                IN THE SUPREME COURT OF MISSISSIPPI

                       NO. 2014-CA-01638-SCT


ARROWOOD INDEMNITY COMPANY

v.

MISSISSIPPI WINDSTORM UNDERWRITING
ASSOCIATION


DATE OF JUDGMENT:              06/16/2014
TRIAL JUDGE:                   HON. DENISE OWENS
TRIAL COURT ATTORNEYS:         CHRISTOPHER ROYCE SHAW
                               ROBERT B. HOUSE
                               REBECCA SUZANNE BLUNDEN
                               ELLEN PATTON ROBB
                               TAMMRA CASCIO
COURT FROM WHICH APPEALED:     HINDS COUNTY CHANCERY COURT
ATTORNEYS FOR APPELLANT:       ANDREW S. HARRIS
                               H. MITCHELL COWAN
                               KAYTIE M. PICKETT
ATTORNEYS FOR APPELLEE:        REBECCA BLUNDEN
                               CHARLES G. COPELAND
                               ELLEN ROBB
                               JAMES H. HEIDELBERG
NATURE OF THE CASE:            CIVIL - INSURANCE
DISPOSITION:                   REVERSED AND REMANDED - 06/16/2016
MOTION FOR REHEARING FILED:
MANDATE ISSUED:



     EN BANC.

     LAMAR, JUSTICE, FOR THE COURT:
¶1.    Arrowood Indemnity Company,1 a member of the Mississippi Windstorm

Underwriting Association (“the Windpool”), submitted its premium data as required for a

post-Katrina data-correction process. Arrowood failed to claim the appropriate credits

available to it by statute which, it alleges, resulted in a nearly five-million-dollar

overpayment. But Arrowood had based its data submission on information provided by the

Windpool, which was incorrect. So Arrowood requested an opportunity to submit the correct

information, but the Windpool denied its request because the deadline for corrections had

passed. The Mississippi Insurance Commissioner and the Hinds County Chancery Court

affirmed the Windpool’s decision. We find that the Windpool’s deadline is tolled under the

facts of this case as it pertains to Arrowood, because its incorrect representation precipitated

Arrowood’s incorrect data submission. We therefore reverse the decisions of the Insurance

Commissioner and the Hinds County Chancery Court and remand this case for proceedings

consistent with this opinion.

                        FACTS AND PROCEDURAL HISTORY

¶2.    The parties stipulated to virtually every fact in this case. The Windpool is a statutorily

created entity that provides wind and hail insurance to citizens on Mississippi’s Gulf

Coast—it is an “insurer of last resort.” Every insurance company that wrote property




       1
         We use the name “Arrowood,” though its name and ownership have changed since
2004. Arrowood is the current trade name for Royal Indemnity Company, which was an
affiliate of Royal & Sun Alliance Group, PLC, or simply “Royal,” which was the original
reporting company.

                                               2
insurance in Mississippi at the time relevant to this appeal was a member of the Windpool.2

As members, the insurance companies were required to participate in the Windpool’s

expenses, losses, and profits. Each company’s share of the expenses, losses, and profits was

based on “their percentages of wind and hail insurance premium writings in Mississippi

during the preceding calendar year.” The member companies reported their premium data

to the Windpool every year, so that it could calculate each company’s participation

percentage. See Miss. Code Ann. § 83-34-9 (2006).

¶3.    If the Windpool suffered losses that exceeded its available assets during a policy year,3

it would assess member companies a dollar amount based on each company’s participation

percentage to cover those losses. The applicable statutes offered an incentive to members

voluntarily to write wind and hail coverage on the Gulf Coast: “A member shall, in

accordance with the [Windpool’s] plan of operation, annually receive credit for essential

property insurance voluntarily written in a coast area, and its participation in the writings of

the association shall be reduced in accordance with the provisions of the plan of operation.”

Miss. Code Ann. § 83-34-9 (2006). So by voluntarily writing wind and hail policies on the




       2
       The applicable statutes were amended significantly in 2007, but those amendments
provided that the pre-2007 versions would apply to events that took place before March 22,
2007. Miss. Code Ann. 83-34-3(2) (Supp. 2015). The parties agree that the pre-2007
version of the statutes governs this appeal.
       3
        A policy year is the twelve-month period after a policy is issued. So when Hurricane
Katrina made landfall on August 29, 2005, it damaged properties that had policies in effect
from both the 2004 and 2005 policy years. Policies from policy year 2004 would have been
those that were issued between August 30 and December 31, 2004. And policies from policy
year 2005 would have been those issued between January 1 and August 29, 2005.

                                               3
Coast, companies received credits that would reduce—or even eliminate—their portion of

an assessment.

¶4.    On March 2, 2004, Arrowood reported to the Windpool that its wind and hail

premiums from 2003 totaled $3,328,914. This amount included premiums for excess

policies—even those that were voluntarily written—and was consistent with the position the

Windpool took the following year: that excess policies did not count as “essential property

insurance” and therefore were not eligible for voluntary-writings credit. On September 29,

2005, Arrowood employee David Thomas sent the Windpool an email stating: “We had

spoken with you late in 2004 to ask if excess policies were eligible for windstorm pool

credits. You[r] response was that they were not . . . .Would you please clarify how Excess

property coverage is not eligible for pool credits[?]”

¶5.    Windpool accountant Jim Redd responded with a faxed attorney’s opinion which

explained that:

       “Essential property insurance” is defined by the Act as insurance against direct
       loss to property as defined and limited in the standard fire policy and extended
       coverage endorsement thereon, as approved by the Mississippi Insurance
       Commission. Essential property insurance is that insurance required by the Act
       to be written by the Association. Excess insurance even though on the same
       properties does not constitute essential property insurance within the meaning
       of the Act . . . .

(Emphasis added.)     Stated differently, the Windpool responded that, because excess

insurance did not qualify as “essential property insurance” under the Act, Arrowood was not

entitled to any voluntary-writings credit for those premiums. See Miss. Code Ann. § 83-34-9

(2006).



                                              4
       Hurricane Katrina and the “true-ups”

¶6.    When Hurricane Katrina struck in 2005, the Windpool suffered its largest loss

ever—far above what its $175 million reinsurance would cover.4 The reinsurance proceeds

covered the losses from the 2004 policy year, but the Windpool was forced to assess its

members $545 million to cover the losses from the 2005 policy year. The Windpool based

that entire assessment on each company’s participation percentage from the 2005 policy year,

which, in turn, was based on premium data from 2004. Before the Windpool issued the final

installment of the assessment, it offered affected members an opportunity to examine their

2004 premium data to ensure that it had been properly reported. But the assessment did not

affect Arrowood because it did not write any relevant policies in 2004.

¶7.    Dubbed a “true-up,” the corrections period had a deadline of March 1, 2006. Several

member companies attempted to submit new data after the deadline, but the Windpool

refused to accept the late data. Those members appealed that decision—along with several

other true-up-related issues—to the Commissioner of Insurance, who affirmed the actions

of the Windpool. The Hinds County Chancery Court reversed the Commissioner, ruling in

favor of the members, and the Windpool appealed to this Court.

¶8.    On appeal, this Court held that the Windpool had the authority to conduct the true-up

and to set a deadline and enforce it:

       4
        “Reinsurance is a process by which an insurance company reduces the extent of its
possible loss under any issued policies by distributing all or part of its potential loss to
another insurance company.” Estate of Osborn v. Gerling Global Life Ins. Co., 529 So. 2d
169 (Miss. 1988) (citing Fontenot v. Marquette Cas. Co., 247 So. 2d 572, 575 (La. 1971)).
In other words, the Windpool had purchased $175 million worth of insurance for its
insurance policies.

                                             5
       Hurricane Katrina was one of the deadliest and most costly natural disasters
       in the United States, specifically on the Gulf Coast. [The Windpool]
       recognized the magnitude of Hurricane Katrina’s unprecedented effect on its
       members and, in an effort to administer the association in a fair and equitable
       manner, gave all members an opportunity to resubmit corrected data.
       ....
       It is true that no previously adopted rule gave the [Windpool] permission to
       allow a true-up. But because these were exigent circumstances that demanded
       unusual and immediate action, [it] was allowed to circumvent the process. The
       true-up was not an effort on behalf of [the Windpool] to make a new rule; it
       was simply a remedy to the property-insurance chaos caused by Hurricane
       Katrina.
       ....
       [The Windpool], and any entity for that matter, must have enforceable
       deadlines to operate properly. As the law existed prior to Hurricane Katrina,
       a member’s assessment was based on its net direct premiums written during
       the previous calendar year, and credit for voluntar[y] writings is given
       annually. Miss. Code Ann. § 83-34-9 (2005). Each member’s assessment is
       made in proportion to the total premiums written by all members during the
       previous calendar year. See id. Yes, members shall receive credit annually for
       their voluntary writings . . . . But members can receive these benefits only if
       they timely report the information.

Mississippi Windstorm Underwriting Ass’n v. Union Nat’l Fire Ins. Co., 86 So. 3d 216, 223

(Miss. 2012).

¶9.    But this Court also found that the Windpool’s decision to apply a majority of the

reinsurance to cover the 2004 policy-year losses was erroneous. Id. at 225-26. Rather, this

Court said, “[t]he reinsurance should be applied consistent with the liabilities for any given

policy year . . . . For an accurate assessment, the figures should be recalculated using the

method mandated by Section 83–34–9.” Id. at 226.

¶10.   Following Union National, the Windpool reallocated the $175 million reinsurance

between the policy years based on participation percentage, rather than using most of it to

cover completely the 2004 policy-year losses. As a result, “the 2004 policy year did not have

                                              6
sufficient funds to cover the losses without an assessment.” And because some of that

resulting assessment would be based on 2003 premium data, the Windpool decided to offer

companies another true-up for that year’s information.

¶11.   On August 16, 2012, the Windpool sent members a letter informing them of the

upcoming true-up and telling them that details and deadline information would be released

over the next few months. On October 25, 2012, the Windpool sent a more detailed letter

to members, setting out the forms needed, the procedure for submission, and a final

submission deadline of January 1, 2013. The Windpool sent a third letter to members on

December 10, 2012, which reminded them of the January 1, 2013, deadline and stated that

“submissions received by the [Windpool] after January 1, 2013 will not be accepted.”

¶12.   Arrowood sent the Windpool a letter of intent on December 13, 2012, and said that

it would not be resubmitting any data for the second true-up. As such, the Windpool would

use Arrowood’s original 2003 data that it had submitted in early 2004 to calculate its

participation percentage for the reassessment made necessary by Union National. On

February 15, 2013, the Windpool informed each member of its estimated participation

percentage.

¶13.   Arrowood then emailed the Windpool on March 27, 2013, expressing concerns about

“[a] significant issue with [its] 2003 reportable data,” and asking to schedule a conference

call with Windpool representatives. During a subsequent email exchange, Arrowood

attached the attorney’s opinion that the Windpool had sent it in 2005 to explain why it had

reported its premiums the way it did.



                                             7
¶14.   Brad Little, an assistant manager for the Windpool, responded and stated that the

attorney’s opinion contained incorrect information, and that Arrowood should have received

voluntary-writings credit for much of its 2003 premiums:

       [P]roperty extended coverage premium[s] written on a direct basis by a MS
       Dept. of Ins. admitted member carrier was assessable by the [Windpool] in the
       pre-[2007] structure.

       It [does] not matter whether the extended coverage premium was written for
       the entire limits for a given risk, or some layer of limits for the risk. If the
       coverage was direct premium reportable to the MS DOI, it was subject to wind
       pool insurer reporting requirements. It was also eligible for voluntary
       wind/hail write out credits if related to a risk located in the lower 6 coastal
       counties (when wind/hail was included for coverage).

       Non admitted, excess and surplus carrier premium was not assessable.
       However, a layered property extended coverage premium written on a direct
       basis through any admitted carrier as reported to the MS DOI was (and is)
       assessable.

       Joel [Ferriss, another Windpool official] and I did see where some form of
       attorney opinion was included with [Arrowood’s] 3-27-13 email. However, the
       author was not noted and it frankly appears incorrect. We can discuss issues
       for clarification if you continue to feel an appeal to the [Windpool] Board is
       desired.

(Emphasis added.)

¶15.   On April 5, 2013, Arrowood responded to Little via letter and stated

       Given that Essential Property Insurance does not include excess coverage;
       such coverage should not be reportable for purposes of participation
       calculations. To assess companies using [a] participation calculation that
       include[s] other than essential property insurance when they are not allowed
       to report voluntary writings is inequitable. Alternatively, should Arrowood be
       required to report the excess premiums, we believe that it is appropriate to
       allow those same excess premiums written in the wind zone counties to be
       eligible for wind pool credits.




                                              8
       We request that you accept this re-filed 2003 end of year premium data to be
       used for 2004 participation calculation. We only became aware of the
       reporting error upon our review of the Preliminary Calculation of Participation
       Percentages After Allowing for Re-filing which was received with your letter
       dated February 15, 2013.

But the Windpool denied Arrowood’s request via letter, because Arrowood made the request

after the January 1, 2013 deadline. The Windpool noted that it had apprised Arrowood of

the deadline in its various letters sent in late 2012, and that this Court had upheld its authority

to conduct a true-up and to set and enforce a deadline. The Windpool also informed

Arrowood that it could appeal its decision to the Insurance Commissioner within thirty days.

       Arrowood’s Appeals to the Commissioner and Chancery Court

¶16.   Arrowood appealed to the Commissioner, who affirmed the Windpool’s decision.

Although the Commissioner’s findings of fact included the email-and-fax exchange wherein

the Windpool told Arrowood that its excess policies were ineligible for voluntary-writings

credit, he did not analyze that information in his conclusions of law. Rather, the entirety of

the Commissioner’s substantive analysis consisted of three sentences explaining that Union

National controlled:

       [T]he [Windpool] has not denied Arrowood any constitutional or statutory
       right; the Mississippi Supreme Court has already determined that the
       [Windpool] has the power to set a deadline, require adherence to the deadline,
       and deny its former member an unlimited right to correct their own reporting
       errors.

       [T]he [Union National] case addressed the exact same issue on essentially
       identical facts. The only material difference between the previous Hurricane
       Katrina assessment appeals and this one is that the true-up is for 2004 rather
       than 2005.




                                                9
       Arrowood failed to submit the now-requested changes prior to the January 1,
       2013 deadline.

So the Commissioner held that the Windpool could enforce the deadline and prevent

Arrowood from resubmitting its data.

¶17.   Arrowood then appealed to the Hinds County Chancery Court, which affirmed the

Commissioner’s decision. The chancellor, like the Commissioner, found that Union

National allowed the Windpool to set and enforce deadlines. As for the Windpool’s

misrepresentation to Arrowood, the chancellor found that Arrowood was simply “confused”

about excess policies, and that “if Arrowood wanted the credit Arrowood should have timely

provided all the information [the Windpool] requested.” The chancellor made no mention

of the fax that the Windpool sent to Arrowood with admittedly false information about

credits, but found instead that “the fact that Arrowood had several chances to adhere to th[e]

deadline and failed to do so is not [the Windpool]’s fault or concern.” The chancellor also

said that “[f]or Arrowood to delay [the true-up] process due to being ‘confused’ about the

information it was supposed to submit, goes to the very nature of why deadlines are

important to the Supreme Court.”

¶18.   The chancellor denied Arrowood’s motion for rehearing, and Arrowood now appeals

to this Court and raises several issues. But we address Arrowood’s second issue only, which

we find dispositive, and restate as: Is the Windpool’s deadline tolled as to Arrowood because

the Windpool’s own incorrect representations led to Arrowood’s inaccurate submission?5

       5
        Arrowood raises three other issues, which we do not address: (1) the Windpool
arbitrarily and capriciously allowed one insurer and not another to circumvent its deadlines;
(3) the Commissioner’s decision to enforce the Windpool’s deadlines was not within his

                                             10
                                        ANALYSIS

¶19.   Arrowood argues that the Commissioner erred when he “[allowed] the Windpool to

ignore the effect of its prior misrepresentation.” Arrowood points out that, while the

Commissioner was aware of the Windpool’s 2005 misrepresentation, he still found that it had

the authority to enforce its deadlines; a finding which was an “erroneous” interpretation of

this Court’s precedent. Arrowood argues further that the Windpool “misrepresented its

interpretation of key statutory terminology to Arrowood,” and that the misrepresentation was

material.

¶20.   Negligent misrepresentation is applicable when a party proves:

       (1) a misrepresentation or omission of a fact; (2) that the representation or
       omission is material or significant; 3) that the person/entity charged with the
       negligence failed to exercise that degree of diligence and expertise the public
       is entitled to expect of such persons/entities; (4) that the plaintiff reasonably
       relied upon the misrepresentation or omission; and (5) that the plaintiff
       suffered damages as a direct and proximate result of such reasonable reliance.

Horace Mann Life Ins. Co. v. Nunaley, 960 So. 2d 455, 461 (Miss. 2007). And this Court

has acknowledged that misrepresentation by a party may toll the applicable statute of

limitations when another party relies on that misrepresentation. Holbrook v. Albright Mobile

Homes, Inc., 703 So. 2d 842, 845 (Miss. 1997) (“It is clear that genuine issues of material

fact exist in this case such that summary judgment should not have been granted . . . ,

whether Albright misled the Holbrooks into believing no coverage existed is disputed,




scope or power because the Windpool lacks authority to set and enforce the true-up deadline
without promulgation and approval of formal rules; and (4) the Commissioner erred as a
matter of law in granting the Windpool deference in his review.

                                              11
whether the Holbrooks relied on any such misleading statements such that the statute of

limitations should be tolled must be resolved.”).

¶21.   Here, the parties have stipulated, and the Commissioner found, that Arrowood asked

the Windpool if it could receive voluntary-writings credit for its excess policies. Arrowood

explained in that email that it had “locate[d] a definition of Essential Property in the Plan,

but [was] unable to clearly find a specific exclusion of Excess coverage.” And as explained

above, the significance of this inquiry is that only “essential property insurance” is eligible

for voluntary-writings credit. See Miss. Code Ann. § 83-34-9.

¶22.   The Windpool answered Arrowood’s question by stating expressly that “[e]xcess

insurance even though on the same properties does not constitute essential property insurance

within the meaning of the Act. . . .” Based on that answer, Arrowood did not seek to correct

the reporting of its net direct premiums during the true-up, nor did it seek to get voluntary-

writings credit for the portion of those premiums that were for excess policies. Only after

the deadline did the Windpool disavow the information in the attorney’s opinion it had faxed

to Arrowood.

¶23.   The Windpool ostensibly concedes that its representation to Arrowood was

“confusing.” But Arrowood has not argued that it ever was confused about the Windpool’s

answer, and we fail to see how that answer could be confusing to someone who had asked

that specific question. Indeed, we find only one time in the record where counsel for

Arrowood used the term “confusion” regarding the excess-policy question, and he did so

when referring to Arrowood’s state of mind that led to it asking the Windpool for



                                              12
clarification, not when referring to the Windpool’s answer. So we disagree with the

chancellor’s finding6 and the Windpool’s implication that Arrowood was “confused” by the

Windpool’s answer. Rather, any confusion Arrowood had is what prompted it to ask the

Windpool why excess coverage was not eligible for voluntary-writings credit. And it was

the incorrect information provided by the Windpool upon which Arrowood relied when it

failed to claim that credit.

¶24.   The Windpool also argues that Arrowood’s reliance was unreasonable because the

pre-true-up letters it sent contained “accurate and complete information . . . including what

a voluntary writing was and how to get credit for it.” Specifically, the Windpool highlights

several statements in those letters that purportedly “contradicted [its] previous misstatement,”

such that Arrowood could not reasonably rely on it:

       C       The 2004 policy year percentages of participation are based upon 2003
               end of year reported data (statewide writings and wind zone voluntary
               writings credit).

       C       [M]any member companies advised the [Windpool] that they had not
               properly reported their 2004 voluntary property writings on the
               Mississippi coast. Failing to properly report these writings increased
               their percentage of assessment for policy year 2005.

       C       Each member company participated in the profits or losses of each
               policy year based on its percentage of the property insurance in
               Mississippi for the preceding year, with credit modifications for



       6
         The chancellor said in her order that “For Arrowood to delay [the true-up] process
due to being ‘confused’ about the information it was suppose[d] to submit, goes to the very
nature of why deadlines are important to the Supreme Court . . . . Arrowood gave [the
Windpool] notice that it would not be submitting any new data. Arrowood made the choice
not to respond. Arrowood made the choice not to ask questions and clear up any confusion.”


                                              13
              voluntarily writing property with wind coverage on the Mississippi
              Gulf Coast.

       C      We invite your special attention to the provision of the Plan of
              Operation which allows credit for business voluntarily written in the
              Mississippi Coast Area.

       C      Any property insurance policies which do not cover the perils of
              Windstorm and Hail should not be submitted.

       C      It will be necessary for each member company of the [Windpool] to
              submit a bordereau listing all property insurance written which covers
              the perils of Windstorm and Hail . . . .

¶25.   But we disagree that any of these statements provided information that would cast

doubt on the Windpool’s original answer to Arrowood’s question. To be sure, none of the

statements specifically echo the information in the Windpool’s attorney’s opinion, but neither

do any of the statements contradict that opinion. Indeed, all of the statements appear either

to provide less information than, or specifically refer to, the governing statutes and

Windpool’s Plan of Operation that led to Arrowood’s inquiry in the first place. In short, we

see nothing in these letters that would alert a member that excess policies are a basis for

voluntary-writings credit, when that member previously had been told the opposite.

Accordingly, we reject the Windpool’s argument that “[a]ny mistaken information that may

have existed as a result of the September 29, 2005 facsimile was corrected in the August 12th

and October 25th letters.”

¶26.   In sum, we find that all of the elements of negligent misrepresentation are present

here. The Windpool incorrectly represented to Arrowood that it could not receive credits for

excess policies, and that representation certainly was material. The Windpool’s decision to



                                             14
reply to Arrowood with an erroneous attorney’s opinion evidences a lack of that “degree of

diligence and expertise” that the public is entitled to expect of the Windpool. As discussed

above, Arrowood reasonably relied on the Windpool’s representation, and it certainly

suffered damages when it failed to get credit for voluntarily writing wind and hail policies

on the Coast. While we agree with the Commissioner that this Court said in Union National

that the Windpool has the authority to allow true-ups, to set deadlines and to enforce those

deadlines, we did not say that those deadlines were immutable and were not subject to other

mitigating principles of law. As such, we find that the Windpool’s misrepresentation tolled

its deadline as to Arrowood. We therefore reverse the decisions of the Commissioner and

the Hinds County Chancery Court.

                                     CONCLUSION

¶27.   For the foregoing reasons, we reverse the decisions of the Insurance Commissioner

and the Hinds County Chancery Court and remand this case to the Insurance Commissioner

for proceedings as necessary, consistent with this opinion.

¶28.   REVERSED AND REMANDED.

       RANDOLPH, P.J., KITCHENS, KING, MAXWELL AND BEAM, JJ.,
CONCUR. DICKINSON, P.J., CONCURS IN RESULT ONLY WITH SEPARATE
WRITTEN OPINION JOINED BY COLEMAN, J. COLEMAN, J., CONCURS IN
PART AND IN RESULT WITHOUT SEPARATE WRITTEN OPINION. WALLER,
C.J., NOT PARTICIPATING.


       DICKINSON, PRESIDING JUSTICE, CONCURRING IN RESULT ONLY:




                                            15
¶29.    Because I maintain my view that the Windpool possesses no statutory authority to

promulgate a statute of limitations for the true-up process,7 I do not join the majority’s tolling

analysis but agree the Windpool had no right to refuse to accept Arrowood’s refiled premium

data.

        COLEMAN, J., JOINS THIS OPINION.




        7
       Miss. Windstorm Underwriting Ass’n v. Union Nat’l Fire Ins. Co., 86 So. 3d 216,
231–32 (Miss. 2012) (Dickinson, P. J., dissenting).

                                               16
