§ 4436,
	[¶3]  Liberty Mutual wrote workers' compensation insurance in Maine
at all relevant times and until 1987. In November and December 1987
Liberty Mutual Insurance Company, Liberty Mutual Fire Insurance Company
and Liberty Insurance Corporation, with Bureau of Insurance (Bureau)
approval, each voluntarily terminated their licensed authority to write
workers' compensation insurance in Maine.  
	[¶4]  In 1989 the Act was amended to, inter alia, specify the extent to
which a withdrawn insurer remains a "member insurer."{1}  24-A M.R.S.A. §
4435(6).  The 1989 amendments also modified the methodology used in
making the assessments of each member insurer.{2}  24-A M.R.S.A. § 4440(1). 
	[¶5]  From 1989 through 1993 MIGA continued to assess Liberty
Mutual for claims arising from insurers that became insolvent prior to
Liberty Mutual's withdrawal in 1987.  Each assessment was based on the
insurer's net direct written premiums for the year preceding the
assessment year (1988 through 1992).  Liberty Mutual paid these
	[¶6]  In September 1994 MIGA made an additional assessment for
1991 after discovering that two Liberty Mutual companies had no premiums
in 1990 and consequently were not assessed in 1991.  The additional
assessment was calculated, pursuant to the 1989 amendments to § 4440(1)
of the Act, by averaging the companies' premiums during the five years
preceding Liberty Mutual's withdrawal from the workers' compensation
insurance market.  The total 1991 assessment, as corrected, was $89,064.  
	[¶7]  Liberty Mutual initially refused to pay the additional assessment
for 1991.  Subsequently, MIGA filed a petition with the Bureau of Insurance
to suspend or revoke Liberty Mutual's license to transact property or
casualty insurance in Maine and to award eight percent interest on the
unpaid assessment.  After a hearing on MIGA's petition, the Bureau found
that the 1989 amendments are prospective legislation and that Liberty
Mutual's constitutional rights were not violated when the 1989 amendments
were applied to it.  Accordingly, the Bureau ordered Liberty Mutual to pay to
MIGA the assessed amount of $89,064 plus interest.  Liberty Mutual
appealed to the Superior Court pursuant to M.R. Civ. P. 80C. The Superior
Court affirmed the Bureau's decision in all respects and Liberty Mutual
	[¶8]  "On an appeal from the Superior Court's review of an
administrative decision, we review the agency's decision directly for an
abuse of discretion, errors of law, or findings unsupported by the evidence. 
The construction of a statutory scheme is a question of law for the court." 
American Republic Ins. Co. v. Superintendent of Ins., 647 A.2d 1195, 1197
(Me. 1994), cert. denied _ U.S. _, 115 S. Ct. 1399, 131 L. Ed. 2d 287
(1995) (citation omitted).
	[¶9]  Liberty Mutual argues that application of the Act's 1989
amendments to it would retroactively change the consequences of its 1987
decision to withdraw as a workers' compensation carrier by providing that it
would now be subject to assessments under the Act.  Legislation is
considered retroactive if its application determines the legal significance of
acts or events that occurred prior to the statute's effective date.  Terry v. St.
Regis Paper Co., 459 A.2d 1106, 1108 (Me. 1983); Coates v. Maine
Employment Sec. Comm'n, 406 A.2d 94, 96 (Me. 1979).  Nevertheless, "the
application of a statute 'remains prospective if it governs operative events
that occurred after its effective date, even though the entire state of affairs
includes events predating the statute's enactment.'"  Barnes v.
Commissioner of the Dep't of Human Serv., 567 A.2d 1339, 1341 (Me.
1989) (quoting Norton v. C.P. Blouin, Inc., 511 A.2d 1056, 1060 n.5 (Me.
1986)).  In determining the legal consequences of new legislation, we must
look to the events the Legislature intended to be significant.  Barnes, 567
A.2d at 1341.  Liberty Mutual contends that the "operative event" in the
instant case was its 1987 conduct of withdrawing from the workers'
compensation market and that the act of withdrawing from the market also
terminated its liability to MIGA in any year that it did not collect premiums. 
We disagree.  
	[¶10]  Pursuant to the 1987 statutory definition of "member insurer,"
Liberty Mutual ceased to be a member of MIGA when it withdrew from the
Maine workers' compensation market.  Nevertheless, MIGA's plan of
operation provided that a withdrawn insurance carrier would remain liable
for any assessments based on insolvencies that occurred prior to the
termination of its license.  
	[¶11]  As enacted in 1969, the Act mandated MIGA to "submit to the
superintendent a plan of operation . . . necessary or suitable to assure the
fair, reasonable and equitable administration of the association."  24-A
M.R.S.A. § 4439(1)(A) (1969).  In 1970 MIGA submitted its plan of operation
which was approved by the superintendent and became effective later that
year.  MIGA's plan of operation provides that an insurer admitted to transact
insurance covered by the Act automatically becomes a "member" of MIGA. 
When an insurer ceases to be admitted, it automatically ceases to be a
member of MIGA, "[p]rovided that such insurer shall remain liable for any
assessments based on insolvencies that occurred prior to the termination of
its license."  Maine Insurance Guaranty Association, Plan of Operation, Art.
5(A) (1970).  The Act and any future amendments to the Act were also
incorporated by reference into MIGA's plan of operation.  Id. at Art. 7.  All
member insurers are required to comply with the plan of operation.  24-A
M.R.S.A. § 4439(2).    
	[¶12]  The Legislature granted broad authority to MIGA to develop a
plan of operation to effectuate the Act.  The plan developed by MIGA was
approved by the Superintendent and became binding on all member
insurers.  Liberty Mutual, as a member insurer prior to 1987, was required
to comply with the plan of operation as a condition of its license to sell
workers' compensation insurance in Maine.  Pursuant to that plan, even
after Liberty Mutual ceased to be a "member insurer," it remained liable for
insolvencies that occurred prior to its withdrawal.{3}  Consequently, Liberty
Mutual's 1987 act of withdrawing from the Maine workers' compensation
market did not change its legal status under the Act, i.e. it did not affect the
existence of its ongoing liability to MIGA for insolvencies that occurred
while it remained a member insurer.
	[¶13]  Looking to the event the Legislature intended to be significant
in the 1989 amendments of the Act, it is clear that the "operative event"
was the need to make an assessment as the result of an insolvency.{4}  See
Metropolitan Property & Casualty Ins. Co. v. Rhode Island Insurer's
Insolvency Fund, 811 F. Supp. 54, 58 (D.R.I. 1993) (cross-assessment
amendments to insurer's insolvency fund statute "triggered" by need to pay
claims in given year rather than previous insolvencies that spawned claims;
no retroactive application of statute).  The 1989 amendment to 24-A
M.R.S.A. § 4440(1) changed the method of calculating an assessment for
which Liberty Mutual was already liable.  Had no claims from pre-1987
insolvencies arisen, the 1989 amendments to section 4440(1) would never
have applied to Liberty Mutual.  The additional assessments at issue in this
case occurred in 1991.  Here, the "operative event" took place after the
effective date of the 1989 amendments and the amendments were applied
prospectively to determine the proper assessment to be apportioned to
Liberty Mutual.  Accordingly, the Bureau did not err when it determined that
the amendments were not applied retroactively to Liberty Mutual in this
	[¶14]  Since the 1989 amendments have not been applied
retroactively to Liberty Mutual, we need not address the constitutional issues
raised.  Halfway House, Inc. v. City of Portland, 670 A.2d 1377, 1380 (Me.
	The entry is:
					Judgment affirmed. 

Attorney for plaintiff:

Kevin M. Gillis, Esq. (orally)
Troubh, Heisler & Piampiano, P. A.
P O Box 9711
Portland, ME 04104-5011

Attorneys for defendant:

Andrew Ketterer, Attorney General
Judith Shaw Chamberlain, Asst. Atty General (orally)
6 State House Station
Augusta, ME 04333
(for Superintendent of Insurance)

John H. Rich, III, Esq.
Perkins, Thompson, Hinckley & Keddy
P O Box 426
Portland, ME 04112
(for Maine Insurance Guaranty Association)
FOOTNOTES******************************** {1} The definition of a "member insurer" was amended as follows (1989 language underlined): "Member insurer" means any authorized insurer which writes any kind of insurance to which this subchapter applies. If an insurer is authorized at the time of an insolvency and subsequently is approved to withdraw its license authority for the kinds of insurance covered by any account to which claims relating to the insolvency are allocated, the withdrawn insurer shall continue to be a member of each account solely for purposes of assessments relating to claims resulting from the insolvency until these claims are paid or otherwise extinguished. 24-A M.R.S.A. § 4435(6). {2} The method of calculating assessments was amended as follows (1989 language underlined): The assessments of each member insurer provided for under section 4438 shall be in the proportion that the net direct written premiums of the member insurer for the calendar year preceding the assessment on the kinds of insurance in the account bears to the net direct written premiums of all member insurers for the same calendar year on the kinds of insurance in the account, except that assessments to cover a shortfall in any account shall be determined in accordance with section 4440-A. In the case of a withdrawn insurer, the average of its net direct written premium for the 5 calendar years prior to withdrawal shall be used as its assessment base for any year following withdrawal in which the insurer has no net direct written premium. 24-A M.R.S.A. § 4440(1). {3} In fact, when Liberty Mutual later withdrew in 1987, it continued to pay assessments based on pre-1987 insolvencies up to and including a 1993 assessment. {4} The preamble to L.D. 750 (114th Legis. 1989) states that the emergency legislation is needed because the funding mechanism needs to be modified immediately to ensure that the funds will have sufficient assets to cover claims of individuals insured by companies that have recently become insolvent. The statement of fact accompanying the amendments states that the bill attempts to provide a funding mechanism which will accommodate expected claims against MIGA and MLHGA. Although the statement of fact also addresses withdrawn insurers, it does so in the context of explaining the assessment process. The clear focus of the legislation is a need to revise the method of calculating assessments.