Missouri Property and Casualty Insurance Guaranty Association, Plaintiff-Respondent, Cross-Appellant, v. Pott Industries, et al., Defendant-Appellant, Cross-Respondent.

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court. Opinion Missouri Court of Appeals Eastern District Case Style: Missouri Property and Casualty Insurance Guaranty Association, Plaintiff-Respondent, Cross-Appellant, v. Pott Industries, et al., Defendant-Appellant, Cross-Respondent. Case Number: 71739 and 71791 Handdown Date: 11/18/1997 Appeal From: Circuit Court of St. Louis County, Hon. Robert Lee Campbell Counsel for Appellant: Mark Sableman, W. Stanley Walch and Norbert Glassl Counsel for Respondent: Adrian P. Sulser, Gerre S. Langton and Mary Anne Lindsey Opinion Summary: Pott Industries and Missouri Insurance Guaranty Association (MIGA) both appeal summary judgments on declaratory judgment and award of some, but not all, of Pott's counterclaims for reimbursement. AFFIRMED. Division Three holds: (1) The trial court did not err in awarding reimbursement of Pott's attorney's fees to defend claims MIGA was obligated but refused to defend. (2) In the absence of statutory authority in the Missouri Guaranty Act, former Section 375.785, RSMo 1986, MIGA is not liable for interest on liquidated claims for reimbursement. (3) Pott's expenses to maintain this lawsuit are not the statutory obligation of MIGA. They are not authorized by contract or statute and are not available to balance benefits or as part of collateral litigation. (4) The Vexatious Refusal Statute is inapplicable to MIGA. Citation: Opinion Author: Kent E. Karohl, Judge Opinion Vote: AFFIRMED. Ahrens, P.J., and Crandall, Jr., J., concur. Opinion:

Employer, Pott industries (Pott)(FN1) appeals from an amended judgment in a declaratory action entered against the Missouri Insurance Guaranty Association (MIGA)(FN2) and on Pott's counterclaims. Midland Insurance Company (Midland) insured Pott until Midland became insolvent in 1986. The trial court granted Pott's motion for summary judgment and found, as a matter of law, "Pott is entitled to judgment as requested for all attorneys' fees incurred in defense of claims." It granted MIGA's motion for summary judgment on other claims made by Pott. Pott argues for reimbursement of additional expenses it incurred when MIGA denied liability and refused to defend various claims against Pott, claims covered by Midland's policy. Pott requests: (1) prejudgment interest on amounts it expended to defend or settle claims covered by its Midland policy; (2) expenses incurred to establish MIGA's coverage of Pott's claims; and (3) damages for vexatious refusal to defend or reimburse Pott. MIGA cross-appealed and argues the trial court erred in assessing against MIGA all attorney's fees Pott incurred while defending the underlying claims against it. The facts of this case are lengthy. The parties fully litigated the merits of the dispute, MIGA's coverage of Pott's claims, prior to this appeal.(FN3) The parties agree the background is as follows. Midland insured Pott under a series of workers' compensation policies issued from January 1, 1977 to November 1, 1986. The Superior Court of New York declared Midland insolvent on April 3, 1986.(FN4) The court set April 3, 1987, as the last day for insureds to present proof of claims. The Midland liquidator accepted and validated Pott's omnibus claim for losses later arising under Midland's policies. Prior to insolvency, Midland was a member-insurer of MIGA. Twenty-five of Pott's employees filed workers' compensation claims (original claims) naming Pott as employer and Midland as insurer. Pott requested MIGA provide it with defense and indemnity against the claims under Midland's policies. MIGA initially assumed the defenses without any reservation of rights. For a significant period of time it controlled the defense and defense strategy for the claims. On April 11, 1990, it withdrew claiming Pott did not present its specific claims of loss to either Midland's liquidator or MIGA before the bar date of April 3, 1987. After withdrawing, MIGA filed a petition for declaratory judgment to obtain a declaration of its obligations with respect to the pending original claims. On October 28, 1991, the trial court stayed the declaratory judgment action pending final determination of the workers' compensation claims. On May 20, 1992, an Administrative Law Judge (ALJ) found MIGA obligated to cover the claims and awarded benefits. MIGA appealed. The Labor and Industrial Relations Commission affirmed the award on October 21, 1993. MIGA appealed to this court. We transferred the appeal to the Supreme Court. On April 15, 1995, the Supreme Court held the Commission had

subject matter jurisdiction to determine coverage. See Mikel v. Pott Indus./St. Louis Ship., 896 S.W.2d 624 (Mo. banc 1995) ("Mikel I"). After retransfer, we affirmed the Commission's award. See Mikel v. Pott Indus./St. Louis Ship., 910 S.W.2d 323 (Mo. App. E.D. 1996) ("Mikel II"). During the appeal, Pott settled the original claims for workers' compensation without MIGA's objection. It paid claimants $90,536.80 and defense costs of $9,210.47. After Pott filed its original counterclaim, it demanded MIGA defend and indemnify it under Midland's policies for two more workers' compensation claims (subsequent claims) and a property damage claim (additional claim). The property damage claim consisted of four claims consolidated for discovery purposes. MIGA initially did not acknowledge coverage of the subsequent claims and the additional claim and required Pott to undertake the defense. MIGA later assumed the defense without reservation of rights. Pott paid an additional $47,500 in settlement costs to claimants and $254,149.98 in defense costs on the original claims. It paid $2,323.50 and $2,565.52 in defense costs for the subsequent claims and the additional claim, respectively. On April 10, 1995, Pott filed its answer and counterclaim to MIGA's petition for declaratory judgment. Pott alleged it was entitled to reimbursement for the following: (1) settlement amounts it paid to claimants on the original claims and defense costs paid on the original, subsequent, and additional claims; (2) prejudgment interest for settlement amounts paid to claimants and defense costs paid; (3) costs incurred in litigating the coverage issue, its counterclaim in the present case, and this appeal; and, (4) vexatious refusal damages. On June 3, 1996, MIGA filed a reply to the counterclaims. On July 2, 1996, Pott filed a motion for summary judgment on all of its claims for reimbursements in its counterclaim. MIGA orally requested dismissal of Pott's vexatious refusal damages claim. MIGA tendered $88,036.88 and $47,300 to reimburse Pott for amounts it paid to claimants. It also tendered $9,110.47, $139,805.46, $2,123.50 and $2,465.52 representing payments for Pott's expenses in defending the original, subsequent and additional claims. In summary: Settlement Costs Settlement Costs Defense CostsDefense Costs Pott Incurred MIGA Reimbursed Pott Incurred MIGA Reimbursed Original$90,536.80$88,036.88$9,210.47$9,110.47 Claims 47,50047,300254,149.98139,805.46 Subsequent 0 02,323.502, 123.50 Claims Additional 0 02,565.522,465.52

Claims On December 4, 1996, the trial court entered an amended summary judgment on MIGA's original petition for declaratory judgment. It granted Pott's claims for defense costs of $114,744.52 for the original claims. It denied Pott's claims for prejudgment interest. It also denied Pott's claim for reimbursement of costs in prosecuting this case. It dismissed, with prejudice, Pott's claim for vexatious refusal after finding Count VIII failed to state a claim upon which relief could be granted. Finally, it ordered, "[h]aving fully and finally adjudicated all claims presented in Plaintiff MIGA's declaratory judgment claim and Defendant Pott's Amended Counterclaim, the Court orders all costs of this action assessed against Plaintiff MIGA." Both parties appealed. Pott argues three claims of error and MIGA argues one. We review MIGA's point and Pott's first two points de novo. Missouri Property & Casualty Ins. Guar. Ass'n v. Petrolite Corp., 918 S.W.2d 869, 871 (Mo. App. E.D. 1996). These points are purely issues of law. Id. We review the record in the light most favorable to the party against whom the trial court entered its judgment and accord the non-movant the benefit of all reasonable inferences. Id. We review Pott's third issue, vexatious refusal, in view of the facts in the light most favorable to the claimant. Volume Services, Inc. v. C.F. Murphy Ass'n, 656 S.W.2d 785, 789 (Mo. App. 1983). We will address MIGA's cross-appeal first. I.Attorney's Fees For The Underlying Claims. MIGA argues the trial court erred when it found Pott entitled to recovery of all of the attorney's fees it paid in defense of the underlying claims. These are claims a solvent Midland would have been required to defend. On October 29, 1996, before the trial court's amended summary judgment, MIGA tendered an additional $49,658.04 for defense costs on the original claim. The reimbursement of attorney's fees in controversy now stands at $65,086.48; $114,744.52 awarded by the trial court less $49,658.04 tendered by MIGA. The relevant statute, former Section 375.785.3 and .4 et seq. RSMo 1986, the Missouri Guaranty Act, provided in part: 3. As used in this section: (2) "Covered Claim" means an unpaid claim including those for unearned premiums, . . . which arises out of and is within the coverage of an insurance policy to which this section applies issued by a member insurer, . . .; 4. (1) [MIGA] shall: (a) Be obligated to the extent of the covered claims existing prior to the date of entry of a decree or judgment . . . but such obligation shall include only that amount of each covered claim which is in excess of one hundred dollars and is less than fifty thousand dollars. In no event shall [MIGA] be obligated to a policyholder or claimant in an amount in excess of the face amount of the policy from which the claim arises . . . .

(b) Be deemed the insurer to the extent of its obligations on the covered claims and to such extent shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent. MIGA argues the trial court's award of $114,744.52 for non-reimbursed attorney's fees Pott paid in defense of claims is erroneous as a matter of statutory law because it exceeds the monetary limitation of $49,900, as found in Section 375.785.4(1)(a) RSMo 1986, for covered claims. It emphasizes that the language of the Guaranty Act does not distinguish between covered claims for defense costs and covered claims for indemnity costs. It urges this court to apply the limit in Subsection 4(1)(a) of greater than $100 and less than $50,000, on costs awarded under Subsection 4(1)(b). It observes Missouri case law does not provide precedential authority to permit an award for attorney's fees and defense costs above $49,900. It notes in every Missouri case addressing MIGA's liability for defense costs, the costs in controversy were less than the statutory limit. It foresees the result of affirming the trial court's award would authorize the recovery of "unlimited" defense costs against MIGA contrary to the "clear" language of the Guaranty Act. It claims it fully discharged its obligation when it paid $49,658.04 of the $114,744.52 awarded by the trial court. Pott argues Mikel II, 910 S.W.2d at 328, resolved MIGA's "covered claim" argument. It also argues the Guaranty Act does not limit MIGA's cost of defense responsibility. It requests that we interpret Subsection 4(1)(a) as imposing a $49,900 monetary cap on MIGA's indemnification obligations on sums paid to claimants and Subsection 4(1)(b) as imposing no financial limits on MIGA's other "rights, duties, and obligations"in under Midland's policies. Pott contends the absence of a fixed dollar amount in Subsection 4(1)(b) will not result in unlimited defense expense as MIGA complains because MIGA could have assumed its responsibility to defend the claims and prevented the charges. With respect to the underlying claims, MIGA stands in the shoes of the insolvent insurer and has all the "rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent." Hankins Const. Co. v. Missouri Ins. Guar. Ass'n, 724 S.W.2d 583, 590 (Mo. App. 1986). MIGA is required to indemnify insureds for any losses resulting from covered claims up to the policy limit or $49,900, whichever is less. Petrolite, 918 S.W.2d at 873. In Petrolite, this court rejected MIGA's argument that the monetary cap in Subsection 4(1)(a) included indemnification, as well as, attorney's fees and defense costs. We noted that placing a cap on defense costs "would lend itself to abuses clearly not intended by the legislature" by leaving the insured without indemnification for the actual claim once defense costs exhausted the cap. Id. Thus, the Subsection 4(1)

(a) limitation on MIGA's obligation to pay covered claims, does not include costs to defend the insured. Id. The original, subsequent, and additional claims are all covered claims. See Mikel II, 910 S.W.2d at 328. In essence, MIGA argues Subsection 4(1)(a) limits reimbursement for indemnification up to $49,900 and Subsection 4(1)(b) limits reimbursement for "rights, duties, and obligations" up to a separate cap of $49,900. We find no monetary cap in Subsection 4(1)(b). Such a limitation would leave an insured unprotected once MIGA exhausted $49,900 in attorney's fees and defense costs. That result would be inconsistent with the purpose of the Guaranty Act. Pott is entitled to reimbursement for attorney's fees expended to defend claims MIGA was obligated to defend, if fair and reasonable. MIGA must provide the defense for Pott which Midland would have, if it were solvent. MIGA's failure to defend supports the trial court's requirement it reimburse Pott for attorney's fees and defense costs it paid to defend in the original, subsequent and additional claims. MIGA is liable for the remaining amount of $65,086.48. Point denied. II.Prejudgment Interest. Pott offers various arguments to support a conclusion the trial court erred in refusing to award prejudgment interest on amounts it paid to settle and defend claims covered by Midland's policies. First, it contends the Missouri Interest Statute, Section 408.020 RSMo 1996, applies. It contends the amount of prejudgment interest sought is a liquidated amount which became due on the written contracts of Midland's policies. It argues payments for settlement costs, attorney's fees and other legal expenses are liquidated because they became readily ascertainable as of the date Pott made each payment. It concludes, MIGA owes it interest at the rate of 9% per annum supplied by the Interest Statute because Midland's policies do not supply a rate of interest. MIGA responds the Missouri Interest Statute does not apply to amounts it pays insureds because its liability is not based in contract; it is statutory and prejudgment interest cannot be an obligation read into the Guaranty Act. It maintains the Guaranty Act does not provide an express statutory provision for recovery of interest as required by Hankins, 724 S.W.2d at 591. It also contends that rules of statutory construction require the conclusion that the specific provisions of the Guaranty Act override the general provisions in the Interest Statute. Second, Pott argues the issue of prejudgment interest is primarily one of statutory interpretation. In deciding this issue, it urges us to consider all relevant Missouri statutes, as a whole, and not interpret the Guaranty Act in isolation. It contends: (1) the Guaranty Act must be construed broadly to further its remedial

purpose; and, (2) no specific provision in the Act prohibits an award of interest. It argues we should apply the same reasoning to this interest dispute as we applied to the coverage dispute. The Supreme Court rejected MIGA's argument that the Guaranty Act excluded reference to the Worker's Compensation Act as an authority for deciding coverage questions. It argues that just as the Supreme Court found that the Workers' Compensation Act applied to MIGA, we should apply the Interest Statute to MIGA. Pott again cites to Petrolite, 918 S.W.2d at 873, for the proposition that absent an express limitation in the Guaranty Act, MIGA assumes all of the obligations of the insolvent insurer. Pott emphasizes that the Guaranty Act does not contain an express limitation on prejudgment interest. Thus, if Midland would have had an obligation to pay prejudgment interest on its policies for breach of its duty to defend, then MIGA is also liable for prejudgment interest because it occupies the same legal position of Midland when it steps in the shoes of Midland and takes over the obligations under the policies. In the converse, MIGA agrees an insurer may be required to pay prejudgment interest for breach of its duty to defend, however, it is not an insurer. It argues the contractual duties and obligations of an insurer do not expand its statutory obligations. Third, Pott argues the policy and purpose of the Guaranty Act is to protect innocent insureds from losses due to insurer insolvency which requires an award of prejudgment interest. It argues the goal of the Guaranty Act is to make policy holders whole within the limits of Section 375.785.4(1)(a). Pott concedes the Guaranty Act does contain some limitations that may prevent MIGA from making insureds whole. However, it contends MIGA should provide insureds "all of the funds to which they are entitled within those limitations" on a timely basis. (Emphasis taken). MIGA should not be permitted to pay its obligations with "watered-down dollars." (Emphasis taken). Instead, an award of prejudgment interest is required to compensate Pott fully for its deprivation of the use of its funds. It is not a penalty. As a matter of policy and equity, an award of interest would discourage stalling, which it asserts MIGA practices. It claims it is equitably entitled to prejudgment interest because MIGA refused to defend and indemnify Pott on the claims for over eight years. It engaged in a lengthy delay before satisfying a prior final judgment for repayment. It practiced a pattern of slow payment when it began to make payments. Finally, MIGA received a windfall by earning interest on sums it failed to timely and promptly pay to Potts. MIGA argues that Missouri rejects attempts to invoke equitable remedies to expand its legal obligations. It cites Oliver v. Oklahoma Property & Casualty Ins. Guar. Ass'n, 774 S.W.2d 902, 905 (Mo. App. 1989), as the Western District's refusal to apply equitable principles in violation of the Oklahoma Guaranty Act. In addition, it contends an award

of interest may force payment in excess of the monetary cap of $49,900. It acknowledges the invested funds "enhance" MIGA's ability to meet other "covered claims" without increasing assessments against all persons paying insurance premiums in Missouri. However, it also argues it has not benefited from use of the funds because MIGA does not generate a profit, instead it operates at a cumulative deficit. Fourth, Pott's argues this is an issue of first impression which we are free to decide. Pott relies on Pannell v. Missouri Ins. Guar. Ass'n, 595 S.W.2d 339 (Mo. App. 1990), as a case which implicitly acknowledged there was no limitation on claims of interest against MIGA. In Pannell, the Western District reversed the trial court's award of prejudgment interest. Pott contends Pannell reversed the trial court's award of prejudgment interest solely because the claim was unliquidated. It suggests Pannell would not have addressed the requirement of a liquidated claim to support an award of interest if such awards were unavailable against MIGA. Moreover, it contends Pannell found only two limitations on MIGA's liability in the Guaranty Act. The first limit is a $49,900 cap on coverage amounts. The second is a general limitation on MIGA's liability for actions taken in the course of performance of its powers and duties under the Guaranty Act. Section 375.785.4(1)(a) and .14. Pott distinguishes Hankins on the basis the amount of interest involved in Hankins was very small, thus, denial was an "afterthought." The insured in Hankins apparently did not rely on the Interest Statute. The trial court granted interest at a rate not provided in the Interest Statute. Pott also argues we should limit the Hankins refusal to award interest to the particular insurance contract in that case. It contends that an insurer is liable for prejudgment interest for breach of its duty to defend unless the insurance contract specifically precludes it. It argues MIGA does not object to Pott's demand for interest based on any policy language or exclusion and fails to identify language which we could construe as an exclusion. Finally, it argues Hankins is inconsistent with Petrolite, 918 S.W.2d at 873 and Mikel II, 910 S.W.2d at 328. Pott contends Petrolite and Mikel II refused to read non-statutory limitations into the Guaranty Act. MIGA's response is we must follow Hankins and not expose MIGA to liability for prejudgment interest. It argues the Interest Statute is inapplicable because the Guaranty Act does not authorize recovery of prejudgment interest from MIGA and its liability is statutory, not based on a contract. It contends Pannell is not substantive authority because it simply may have been expedient to dispose of the case as an unliquidated claim, without any consideration of the absence of statutory authority. It is "pure speculation" for Pott to suggest the Pannell court implicitly held MIGA was liable for interest for breach of duty. It argues Petrolite does not apply because that court did not address the issue of liability for prejudgment interest. Finally, it argues that in order for this court to allow

prejudgment interest based on a contract, the insured must establish its insurance policies provide for prejudgment interest; but Pott failed to allege or prove a contractual authorization exists here. Pott's final argument is based on foreign authority. Other state courts have barred prejudgment interest only because their statutes specifically provide interest cannot be recovered. NCNB Nat'l Bank v. Florida Ins. Guar. Ass'n, 541 So.2d 728, 730 (Fla. Dist. Ct. App. 1989); FIGA v. R.V.M.P. Corp., 874 F.2d 1528, 1533 (11th Cir. 1989); Florida Ins. Guar. Ass'n v. Gustinger, 390 So.2d 420, 421 (Fla. Dist. Ct. App. 1980); Lehmann v. O'Brien, 573 A.2d 171, 174 (N.J. Super. Ct. App. Div. 1989); Hendricks v. A.J. Ross Co., 556 A.2d 1267, 1269 (N.J. Super. Ct. App. Div. 1989). In addition, it contends other states with similar provisions, lacking express exclusion or authority, have held the guaranty association obligated for prejudgment interest. Aztec Well Service Co. v. Property & Casualty Ins. Guar. Ass'n, 853 P.2d 726 (N.M. Ct. App. 1993); Sifers v. General Marine Catering Co., 892 F.2d 386 (5th Cir. 1990); Aramburo v. Travelers Ins. Co., 438 So.2d 274 (La. Ct. App. 1983); Sands v. Pennsylvania Ins. Guar. Ass'n, 423 A.2d 1224 (Pa. Super. Ct. 1980). Pott argues the Missouri General Assembly did not intend to insulate MIGA from interest. Pott offers as proof that the General Assembly was aware of other state's exclusions and chose not to include any specific bar in its own guaranty statute. MIGA also relies on foreign authorities which would prohibit recovery of prejudgment interest against it because its liability arose from statute rather than the insurance contract, and a guaranty association is not a legal successor of the insolvent insurer. City Of Greensboro v. Reserve Ins. Co., 321 S.E.2d 232 (N.C. Ct. App. 1984); Chris Episcopo Constr. v. Int'l Underwriters Ins. Ass'n, No. CIV.A.86C-04-063, 1994 WL 555381, at *4 (Del. Super. Aug. 31, 1994); Nebraska Life & Health Ins. Guar. Ass'n v. Dobias, 531 N.W. 2d 217, 220-221 (Neb. 1995). We hold prejudgment interest on an insured's liquidated claims for reimbursement of sums paid to satisfy obligations of MIGA is a matter to be determined by the legislature. The arguments of the parties are equally persuasive, however, MIGA is an association with limited statutory authority. It functions without the usual decision making freedom of a private business. The resources provided for its use to meet its obligations are not determined by profit and loss. We affirm the denial of prejudgment interest in the absence of a statutory duty to pay it. Interest is different from reimbursement of sums paid on claims and costs of defense of claims. MIGA owes the latter because they were obligations of Midland, and through the Guaranty Act, MIGA's obligations. In the absence of a claim, proof, and a finding Midland's policies contained an agreement to pay prejudgment interest on Pott's expenses following a wrongful denial of coverage, MIGA is not subject to a judgment for

prejudgment interest. III.Costs To Establish Coverage. Pott argues the trial court erred in refusing to order reimbursement for expenses incurred to pursue MIGA for breach of its statutory duty to provide a defense. It contends the trial court's refusal in effect denied it a "net" reimbursement because of the amounts it expended to establish coverage "cut deeply" in the amounts it received on the underlying claims. Pott argues its expenses to establish coverage may be allowed because the expenses: (1) are not prohibited by the Guaranty Act; (2) are warranted as a matter of equity to balance the benefits; and, (3) were incurred as collateral litigation expenses. Pott first argues the Guaranty Act does not exclude an award of attorney's fees expended to establish coverage. The Guaranty Act places MIGA in the shoes of an insolvent insurer to assume a full defense of its obligations under the policies. It has been held that guaranty associations are liable for fees a claimant incurs in pursuing an action against the guaranty association. Deshotels v. SHRM Catering Services, 842 F.2d 116, 120 (5th Cir. 1988) and Sifers, 892 F.2d at 398-99. However, the question is does the statute make MIGA liable for Pott's expenses to establish MIGA's statutory obligation to provide a defense under Section 375.785.4(1)(b). Second, Pott argues this court should require MIGA to reimburse Pott's expenses to establish coverage in order to balance the benefits caused by its refusal to recognize or comply with its coverage obligations. It will not be made whole without this court awarding it attorney's fees and expenses. It contends a balancing of the benefits is warranted here because of MIGA's stubborn resistance to provide coverage "in spite of the consistent rejection of its position by all forums" where its resistance is contrary to the intended purpose of the Guaranty Act of protecting insureds from the effects of insurer insolvency. (Emphasis taken). Third, Pott argues its attorney's fees and costs fall under the collateral litigation doctrine. It contends the costs were incurred as the natural and proximate result of MIGA's breach of its statutory duty as primary obligor, to provide Pott as secondary obligor, a defense under Midland's policies. It incurred the necessary fees in good faith to protect itself from adverse consequences of MIGA's breach of duty and was forced to litigate in multiple forums because of MIGA's unreasonable and stubborn rejection of its obligations. The fact that MIGA lost at every stage of the Mikel proceedings is offered as proof that MIGA's resistance was not in good faith. Missouri follows the American rule that each litigant bear his own attorney's fees. David Ranken Jr. Tech. Inst. v. Bykins, 816 S.W.2d 189, 193 (Mo. banc 1991). However, attorney's fees are ordinarily recoverable when: (1) authorized by contract; (2) authorized by statute; (3) a court of equity finds them necessary to balance the

benefits; or, (4) incurred because of collateral litigation. Forsythe v. Starnes, 554 S.W.2d 100, 111 (Mo. App. 1977). Absent a contract or statute, we rarely find the very unusual circumstances that allow an award of attorney's fees. Bykins, 816 S.W.2d at 193. Very unusual circumstances means "an unusual type of case, or extremely complicated litigation wherein the legal actions taken by the parties significantly differ from other actions taken by other parties in similar situations, or by others trying to achieve the same result." Wilkerson v. Gateley, 922 S.W.2d 465, 467 (Mo. App. E.D. 1996). We make an exception where the natural and proximate result of a wrong or breach of duty forces the wronged party into collateral litigation, and the fees are reasonable, incurred necessarily and in good faith to protect the insured from the injurious consequence thereof. Bykins, 816 S.W.2d at 193; Johnson v. Mercantile Trust Co. Nat'l. Ass'n, 510 S.W.2d 33, 40 (Mo. 1974). There is no contractual or statutory authority for Pott to recover its costs of this litigation. MIGA does not occupy Midland's legal relationship with Pott. Pott would not be in this litigation except for the Guaranty Act which created MIGA. The legislature could have, but did not, authorize attorney's fees to insureds who were successful in forcing MIGA to defend or to reimburse claims, losses, and expenses. Furthermore, Deshotels and Sifers, supra, are not applicable here. The Missouri Guaranty Act does not recognize that attorney's fees may be awarded against MIGA for acting "arbitrarily, capriciously, or without probable cause" in denying a claim. Pott may not recover in equity under the balance of the benefits doctrine. This has been part of a lengthy, but not unusual circumstance. Reimbursement claims are not complex litigation. Moreover, there is no statutory requirement MIGA make Pott completely whole in order to balance the benefits. The collateral litigation doctrine is inapplicable. Pott's pursuit of MIGA to provide coverage is not collateral litigation. Pott's litigation in defending the original, subsequent, and additional claims is the collateral litigation on MIGA's denial of coverage and refusal to defend. Pott's expenses in defending the underlying claims were already allowed; MIGA paid them in part and owes the balance. IV.Vexatious Refusal Damages. Pott's last issue involves dismissal, with prejudice, of its cause of action for vexatious refusal damages. Pott argues the Vexatious Refusal Statute, Section 375.420 RSMo 1996, offers an available exception to the American rule of attorney's fees. Pott also wants a ruling that Section 375.785.14 protects MIGA only from liability for administrative acts done in good faith and to carry out the Guaranty Act's purpose; not from refusal to perform its statutory duty. It contends MIGA waived its right to later deny coverage when it assumed the defense of the claims without reservation of rights. It also asserts that MIGA's actions were unreasonable in refusing coverage

and payment. Pott is comforted to recall every tribunal has rejected MIGA's arguments in its attempt to avoid coverage. Pott argues the finding in Pannell that MIGA is not an insurance company is contrary to the Guaranty Act provision that MIGA is "deemed an insurer." It also argues declining to find vexatious refusal damages contradicts the finding in Mikel I that MIGA is obligated to the same extent as the insurer had it not become insolvent. The Vexatious Refusal Statute, authorizes interest and attorney's fees against any insurance company that has vexatiously refused to pay the loss under its policies. Section 375.420 RSMo 1996. The Vexatious Refusal Statute does not govern MIGA because it is not an insurance company. Pannell, 595 S.W.2d at 352. MIGA is a "nonprofit unincorporated legal entity." Section 375.785.1, supra. It is insulated under Subsection 14 of Section 375.785 RSMo 1986, which provides: [t]here shall be no liability on the part of and no cause of action of any nature shall arise against . . . [MIGA] . . . for any action taken by . . . [it] in the performance of . . . powers and duties under this section. We again hold MIGA is not an insurance company. It is deemed the insurer to a limited extent for defense and payment of covered claims that arise out of an insolvent insurer's policies. It performs as a statutory association, but its duties do not convert it into an insurance company. MIGA cannot be held liable for vexatious refusal damages. We affirm. Footnotes: FN1. Enron Corporation is the successor of Pott Industries. FN2. In 1989, MIGA's name was changed to the Missouri Property and Casualty Insurance Guaranty Association. Section 375.772 RSMo Cum. Supp. 1990. FN3. Mikel v. Pott Indus./St. Louis Ship., 896 S.W.2d 624 (Mo. banc 1995) ("Mikel I") and Mikel v. Pott Indus./St. Louis Ship., 910 S.W.2d 323 (Mo. App. E.D. 1996) ("Mikel II"). FN4. All statutory references are to Section 375.785 RSMo 1986, which was applicable on the date of Midland's insolvency of April 3, 1986. Section 375.785 was repealed in 1989 and replaced by a new statute codified at Section 375.772 RSMo 1994. Separate Opinion: None This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.