Allstate Ins. Co. v. Ivie, 15983
| Decision Date | 07 February 1980 |
| Docket Number | No. 15983,15983 |
| Citation | 606 P.2d 1197 |
| Parties | ALLSTATE INSURANCE COMPANY, Plaintiff and Respondent, v. Louise IVIE and Travelers Insurance Companies, Defendant and Appellant. |
| Court | Utah Supreme Court |
L. Rich Humpherys of Christensen, Gardiner, Jensen & Evans, Salt Lake City, for defendant and appellant.
L. E. Midgley, Salt Lake City, for plaintiff and respondent.
Before us is a matter involving our "no-fault" insurance act. It was resolved, by summary judgment, in favor of plaintiff Allstate Insurance Company. We reverse and remand. Costs awarded to defendant Ivie.
Defendant, hereinafter "Ivie," sustained severe personal injuries in a motor vehicle accident. Allstate Insurance Company, the plaintiff herein, was the "no-fault" insurance carrier for the vehicle in which Ivie was a passenger. In compliance with the Utah Automobile No-Fault Insurance Act, Section 41, Title 31, U.C.A.1953, as enacted 1973, Allstate paid Ivie PIP (personal injury protection) benefits amounting to the sum of $7,394.00. Thereafter, Ivie filed an action for damages against James Salisbury, the driver of the other motor vehicle involved in the accident. Salisbury's liability insurer was Travelers Insurance Company. Allstate declined to join in or participate in the lawsuit, although it asserted it had subrogation rights to the extent of the PIP benefits it had paid.
The trial of the negligence action was set for April 11, 1978. In March 1978, Travelers offered to settle for $44,000. Travelers' liability was limited to $50,000 under the policy. Ivie's counsel was employed under a contingency fee arrangement, viz., twenty-five percent prior to actual trial preparation and one third if the case were settled immediately before or during the trial, or went to judgment. Additionally, Ivie was responsible for all costs and expenses incurred in the prosecution of her claim. After reviewing the deposition of tort-feasor Salisbury, and further investigation, Ivie determined there would be a limited opportunity to collect a judgment in excess of the liability policy limit of $50,000, although Ivie claimed $150,000 in damages. Under these circumstances, Ivie accepted a settlement of $44,000; thus she limited her attorney's fees to twenty-five percent. Travelers issued two drafts: one was made payable jointly to Allstate and Ivie in the sum of $7,394.00; the other was for the balance of the $44,000 settlement. Ivie refused to deliver the check for $7,394.00 to Allstate, and the present action was filed.
In its complaint, Allstate pleaded in the alternative that it was entitled to subrogation under the contractual terms of the policy issued on the vehicle in which Ivie was a passenger to the extent it had paid the PIP benefits, or it was entitled to reimbursement under Section 31-41-11, U.C.A.1953, enacted in 1973. Allstate further pleaded for a declaration of its rights in regard to Ivie's recovery as a result of the settlement of her tort action. Allstate moved for summary judgment.
Ivie opposed the summary judgment on the ground there were triable issues of fact. Ivie urged equitable principles apply to subrogation and the insured is entitled to be made whole before the insurer is entitled to any portion of the recovery from the tort-feasor. Ivie argued she sustained severe injuries and was compelled to settle for a sum totally inadequate to compensate her for the total damages sustained. According to her argument, to prevail Allstate must prove it has a greater equity than Ivie, which, in effect, would require proof Ivie had received double payment for her medical expenses. 1
Ivie further urged, if Allstate were entitled to its subrogation claim, it should contribute to the costs and attorney's fees incurred by Ivie in collecting the claim. Ivie cites the principle that in the absence of an agreement to the contrary as set forth by the terms in a policy of insurance, the insured, who is successful in the recovery of funds which include money payable by the insured to an insurance company, is entitled to deduct attorney fees and other expenses reasonably and necessarily incurred in making such a recovery from the amount payable to the insurance company. 2
The trial court granted Allstate's motion for summary judgment. Specifically, the court granted Allstate judgment against Ivie and Travelers jointly and severally in the sum of $7,394.00. The court declared Travelers was bound by the provisions of Section 31-41-11, and Ivie was not entitled to an attorney's fee from Allstate.
To resolve the issues between the parties, it is essential to construe Section 31-41-11; however, this section cannot be construed in isolation, but must be correlated with other pertinent provisions in Chapter 41 of Title 31, Utah Automobile No-Fault Insurance Act. As an aid to the proper construction of this act, reference to an article by Robert E. Keeton in the 1973 Utah Law Review is beneficial, Compensation Systems and Utah's No-Fault Statute, 1973 ULR 383. Therein, it is explained that twenty-one states have enacted "no-fault" legislation. These laws are of two types: first, the add-on statutes; and second, the partial tort exemption statutes. The add-on statutes merely add to the negligence system of reparations with some kind of no-fault benefits to an injured person, without regard to fault. All tort claims are preserved under these statutes, although some provide for subrogation or offset to avoid double recovery for an item of loss. These add-on laws are not regarded as true "no-fault" legislation.
The true "no-fault" insurance is a type of compensation system which couples the payment of benefits on a no-fault basis with the partial elimination of fault-based tort actions for both economic losses and pain and suffering. This system generally continues to permit fault-based claims for pain and suffering in the more serious cases and for economic losses above no-fault benefits. A system which has no tort exemption at all is not a "no-fault" insurance. The Utah no-fault statute is a compulsory, partial tort exemption law coupling no-fault insurance benefits, Section 6, with a partial elimination of tort claims for bodily injury.
Section 2 of the act provides:
The purpose of this act is to require the payment of certain prescribed benefits in respect to motor vehicle accidents through either insurance or other approved security, but on the basis of no fault, preserving, however, the right of an injured person to pursue the customary tort claims where the most serious type of injuries occur . . .
(1) No person for whom direct benefit coverage is provided for in this act shall be allowed to maintain a cause of action for general damages arising out of personal injuries alleged to have been caused by an automobile accident except where there has been caused by this accident any one or more of the following:
(a) Death;
(b) Dismemberment or fracture;
(c) Permanent disability;
(d) Permanent disfigurement; or
(e) Medical expenses to a person in excess of $500.
(2) The Owner of a motor vehicle with respect to which security is required by this act Who fails to have such security in effect at the time of an accident Shall have no immunity from tort liability and Shall be personally liable for the payment of the benefits provided for under Section 31-41-6. (Emphasis supplied).
Under this statutory plan, first party PIP benefits up to the amounts provided in Section 6 are paid to an injured person without regard to fault. Furthermore, the injured party is precluded from maintaining an action to recover general damages (all damages other than those awarded for economic losses), 3 except where the threshold requirements of Section 9(1) are met. Under Section 9(2), there are two consequences to the owner of a motor vehicle who fails to have the security required by Section 5: first, he has no immunity from tort liability; second, he is Personally liable for the benefits provided under Section 6. The only logical inference is that if a party has the security required under Section 5, the no-fault insurance act confers two privileges: first, he is granted partial tort immunity; second, he is not personally liable for the benefits provided under Section 6. He does, however, remain liable for customary tort claims, viz., general damages and economic losses not compensated by the benefits paid under Section 6, where the threshold provisions of Section 9(1) are met.
There is no provision in the statutory scheme to indicate the tort-feasor who has complied with the security provisions of the act, becomes personally liable for the PIP benefits provided in Section 6, when the injured party is entitled under the threshold provisions of Section 9(1) to maintain a claim for personal injuries. In such a situation, the injured party should plead only for those damages for which he has not received reparation under his first party insurance benefits. In order to present a completely factual picture to the jury, the injured party may wish to present evidence of all his medical bills or other economic losses. The court, by an appropriate instruction, could explain to the jury that these economic losses have not been included in the prayer for damages, because the injured party has previously received reparation under his own no-fault insurance coverage.
The foregoing interpretation is the only one consistent with the provisions in Section 9(2). The obvious legislative intent was to encourage compliance with the security provisions of the act. The design to compel compliance included not only partial tort exemption, but immunity from Personal liability for payment of the benefits provided for under Section 6.
When Section 9(2) is construed in conjunction with Section 9(1), the legislative intent emerges.
No person for whom direct benefit coverage is provided for in this act shall be allowed to maintain a cause of action for general damages . . ....
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