Chambers v. Walker, 55336

• Citation: 653 P.2d 931,1982 OK 128
• Decision Date: 02 November 1982
• Docket Number: No. 55336,55336
• Parties: Tony Ray CHAMBERS, Appellant, v. Henry Winfield WALKER and MFA Insurance Company, Appellees.
• Court: Supreme Court of Oklahoma

Page 931

653 P.2d 931

1982 OK 128

Tony Ray CHAMBERS, Appellant, v. Henry Winfield WALKER and MFA Insurance Company, Appellees.

No. 55336.

Supreme Court of Oklahoma.

Nov. 2, 1982.

Appeal from the District Court of Tulsa County; Robert F. Martin, judge.

Appellant appeals from summary judgment which permitted appellee-insurer to set-off amounts recovered by appellant under Workmen's Compensation against its uninsured motorist liability in accordance with terms of insurance policy.

REVERSED AND REMANDED.

James H. Werner and Scott W. Draughon, Tulsa, for appellant.

Best, Sharp, Thomas, Glass & Atkinson by Joseph A. Sharp, Jack M. Thomas, and Robin M. Aiken, Tulsa, for appellees.

WILSON, Justice.

This appeal presents only one issue: whether an uninsured motorist coverage provision allowing a reduction or set-off of amounts paid or payable under any workmen's compensation law is void as being in derogation of the legislative purpose contained in the Uninsured Motorist Statute.

The undisputed facts are that a traffic accident occurred involving Tony Ray Chambers [hereinafter referred to as appellant] and the defendant, Henry Winfield Walker. As a result of the collision, appellant suffered a broken neck rendering him totally disabled and without use of his arms or legs. Mr. Chambers was eighteen (18) years old at the time. When the accident occurred, appellant was on a business errand for his father, by whom he was employed. Mr. Chambers has already made a recovery against his father's workmen's compensation carrier in an amount equal to or greater than $10,000.00.

The automobile, owned by appellant's grandfather, was covered by a policy of insurance issued by the MFA Insurance Company [hereinafter referred to as appellee, or MFA] providing for uninsured motorist protection in the amount of $10,000.00 for a single person in a single accident. This protection extended to a permissive driver of the vehicle, in this case the appellant herein. The defendant, Henry Winfield Walker, was an uninsured motorist and both parties agree that Walker was at fault in this accident.

The appellant has brought suit herein for the total sum of $810,000.00 and the parties agree that whatever sum might be ultimately awarded in this case would exceed the workmen's compensation benefits and the $10,000.00 coverage sought herein.

MFA relies on its policy provision (Clause 4(b) 2--Limits of Liability) reducing the amount of its coverage under the uninsured motorist provision by any amount received by the appellant under the Oklahoma Workmen's Compensation Law. ¹ Giving effect to said provision, the trial court granted summary judgment to the appellee. In support of the trial court's decision, MFA cites Markham v. State Farm Mutual Automobile Insurance Co., 464 F.2d 703 (10th Cir.1972) wherein the rationale included the statement that the purpose of the Oklahoma Uninsured Motorist Statute ² is to afford the insured the same protection when involved in an accident with an uninsured motorist as he would have enjoyed if the offending motorist had carried liability insurance. MFA contends that if the uninsured motorist in the instant case had carried a liability policy as required by the Financial Responsibility Statute, ³ appellant would not have been allowed to keep both his recovery from said motorist and his workmen's compensation benefits. Therefore, MFA argues it should be allowed to deduct from its uninsured motorist coverage any amounts plaintiff would have lost through subrogation of the Workmen's Compensation carrier, since the net recovery to the plaintiff would be the same. Such a procedure is referred to as the "net recovery theory" and will be thus referred to herein. Courts in rejecting the net recovery theory have espoused various rationales. States requiring minimum uninsured motorist coverage have confronted policy provisions purporting to reduce liability by the amount of workmen's compensation and have held such provisions void as against public policy where they resulted in a lesser obligation for the insured than required by statute--Southeast Title and Insurance Company v. Austin, 202 So.2d 179 (Fla.1967); Peterson v. State Farm Automobile Insurance Company, 238 Or. 106, 393 P.2d 651 (1964); Preferred Risk Mutual Insurance Company v. Holmes, 287 Ala. 251, 251 So.2d 213 (1971); Williams v. Buckelew, 246 So.2d 58 (La.App.1971); Aldcroft v. Fidelity and Casualty Company, 106 R.I. 311, 259 A.2d 408 (1969); Booth v. Seaboard Fire and Marine Insurance Company, 431 F.2d 212 (8th Cir.1970).

In rejecting the net-recovery theory, the Supreme Court of Nebraska in construing language similar to that relied on by appellee in Markham, supra, stated:

"The defendant urges that the district court's holding is justified by the language found in 'Stephens' (Stephens v. Allied Mutual Insurance Company, 182 Neb. 562, 156 N.W.2d 133) which reads: 'The insured is entitled to recover the same amount he would have recovered if the offending motorist had maintained liability insurance.' This construction of the language of the 'Stephens' case slights the intended meaning of the Nebraska Court. Workmen's compensation benefits are never setoff in favor of the tortfeasor. To apply'Stephens'; ;

In its analysis of the net-recovery theory, the Supreme Court of Arkansas made clear that the legislative mandate to provide uninsured motorist coverage and the legislation providing subrogation rights for the workmen's compensation carrier could not be construed to provide a windfall for the insurer. The Court stated:

"We do not equate the right of a workmen's compensation carrier to subrogation against a tortfeasor's liability carrier with the asserted right of the insured's own indemnity carrier to reduce the amount of its coverage by the amount of benefits received from a collateral source, in spite of the fact that the insured had paid a premium for the full amount of prescribed limits. To do so would result in giving greater coverage to one who was not covered by workmen's compensation than one who was. The uninsured motorist legislation was passed long after adoption of the Workmen's Compensation Act. When we consider the basic purposes of the latter act, our belief that the legislature did not intend that the Uninsured Motorist Act be the means of discrimination against working people protected under the workmen's compensation laws is strengthened. Analogy of the subrogation right of the compensation carrier to the right of the indemnity carrier to reduce its liability is inappropriate. The subrogation right is for the protection of the compensation carrier. The right claimed by NFU would simply provide it with a windfall in the case of one covered by the workmen's compensation laws. The purpose of the Uninsured Motorist Act is to protect the insured, not the insurer." (Emphasis supplied.) The Travelers Insurance Co. v. National Farmer's Union Property and Casualty Co., 252 Ark. 624, 480 S.W.2d 585, 591 (1972).

We agree with the reasoning expressed in Travelers above. This Court has recognized in Keel v. MFA Insurance Co., 553 P.2d 153 (Okl.1976) the unfairness of permitting an insurer to deny to an insured the benefit of a certain type of coverage for which the insured has paid premiums.

The terms of 36 O.S.1971, § 3636 state that no automobile liability insurance policy may be offered unless it includes uninsured motorist coverage in amounts not less than those prescribed by Section 7-204 of Title 47, Oklahoma Statutes. We regard policy provisions such as the one under examination herein as a subterfuge to get around minimum statutory requirements of coverage established by the Legislature. See Bacchus v. Farmers Insurance Group Exchange, 106 Ariz. 280, 475 P.2d 264 (1970); Booth v. Seaboard Fire and Marine Insurance Company, supra; Nationwide Mutual Insurance Company v. Hillyer, 32 Colo.App. 163, 509 P.2d 810 (1973). In Porter v. MFA, 643 P.2d 302, 304, we held a consent-to-sue clause void, recognizing that its effect could be to "chill settlements and otherwise dilute the mandatory uninsured motorist statute." (Emphasis supplied).

The Court's construction of 36 O.S.1971 §...