Alabama Workers' Comp Blawg

  • 13
  • Feb
  • 2012

Alabama Insurance Guaranty Association and Six Year Statute of Limitations

On February 10, 2012, the Alabama Supreme Court released it opinion in Ex parte Water Works and Sanitary Sewer Board of the City of Montgomery wherein it ruled that the Alabama Insurance Guaranty Association (AIGA) has a six year statute of limitations to seek reimbursement from a high net worth insured. In this case the Water Works and Sanitary Sewer Board of the City of Montgomery (hereinafter Board) was insured by an insurance company that went insolvent (Legion). The insurance company was, however, a member insurer of the AIGA. Therefore, in July 2003, the AIGA took over the claim filed by the Board’s employee related to an injury that occurred in 2001. In November of 2003 the claim was settled and paid by the AIGA.

On October 7, 2003, AIGA sought to determine the Board’s net worth pursuant to the AIGA Act, which states that the AIGA can seek reimbursement from any insured whose net worth exceeds twenty-five million dollars. After several attempts the Board finally responded to the net worth request in August of 2009 stating that its net worth exceeded twenty-five million dollars. AIGA filed the underlying declaratory judgment action seeking to enforce its right to reimbursement. The Board took the position that the AIGA’s claim was limited to payments made within two years of filing the action based on a two-year statute of limitations. The AIGA took the position that the claim was subject to a six year statute of limitations. The trial court awarded the AIGA amounts paid on the claim during the two years immediately prior to the declaratory judgment action. The AIGA appealed and the Court of Civil Appeals ruled that the action did not sound in tort or contract but was a statutory right to reimbursement similar to a common law action of debt subject to the six year statute of limitations. The Board petitioned the Alabama Supreme Court.

The Alabama Supreme Court affirmed the Court of Civil Appeals’ decision and held the claim filed by the AIGA was subject to the six year statute of limitations not the two year statute of limitations. The Supreme Court opined that the action was a statutory right permitting the recovery of a liquidated sum. This claim would therefore fall under actions for the recovery of money upon a loan pursuant to §6-2-34 (5), which states "actions for the recovery of money upon a ... liquidated account" are subject to a six year statute of limitations. The case was remanded to the trial court for a determination based on the application of the six year statute of limitations.

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