Truck Ins. Exch. v. Rutherford

• Decision Date: 27 April 2017
• Docket Number: No. 20150858,20150858
• Citation: 395 P.3d 143
• Parties: TRUCK INSURANCE EXCHANGE, Appellant, v. Danny L. RUTHERFORD, Appellee.
• Court: Utah Supreme Court

395 P.3d 143

TRUCK INSURANCE EXCHANGE, Appellant,

v.Danny L. RUTHERFORD, Appellee.

No. 20150858

Supreme Court of Utah.

Filed April 27, 2017

Jaryl L. Rencher, Benjamin K. Lusty, Salt Lake City, for appellant

Mark D. Dean, Brett N. Anderson, Kristy L. Bertelsen, Salt Lake City, for appellee

Justice Himonas authored the opinion of the Court, in which Chief Justice Durrant, Associate Chief Justice Lee, Justice Durham, and Justice Pearce joined.

On Direct Appeal

Justice Himonas, opinion of the Court:

INTRODUCTION

¶ 1 Danny Rutherford suffered extensive injuries when the work van he was driving was hit by a vehicle that had run a red light. Mr. Rutherford sought compensation from both his employer's workers' compensation insurer and Truck Insurance Exchange (TIE), which provides Mr. Rutherford's employer with underinsured motorist coverage. Mr. Rutherford seeks double recovery, arguing that Utah Code section 31A-22-305.3(4)(c)(iii) —which states that underinsured motorist coverage "may not be reduced by benefits provided by workers' compensation insurance"—means that underinsured motorist insurance must compensate Mr. Rutherford in full, up to the limits of the policy, irrespective of whether workers' compensation insurance has already covered a portion of the claim. In response, TIE argues that under section 305.3(4)(c)(i) of the same statute—which states that underinsured motorist coverage "is secondary to the benefits provided by" workers' compensation—it should not have to pay benefits that workers' compensation has or should have covered. We hold that TIE's status as a secondary insurer means that it must fully compensate Mr. Rutherford within its policy limits, but only for damages in excess of what workers' compensation paid, so as to avoid an inappropriate double recovery. We therefore reverse the district court's contrary grant of summary judgment.

BACKGROUND

¶ 2 Mr. Rutherford was driving a company van in the course of his employment when he was struck by an underinsured driver, leaving him with significant injuries. In the wake of his accident, Mr. Rutherford filed several claims for insurance compensation.

¶ 3 The first claim, to Mid Century Insurance, was for workers' compensation benefits for medical expenses, lost income, and permanent disability. Although Mr. Rutherford's medical expenses exceed $250,000, Mid Century Insurance has paid only $183,628.81 for medical expenses. It has also paid benefits for lost wages and permanent disability. Mr. Rutherford also recovered $50,000 from the other driver's insurance, although Mid Century Insurance subsequently recovered about $28,000 of that total in a subrogation action. Finally, because Mr. Rutherford was acting in the scope of his employment when the crash occurred, he also filed a claim with TIE, which insures Mr. Rutherford's employer. Mr. Rutherford sought to recover full benefits under TIE's underinsured motorist (UIM) policy for medical expenses, lost income, lost vocational capacity, future medical expenses, pre- and post-judgment interest, and general damages.

¶ 4 Both Mr. Rutherford and TIE filed motions for summary judgment. TIE sought a declaration that it was not liable to pay Mr. Rutherford medical expenses, lost income, or permanent or temporary disability benefits, which it argued Mid Century Insurance should pay or has already paid. Mr. Rutherford argued that Utah Code section 31A-22-305.3(4)(c) and the collateral source rule prohibited TIE from deducting workers' compensation benefits when determining its liability to Mr. Rutherford. The district court granted summary judgment for Mr. Rutherford, holding that Mr. Rutherford's interpretation "is more consistent with the underlying purpose" of Utah's insurance statutes. The district court also relied on our prior holdings in Thamert v. Continental Casualty Co. , 621 P.2d 702 (Utah 1980), and Lieber v. ITT Hartford Insurance Center, Inc. , 2000 UT 90, 15 P.3d 1030, in which we stated that a UIM insurer "should not be permitted to offset payments received by the plaintiff as workmen's compensation." Thamert , 621 P.2d at 704 ; see also Lieber , 2000 UT 90, ¶ 24, 15 P.3d 1030. TIE timely appealed. We have jurisdiction over this matter under Utah Code section 78A-3-102(3)(j).

STANDARD OF REVIEW

¶ 5 Summary judgment is appropriate when "there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." UTAH R. CIV. P. 56(a). We review the district court's grant or denial of summary judgment for correctness, drawing all reasonable inferences from the facts in the light most favorable to the nonmoving party. Massey v. Griffiths , 2007 UT 10, ¶ 8, 152 P.3d 312.

ANALYSIS

¶ 6 At issue in this case are two provisions of Utah's underinsured motorist coverage statute: Utah Code section 31A-22-305.3(4)(c)(i), which says that underinsured motorist coverage "is secondary to the benefits provided by" workers' compensation, and section 305.3(4)(c)(iii), which provides that underinsured motorist coverage "may not be reduced by benefits provided by workers' compensation insurance." TIE argues that the use of "secondary" in section 305.3(4)(c)(i) means it should be able to offset its potential liability by any payments Mr. Rutherford has received from his workers' compensation policy. To hold that a UIM insurer could not take into account what the injured driver has already received, TIE argues, would read the term "secondary" out of the statute. Mr. Rutherford, on the other hand, focuses on section 305.3(4)(c)(iii), arguing that the plain language of the statute prohibits TIE from reducing its UIM benefits by any workers' compensation benefits.

¶ 7 Our primary goal when interpreting statutes is to "evince the true intent and purpose of the Legislature." Duke v. Graham , 2007 UT 31, ¶ 16, 158 P.3d 540 (citation omitted). And it is legal dogma that the best evidence of legislative intent is "the plain language of the statute itself." State v. Martinez , 2002 UT 80, ¶ 8, 52 P.3d 1276. But when a statute "adopts a legal term of art ... with a settled meaning in the law, we interpret the statute to embrace the meaning of the term as it is understood in that context." Hansen v. Hansen , 2012 UT 9, ¶ 19, 270 P.3d 531. Applying these principles, we conclude that the statute provides that the UIM insurer must pay benefits until the insured is fully compensated, but that it does not need to duplicate the workers' compensation benefits where doing so would provide the insured with double recovery.

¶ 8 We begin our analysis with the meaning of "secondary" in section 305.3(4)(c)(i). We first note that, like "primary coverage," "secondary coverage" is a well-established term of art in the insurance context. See Li v. Enter. Rent–A–Car Co. of Utah , 2006 UT 80, ¶ 21, 150 P.3d 471 (noting term-of-art meaning of "primary coverage" and distinguishing it from "secondary coverage"). "Secondary coverage" is synonymous with "excess coverage," id. , which is "[a]n agreement to indemnify against any loss that exceeds the amount of coverage under another policy." Excess coverage , BLACK'S LAW DICTIONARY (7th ed. 1999). We applied this term-of-art meaning of secondary coverage in Lopez v. United Automobile Insurance Co. , in which an injured driver attempted to recover underinsured motorist coverage benefits. 2012 UT 10, 274 P.3d 897. We held that because the UIM statute provided that UIM coverage was "secondary to the liability coverage of an owner or operator of an underinsured motor vehicle," the driver was "entitled to be compensated by [the UIM insurer] only for damages in excess of those for which she was compensated by the other motorist's insurer." Id. ¶ 31 & n.41. It is clear, then, that the term "secondary" in section 305.3(4)(c)(i) means that UIM coverage applies only after the workers' compensation benefits have been exhausted. For example, if the workers' compensation insurer and the UIM insurer both provide coverage up to $100,000 and the insured's damages are $150,000, the insured would exhaust workers' compensation benefits to the tune of $100,000 and then receive $50,000 from the UIM insurer.

¶ 9 But TIE's status as a secondary insurer does not mean that it can reduce its coverage by the benefits provided by workers' compensation insurance in violation of Utah Code section 31A-22-305.3(4)(c)(iii). In keeping with the meaning of "coverage" as the "amount available to meet liabilities," WEBSTER'S NEW COLLEGIATE DICTIONARY (8th ed. 1973), TIE cannot lower its policy limits in response to the benefits that workers' compensation pays. See State Farm Mut. Auto. Ins. Co. v. Schatken , 230 W.Va. 201, 737 S.E.2d 229, 235–37 (2012) (interpreting similar statutory language to hold that "coverage" was not reduced where insured could recover up to the UIM policy limits but was prevented from getting double recovery). Take, for example, a situation where the UIM insurer offers coverage up to $100,000 and workers' compensation offers coverage up to $50,000. If the insured has damages of $125,000, workers' compensation will first pay $50,000. The UIM insurer may not then argue that the workers' compensation benefits reduce its coverage—that is, they do not reduce the $100,000 UIM policy to $50,000. But the workers' compensation benefits do reduce the benefits that the UIM insurer must pay—after deducting the workers' compensation award of $50,000, the UIM insurer must pay only the remaining $75,000 of the insured's damages. And TIE must still ensure that Mr. Rutherford is fully compensated even within categories where TIE's coverage overlaps with workers' compensation. As TIE agreed during oral argument, because workers' compensation covers only 66²/₃percent of the employee's average weekly wages at the time of the injury, see UTAH CODE § 34A-2-412, TIE is obligated to pay the remaining 33? percent to ensure that 100 percent of Mr. Rutherford's damages are covered. This setup ensures complete...