Caballero v. Farmers Ins. Group

• Decision Date: 20 June 1969
• Docket Number: CA-CIV,No. 2,2
• Citation: 10 Ariz.App. 61,455 P.2d 1011
• Parties: Conrad CABALLERO, Appellant, v. FARMERS INSURANCE GROUP, Appellee. 587.
• Court: Arizona Court of Appeals

Page 1011

455 P.2d 1011

10 Ariz.App. 61

Conrad CABALLERO, Appellant, v. FARMERS INSURANCE GROUP, Appellee.

No. 2 CA-CIV 587.

Court of Appeals of Arizona.

June 20, 1969.

Rehearing Denied July 17, 1969.

Miller, Pitt & Feldman, by Richard L. McAnally, Tucson, for appellant.

Chandler, Tullar, Udall & Richmond, by James L. Richmond, Tucson, for appellee.

MOLLOY, Chief Judge.

The issue in this litigation is the validity and construction of a provision in an automobile insurance policy which the insurer contends reduces the liability coverage to the extent of payments made under the 'Medical Expense' coverage.

The facts are simple and without dispute. Appellant was injured while riding in a car driven by one Capoot. Capoot was an insured under an automobile policy issued in Arizona by appellee, containing both Bodily Injury Liability coverage, referred to as 'Part I' of the policy, and Medical Expense coverage, referred to as 'Part III' of the policy. Appellant commenced suit against Capoot, and eventually obtained judgment in the amount of $5,000. This figure was arrived at by additur, with the consent of Capoot, after a jury verdict in the amount of $2,500. Among the items of damage claimed by appellant in his action against Capoot, as indicated by pretrial memoranda, were medical expenses resulting from the accident in the amount of $706.20. These expenses were paid in full by appellee, prior to judgment, pursuant to the obligation of its Medical Expense coverage to pay '* * * all reasonable expenses actually incurred within one year from the date of accident * * *' to an injured guest occupant such as appellant. Part III of the policy relating to Medical Expense coverage contains the following provision:

'(1) Expenses Actually Incurred. 'Expenses actually incurred' means expenses for medical services * * * in excess of those paid or payable to or on behalf of any person * * * (b) as damages under Part I (the Bodily Injury Liability coverage) * * * and All payments made to or on behalf of any person under this Part III shall be deemed to have been advanced under the coverage afforded by Part I * * *.' (Emphasis added.)

After judgment, appellant received from appellee the sum of $4,376.01, which the parties agree included a principal payment of $4,293.80 on the $5,000 judgment, leaving a principal balance of $706.20, the amount of appellant's medical expenses paid by appellee prior to judgment.

Appellant instituted this garnishment proceeding against appellee for the $706.20 asserting that the quoted provision was invalid and unenforceable because its enforcement tended to subvert the collateral source rule, and because it was contrary to the reasoning and holdings of certain decisions of our Supreme Court construing the Safety Responsibility Act, A.R.S. § 28--1101 as amended. The trial judge rejected these contentions and held that the appellee-garnishee was entitled to credit for its pre-judgment medical payments to or on behalf of appellant.

Appellant does not argue, in this court, the position taken by him in the lower court that the quoted policy provision undercuts the purpose and effect of the collateral source rule. See, for a discussion of this subject, the 'Editorial comment' to the Annot., 11 A.L.R.3d 1115, at 1116--17. The same annotation collects cases considering the recoverability of medical expenses under both liability and medical expense coverages of an automobile policy in the absence of a credit provision such as the one in the present policy quoted above.

Appellant's sole thrust here is that the provision in this policy that payments under the 'Medical Expense' coverage shall be deemed to be advanced under the liability coverage is violation of the announced public policy of this state. To support this contention, appellant relies upon Sandoval v. Chenoweth, 102 Ariz. 241, 428 P.2d 98 (1967); Jenkins v. Mayflower Insurance Exchange, 93 Ariz. 287, 380 P.2d 145 (1963); Geyer v. Reserve Insurance Company, 8 Ariz.App. 464, 447 P.2d 556 (1968), and authorities from the State of Florida, especially Phoenix Insurance Company v. Kincaid, 199 So.2d 770 (Fla.App.1967), certiorari dismissed, 211 So.2d 210 (Fla., 1968).

In Jenkins, our Supreme Court held that the provisions required by A.R.S. § 28--1170 of the Safety Responsibility Act in a '* * * motor vehicle liability policy * * *' are to be deemed incorporated into every automobile liability policy issued in this state. The Jenkins holding was reaffirmed in Sandoval. Under § 28--1170, subsec. B(2)(a), as amended in 1961, bodily injury liability coverage in an Arizona policy must be in the minimum amount of $10,000. In Geyer, taking our cue from Jenkins and its progeny, we held that the minimum coverage required by our uninsured motorist statute, A.R.S. § 20--259.01 is '* * * a part of every policy issued containing such coverage, and that the prescribed limits cannot be reduced by offsetting policy provisions.' 8 Ariz.App. at 467, 447 P.2d at 559. In Geyer, we cited the Kincaid case from Florida, and also the later case of Tuggle v. Government Employees Insurance Co., 207 So.2d 674 (Fla.1968), which approved the Kincaid holding.

In Kincaid, the intermediate appellate court held ineffective a provision which sought to relieve the insurer of the obligation to pay Under the uninsured motorist coverage medical expenses paid or payable under the 'Medical Payments Coverage' of the policy. In Tuggle, the Supreme Court of Florida held ineffective a similar, but different, clause, ¹ which, like the clause in Kincaid, sought to reduce the amount Payable under the uninsured motorist coverage. In so holding, the majority opinion in Tuggle called attention to a previous holding which '* * * excludes any intent that a claimant might pyramid coverages to obtain double recovery, or more than actual damages * * *,' and to other authorities to the same effect as our Geyer decision, holding the uninsured motorist coverage '* * * enforceable to the...