Wasatch v. LWP

2007 UT 32
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
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Wasatch Crest Insurance Co., in No. 20051102
Liquidation; Wasatch Crest Mutual
Insurance Co., in Liquidation;
and D. Kent Michie, Liquidator,
Plaintiffs and Appellants,
v.
LWP Claims Administrators Corp.,
a California corporation; and
LWP Claims Solutions, Inc., F I L E D
a California corporation,
Defendants and Appellees. April 6, 2007
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Third District, Salt Lake
The Honorable Timothy R. Hanson
No. 030915527
Attorneys: John P. Harrington, Cecilia M. Romero, J. Ray
Barrios, Jr., Salt Lake City, for plaintiffs
Edwin C. Barnes, Charles R. Brown, Jennifer A.
James, Salt Lake City, for defendants
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WILKINS, Associate Chief Justice:
¶1 On direct appeal from the district court’s grant of
summary judgment, the Utah Insurance Commissioner, as court-appointed
liquidator (the “Liquidator”), seeks to recover, on behalf of two
liquidating insurance companies, payments made by the companies
to a former affiliate. Utah Code section 31A-27-322 allows a
liquidator to recover “from any affiliate that controlled [a
liquidating] insurer the amount of distributions . . . made at
any time during the five years preceding the petition for
liquidation.” We agree with the district court that the
affiliate in this case was not one that “controlled” the
insurance companies within the meaning of the statute and that
the payments did not constitute “distributions.” We therefore
affirm the district court’s grant of summary judgment.

1 At the time of the purchase, Group created a new corporate
entity, LWP Claims Administrators Corp. (later renamed LWP Claims
Solutions, Inc.), which took possession and title to all the
purchased assets. Because all these entities are essentially the
same company, we refer to them collectively as “LWP.”
2 LWP asserted before the district court that Mutual was no
longer affiliated with Group or any of its affiliates at any time
during which LWP provided services to Mutual. In response, the
Liquidator withdrew its motion for summary judgment with respect
to Mutual but maintains that material issues of fact concerning
(continued...)
No. 20051102 2
BACKGROUND
¶2 In 1999, Wasatch Crest Group, Inc. (“Group”), an
insurance holding company, purchased LWP Commercial Claims
Administrators, Inc. (“LWP”),1 an insurance claims handling
company, from John and Erica Igoe. Shortly after the purchase,
John Igoe became president and chief operating officer of Group
and of Wasatch Crest Insurance Co. (“Insurance”), a wholly-owned
subsidiary of Group, while serving concurrently as chairman of
the board and chief executive officer of LWP. Several other
individuals also held overlapping management positions within the
three companies, though there was never complete identity of
board membership.
¶3 From about the time of the purchase until 2002, LWP
provided claims-handling services for Insurance as well as for
Wasatch Crest Mutual Insurance Co. (“Mutual”), an insurance
company that at one point had owned stock in Group. In 2002,
Group sold LWP for fair market value to John Igoe and Judy Adlam,
who at the same time resigned from their positions with Group and
Insurance. In 2003, Insurance and Mutual were placed into
liquidation.
¶4 The Liquidator filed a claim in district court to
recoup, on behalf of Insurance and Mutual, payments made by the
companies to LWP for the claims-handling services it provided.
The Liquidator relied on Utah Code section 31A-27-322(1), which
states that a liquidator “has a right to recover on behalf of [a
liquidating] insurer from any affiliate that controlled the
insurer the amount of distributions . . . made at any time during
the five years preceding the petition for liquidation, . . .
subject to the limitations [outlined in the statute].”
¶5 In moving for summary judgment, the Liquidator argued
that LWP was an “affiliate that controlled” Insurance and Mutual2

2(...continued)
control of Mutual remain in dispute and that summary judgment
with respect to Mutual in favor of LWP was therefore improper.
3 No. 20051102
and that the payments to LWP constituted “distributions” within
the meaning of this statute. However, the district court denied
the Liquidator’s motion and granted LWP’s cross-motion for
summary judgment. The court held that although LWP was an
affiliate of Insurance, it did not “control” either Insurance or
Mutual as required by the statute. The court also held that the
term “distribution” refers to dividends or other payments of
equity, not to payments for services rendered, as were present
here. Thus, the court determined as a matter of law that the
Liquidator could not recover the payments because the statute was
inapplicable. The Liquidator appealed.
ANALYSIS
¶6 We review the district court’s “interpretation and
application of a statute” for correctness, “affording no
deference to the district court’s legal conclusion.” Gutierrez
v. Medley, 972 P.2d 913, 914-15 (Utah 1998). We likewise review
for correctness the district court’s grant of summary judgment as
a question of law. Uintah Basin Med. Ctr. v. Hardy, 2002 UT 92,
¶ 7, 54 P.3d 1165.
¶7 The Liquidator argues that Insurance and Mutual are
entitled to recover the payments they made to LWP based on the
Utah Insurance Code’s provision for recoupment from affiliates.
See Utah Code Ann. § 31A-27-322 (2005). The Liquidator disputes
the district court’s conclusion that the statute does not apply
based on its findings that LWP was not an “affiliate that
controlled” the companies and that the payments were not
“distributions” within the meaning of the statute. Because the
court granted summary judgment to LWP on these two independently
sufficient bases, we review each in turn.
¶8 The Liquidator first argues that LWP qualifies as an
“affiliate that controlled” Insurance within the meaning of Utah
Code section 31A-27-322. When interpreting a statute, we begin
with the statute’s plain language. J. Pochynok Co. v. Smedsrud,
2005 UT 39, ¶ 15, 116 P.3d 353. The statute states,
If an order for the liquidation . . . of an
insurer authorized to do business in this
state is ordered under this chapter, the
receiver appointed under the order has a
right to recover on behalf of the insurer

No. 20051102 4
from any affiliate that controlled the
insurer the amount of distributions . . .
made at any time during the five years
preceding the petition for liquidation
. . . .
Utah Code Ann. § 31A-27-322(1) (2005) (emphasis added). To
recover from LWP under the plain language of this statute,
therefore, the Liquidator must show that LWP was an “affiliate
that controlled” Insurance. Although LWP concedes that it was an
affiliate of Insurance, the statute requires more for recoupment;
it requires that LWP “controlled” Insurance.
¶9 The Liquidator argues that affiliate status presumes
control, but the plain language of the statute supports no such
assertion. When interpreting statutes, we “presume that the
legislature used each term advisedly,” and we consequently “avoid
interpretations that will render portions of a statute
superfluous or inoperative.” State v. Tooele County, 2002 UT 8,
¶ 10, 44 P.3d 680 (internal quotation marks omitted). The
statute explicitly qualifies the term “affiliate” with the
modifier “that controlled.” Because the Liquidator’s suggested
reading would render the phrase “that controlled” superfluous, we
avoid that interpretation.
¶10 In addition, the Code’s definition of “affiliate”
refutes the Liquidator’s contention that LWP’s concession of
affiliate status implies that it controlled Insurance. The Code
defines “affiliate” in terms of three categories of control:
“‘Affiliate’ means any person who controls, is controlled by, or
is under common control with, another person.” Utah Code Ann.
§ 31A-1-301(5) (2005). Only the first of these three categories
falls into the ambit of section 31A-27-322, which states that a
liquidator may recover from “any affiliate that controlled the
insurer.” By its terms, the statute does not apply to either of
the other two categories of affiliates.
¶11 During the time LWP performed services for Insurance,
both companies were wholly-owned subsidiaries of Group. Although
they shared some common management and were therefore arguably
under common control, at no point did one company own or control
any portion of the other. John Igoe, for example, could not, by
virtue of his role as a director of LWP, instruct Insurance to
make payments to LWP. The fact that he may have done so in his
role as a director of Insurance bears no significance on whether

3 Black’s Law Dictionary 488 (7th ed. 1999).
5 No. 20051102
LWP controlled Insurance. Because no aspect of Igoe’s or others’
positions as directors of LWP endowed them with the power to
direct any action by Insurance, LWP could not have controlled
Insurance within the meaning of the statute.
¶12 The Liquidator also disputes the district court’s
finding that the payments Insurance made to LWP for claims-
handling services were not “distributions” within the meaning of
the statute. Utah Code section 31A-27-322 allows a liquidator to
recoup only “distributions” made by the insurer during the five
years prior to the petition for liquidation. Although the
Liquidator argues that the term “distributions” refers to
payments of any kind, the court determined that the term
“distributions” refers only to dividends or other transfers of
equity, not to payments for services. We agree with the district
court.
¶13 Although the Utah Insurance Code does not define the
term “distribution,” the term is defined elsewhere in the Utah
Code as a portion of equity. For instance, the Utah Revised
Nonprofit Corporation Act defines “distribution” as “the payment
of a dividend or any part of the income or profit of a . . .
corporation.” Utah Code Ann. § 16-6a-102(17)(a) (2005). In
fact, that statute explicitly excludes the interpretation the
Liquidator urges. It states, “‘Distribution’ does not include
fair-value payments for . . . services received.” Id.
§ 16-6a-102(17)(b). Likewise, as the district court noted, the
Utah Revised Business Corporation Act defines “distribution” as a
transfer of equity. See id. § 16-10a-102(13).
¶14 This definition comports with both the common usage of
the term and its treatment in the Insurance Code. “Distribution”
commonly refers to “[t]he act of apportioning or giving out . . .
such as [in] a dividend payment out of current or past
earnings,”3 which suggests no relation to payments for services.
The Insurance Code highlights this point by using contrasting
descriptions of payments in other sections. For instance,
sections 31A-27-320 and -321 allow for the recovery of
“preferences” and fraudulent “transfers” made within certain time
periods. Use of the terms “transfers” and “preferences”
indicates that the legislature intended a different meaning when
it chose the term “distribution” in section 31A-27-322. The term
does not refer to transfers generally, but embraces only
dividends and other transfers of equity. We find no provision in
the Utah Code in which “distributions” encompasses fees earned
for services rendered.

No. 20051102 6
¶15 As payments for services, the payments made to LWP were
not “distributions” within the meaning of section 31A-27-322 and
are not subject to recovery under that section. The Liquidator
does not contend that the payments to LWP were excessive,
fraudulent, or improperly obtained. Nor does the Liquidator
suggest that the payments were, in reality, transfers of equity
disguised as payments for services. Therefore, the payments are
not recoverable as a matter of law.
CONCLUSION
¶16 The Liquidator may not, under Utah Code section 31A-27-
322, recover on behalf of Insurance or Mutual payments made to
LWP for the claims-handling services LWP performed. Although
section 31A-27-322 allows a liquidator to recover “distributions”
made to “affiliates that controlled” a liquidating insurer, LWP
was not an affiliate that controlled Insurance or Mutual, and the
payments were fees for services rendered, not distributions
within the meaning of the statute. The statute therefore does
not apply to these corporations or to these payments. Affirmed.
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¶17 Chief Justice Durham, Justice Durrant, Justice Parrish,
and Justice Nehring concur in Associate Chief Justice Wilkins’
opinion.