Arizona Property and Cas. Ins. Guar. Fund v. Ueki

• Decision Date: 14 August 1986
• Docket Number: CA-CIV,No. 1,1
• Citation: 724 P.2d 70,150 Ariz. 451
• Parties: The ARIZONA PROPERTY AND CASUALTY INSURANCE GUARANTY FUND, Plaintiff-Appellee, v. Judith Mae UEKI, Defendant-Appellant. 8734.
• Court: Arizona Court of Appeals

Page 70

724 P.2d 70

150 Ariz. 451

The ARIZONA PROPERTY AND CASUALTY INSURANCE GUARANTY FUND, Plaintiff-Appellee, v. Judith Mae UEKI, Defendant-Appellant.

No. 1 CA-CIV 8734.

Court of Appeals of Arizona Division 1, Department B.

Aug. 14, 1986.

Holloway & Thomas, P.C. by Benjamin C. Thomas and Nicholas E. Vakula, Phoenix, for plaintiff-appellee.

Phillips & Lyon, P.A. by Seth Andrew Broder, Phoenix, for defendant-appellant.

HAIRE, Judge.

Appellant Judith Mae Ueki has appealed from summary judgment granted in favor of appellee Arizona Property and Casualty Insurance Guaranty Fund (Fund) in the Fund's action for a declaration that it had no obligation to pay appellant's claim arising out of a liability policy issued by an insolvent insurer, Ambassador Insurance Company. The central issue on appeal involves a determination of whether, under the circumstances of this case, A.R.S. § 20-673(C) requires that appellant's claim against the fund be reduced by the amount she had recovered under other applicable insurance coverage.

The operative facts are undisputed. At the time of the occurrence of the single vehicle accident which resulted in appellant's injuries, Henry Ueki, Sr. was driving a vehicle owned by Jack Pudlas, and appellant was riding as his passenger. The parties have agreed throughout this litigation that appellant sustained damages in excess of $15,000.

At the time of the accident Henry Ueki, the allegedly negligent driver, was insured under a liability policy issued by Rockwood Insurance. The policy's liability limits were $15,000 per person and $30,000 per accident. Mr. Pudlas and his vehicle were insured under a policy issued by the Ambassador Insurance Company. The liability limits of the Ambassador policy were $15,000 as applied to appellant. At some point after the accident, Ambassador became insolvent and was placed in receivership. Pursuant to A.R.S. § 20-661 et seq., the Fund succeeded Ambassador in connection with appellant's claim against Henry Ueki. Rockwood Insurance paid appellant its policy limit of $15,000 in partial settlement of her claim against Ueki. Thereafter, the Fund filed this action seeking a declaration that under A.R.S. § 20-673(C) the Fund's maximum possible liability of $15,000 under the Ambassador policy was entirely offset by the $15,000 appellant had received from Rockwood Insurance, and that accordingly the Fund could not be liable to appellant in any amount. Appellant moved to dismiss the complaint for failure to state a claim upon which relief could be granted, and the Fund countered with a motion for summary judgment. The trial court denied appellant's motion to dismiss and entered summary judgment in favor of the Fund.

An analysis of the Fund's obligations relating to appellant's claim must begin with a consideration of A.R.S. § 20-667. A.R.S. § 20-667(A) provides that the Fund is obligated "to the extent of the covered claims" that exist during specified periods of time with reference to the determination of the insurer's insolvency. It is undisputed that appellant's claim arose during one of the specified periods and therefore obligated the Fund. To the extent pertinent here, § 20-661(3) defines "covered claim" as meaning "an unpaid claim ... which arises out of and is within the coverage of an insurance policy" issued by the insolvent insurer. The Fund's obligation on covered claims is further limited to a maximum of $100,000. See A.R.S. § 20-667(B). In the instant case the amount of coverage under the Ambassador policy was $15,000. Since under the statutory definition, a "covered claim" is limited to a claim "within the coverage" of the insolvent insurer's policy, the maximum amount of appellant's "covered claim" would be $15,000. See also, A.R.S. § 20-667(B) ("In no event shall the fund be obligated ... in any amount in excess of the face amount of the policy....").

A.R.S. § 20-673(C) provides that the "amount payable on a covered claim shall be reduced by the amount of such recovery under other applicable insurance." ¹ Since appellant had already received $15,000 from Henry Ueki's insurer, the trial judge applied § 20-673(C) and concluded that the Fund's obligation on appellant's $15,000 "covered claim" had been reduced to zero. The trial court did not view this result as contrary to the intent of the statutes, because it was "unable to find any indication the purpose of the guarantee fund is to make injured persons whole."

Appellant disputes this latter conclusion by the trial judge, pointing to language in the purpose clause of the original act "[t]he purpose of this act is ... to avoid financial loss to claimants or policyholders because of the insolvency of an insurer...." (Emphasis added). Laws 1970, ch. 78, § 1. We note, however, that even in the original act there were limitations on the Fund's liability, thereby conflicting with a literal reading of the purpose clause. Additionally there have been subsequent amendments which further restrict the Fund's liability. In any event, the purpose clause no longer retains any viability. In 1977, the entire original act was repealed, and the purpose clause was not reenacted. See Laws 1977, ch. 130, § 1.

In support of her argument that the trial court erred in its interpretation of A.R.S. § 20-673(C), appellant notes that the first sentence of A.R.S. § 20-673(C) expressly deems an insolvent insurer's policy to be "excess coverage." She reasons that it is the very nature of an excess clause that the excess insurer has no liability until the primary coverage is exhausted, but that once the primary carrier has paid its policy limit, the excess carrier is liable to the limit of the excess coverage for damages beyond the primary carrier's limit. She apparently concludes that because the Fund's liability is "excess coverage" by statute, the Fund must be held liable to the Ambassador policy's $15,000 limit for any damages appellant may prove in excess of the $15,000 limit under the Rockwood policy.

Appellant also relies heavily on A.R.S. § 20-667(C), which provides that the Fund "is deemed the insurer to the extent of its obligation 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." ² She apparently interprets this language to mean that the Fund must pay the entire amount of the covered claim up to the lesser of $100,000 or the insolvent insurer's policy limit, as long as the claimant does not receive a double recovery.

In our opinion appellant's arguments constitute an evasion of the governing statute's clear terms. Subsection (C) of A.R.S. § 20-673 provides not only that the insolvent insurer's policy is to be deemed excess coverage, and that the claimant must exhaust all rights under other applicable coverages, but also: "Any amount payable on a covered claim shall be reduced by the amount of such recovery under other applicable insurance." This sentence is concise and unambiguous. We have already discussed the statutory definition of "covered claim." The words "such recovery" clearly refer to any amounts which might be recovered under other "applicable" policies referred to in the first two sentences of subsection (C). The words "other applicable insurance" just as clearly refer to other policies applicable to the occurrence which forms the basis for the claim against the insolvent insurer. Therefore, under subsection (C) when a claimant recovers money under other insurance coverage, the amount of the claimant's "covered claim" the Fund would otherwise have to pay must be reduced by the amount the claimant has recovered under other applicable insurance. In this case, where the Fund's exposure was no greater than $15,000, and appellant collected the sum of $15,000 from an insurance policy that applied to her claim against Henry Ueki, the amount which the Fund would otherwise have had to pay on appellant's covered claim was reduced by that sum, leaving a zero balance.

Contrary to appellant's reasoning, A.R.S. § 20-667(C) is fully consistent with this reading of A.R.S. § 20-673(C). Section 20-667(C) provides in pertinent part: "The fund is deemed the insurer to the extent of its obligation on the covered claims...." Appellant seems to assume that the phrase "its obligation" refers to the insurer's obligation, and thus interprets the statutory language to impose on the Fund all the contractual duties to which the insurer would have been subject had it not become insolvent. We cannot agree. The word "its" in subsection (C) refers not to the insolvent insurer, but to the Fund. The context in which the phrase appears makes this clear. A.R.S. § 20-667(A) specifies the periods of time within which the Fund is "obligated" on covered claims. Subsection (B) limits the Fund's "obligation" to the lesser of the face amount of the insolvent insurer's policy or $100,000. It is thus evident that the language of subsection (C) merely places the Fund in the stead of the insurer to the extent that the Fund itself is statutorily obligated on the covered claim. As we have noted, A.R.S. § 20-673(C) specifically reduces the Fund's obligation on a covered claim by any amount the claimant recovers under other applicable insurance. A.R.S. § 20-667 is thus fully consistent with the trial court's interpretation of A.R.S. § 20-673(C).

We also reject appellant's argument that the trial court's interpretation of A.R.S. § 20-673(C) conflicts with that subsection's characterization of the insolvent insurer's policy as "excess coverage." We decline to give that phrase the all-inclusive meaning which appellant urges, because to do so would effectively make the last sentence of subsection (C) meaningless. We are required to construe the statute as a whole and give effect to all its provisions. Gortarez v. Smitty's Super Valu, Inc., 140 Ariz. 97, 680 P.2d 807 (1984); State v. Superior Court, 113 Ariz. 248, 550 P.2d 626 (1976...