Cherry v. Coregis Ins. Co.

• Decision Date: 13 March 2009
• Docket Number: No. 34404.,34404.
• Citation: 204 P.3d 522
• Parties: Tina M. CHERRY, Plaintiff-Respondent, v. COREGIS INSURANCE COMPANY, an Illinois insurance company, doing business in Idaho under Certificate of Authority No. PC602, Defendant-Appellant.
• Court: Idaho Supreme Court

204 P.3d 522

Tina M. CHERRY, Plaintiff-Respondent, v. COREGIS INSURANCE COMPANY, an Illinois insurance company, doing business in Idaho under Certificate of Authority No. PC602, Defendant-Appellant.

No. 34404.

Supreme Court of Idaho, Rexburg, September 2008 Term.

March 13, 2009.

Anderson Julian & Hull, Boise, for appellant. Brian Julian argued.

Goicoechea Law Offices, Pocatello, for respondent. Albert Matsuura argued.

HORTON, Justice.

This appeal involves the interpretation of offset clauses contained in an underinsured motorist insurance (UIM) policy and the interrelationship of that policy and Idaho's worker's compensation laws. The district court granted summary judgment in favor of Respondent Tina Cherry (Cherry), holding that Appellant Coregis Insurance Company (Coregis) was not entitled to offset funds Cherry received from Farmers Insurance Company (Farmers) on behalf of a third-party tortfeasor because Cherry was required to pay those funds to the Idaho State Insurance Fund (the Fund) in order to satisfy the Fund's statutory subrogation interest. Coregis timely appealed to this Court.

Although we disagree with the district court's analysis and conclude that Coregis is entitled to offset the entire sum paid to Cherry by Farmers, we conclude that Coregis is entitled to an offset only for the net sum paid by the Fund to Cherry as worker's compensation benefits. Accordingly, we affirm in part.

I. FACTUAL AND PROCEDURAL BACKGROUND

Cherry was injured in an automobile accident during the course and scope of her employment as a bus driver with the Snake River School District (the School District). The School District carried a policy through Coregis which provided UIM coverage with a policy limit of $250,000. The parties stipulated that Cherry incurred damages of at least $250,000. Coregis' policy contains a "Limit of Insurance" provision that provides:

D. LIMIT OF INSURANCE

1. Regardless of the number of covered "autos", "insureds", premiums paid, claims made or vehicles involved in the "accident", the most we will pay for all damages resulting from any one "accident" is the LIMIT OF INSURANCE for UNINSURED MOTORISTS COVERAGE¹ shown in the Declarations.

2. Any amount payable under this coverage shall be reduced by:

a. All sums paid or payable under any workers' compensation, disability benefits or similar law, and

b. All sums paid by or for anyone who is legally responsible, including all sums paid under this Coverage Form's LIABILITY COVERAGE.

(Emphasis original.)

Following the accident, Cherry received $102,361.01 from the Fund on the condition, as provided in I.C. § 72-223(3), that she repay any money she might receive for the accident from a third-party tortfeasor. Cherry recovered the policy limits sum of $100,000 from the third-party tortfeasor's insurance company, Farmers, and, after deducting her attorney fees and costs from that amount in accordance with I.C. § 72-223(4), Cherry repaid the Fund with the remaining $66,281.38.

Cherry then sued Coregis to recover under the UIM policy. After the action was filed, Coregis applied its interpretation of the setoff provisions set forth above, deducting $102,361.01 for worker's compensation benefits (relying on section D(2)(a)) and $100,000 for the sum recovered from Farmers (relying on section D(2)(b)). Based upon the foregoing figures, Coregis paid Cherry $47,638.99. Coregis then moved the district court for summary judgment, arguing that Cherry was not entitled to any further payment under the terms of the UIM policy. The district court disagreed and granted summary judgment in favor of Cherry for $66,281.38. Cherry moved to alter and amend the order granting summary judgment, arguing that Coregis was not entitled to offset any portion of the $100,000 received from Farmers because Cherry was never actually compensated by that money. The district court agreed and awarded Cherry $100,000, with interest accruing from the date of the first order granting summary judgment. Coregis filed a timely notice of appeal.

II. STANDARD OF REVIEW

When this Court reviews the district court's ruling on a motion for summary judgment, it employs the same standard properly employed by the district court when originally ruling on the motion. Farmers Ins. Co. of Idaho v. Talbot, 133 Idaho 428, 431, 987 P.2d 1043, 1046 (1999). Summary judgment is proper when there is no genuine issue of material fact and the only remaining questions are questions of law. Harwood v. Talbert, 136 Idaho 672, 677, 39 P.3d 612, 617 (2001); I.R.C.P. 56.

The question of whether an insurance policy is ambiguous is a question of law over which this Court exercises free review. To determine whether a policy is ambiguous, the Court must ask whether the policy is reasonably subject to conflicting interpretations. Talbot, 133 Idaho at 432, 987 P.2d at 1047. Any ambiguities should be resolved in favor of the insured, and where language may be given two meanings, one of which permits recovery while the other does not, the policy should be given the construction most favorable to the insured. Foremost Ins. Co. v. Putzier, 102 Idaho 138, 142, 627 P.2d 317, 321 (1981) (citations omitted).

III. ANALYSIS

There are no material facts in dispute. Rather, this appeal presents two issues of law. The primary issue relates to interpretation of the offset provisions in the insurance policy. The second issue is Cherry's entitlement to an award of attorney fees on appeal. These issues will be discussed in turn.

A. Coregis is entitled to an offset only for the net sum of worker's compensation benefits paid to Cherry.

The amount of the $250,000 policy limit to which Cherry is entitled after Coregis applies the offset provisions depends upon the interpretation of the policy in light of the fact that the worker's compensation benefits received by Cherry were subject to the Fund's statutory subrogation interest. When analyzing Coregis' policy, the district court acknowledged that Farmers "paid [Cherry] the limit of its policy with [its insured tortfeasor] in the amount of $100,000." Despite this statement, the district court granted summary judgment in favor of Cherry and ordered Coregis to pay her an additional $100,000 based upon its conclusion that the funds received by Cherry from Farmers were not "paid" according to the meaning of that word as contained in section D(2)(b). We do not think this is a reasonable interpretation.²

The verb "pay," of which the word "paid" is the past participle, is a word of common usage meaning "to give to (a person) what is due." WEBSTER'S NEW WORLD DICTIONARY 1044 (2d College ed.1976). Farmers has given Cherry $100,000, which it has never recouped. From Farmers' perspective, it has manifestly "paid" $100,000. The district court's conclusion is only possible by an analysis that focuses on whether Cherry ultimately benefited from the payment, not on whether Farmers gave her the money to which she was entitled. In our view, this analysis results in a distortion of the word "paid" beyond recognition. For this reason, we vacate the district court's order entered on Cherry's motion to alter and amend.

In our view, the more appropriate approach is to evaluate whether money has been "paid" or is "payable" by examining the financial impact upon the party responsible for "payment." When considering this matter from the perspective of the Fund, one may reasonably assert that the Fund paid one of two different sums: the gross sum of $102,361.01 or the net sum of $36,079.63 after accounting for its recovery of $66,281.38 from Cherry under the statutory subrogation provision of I.C. § 72-223(3).³ Thus, the question is presented whether the phrase "[a]ll sums paid or payable" in the D(2)(a) offset provision refers to gross or net sums paid or payable as worker's compensation benefits. This Court has not previously addressed this question.

In examining an issue of first impression, it is helpful to look at how other jurisdictions have answered the question. The facts of Wildman v. Nat'l Fire and Marine Ins. Co., 703 N.E.2d 683 (Ind.App.1998), are analogous to the facts in this case. Wildman was injured in an automobile accident while at work, and his employer carried an uninsured/underinsured motorist liability policy with dual offset provisions similar to the provisions in the Coregis policy. Id. at 685. Wildman received funds from a worker's compensation carrier, subject to a statutory lien, which he later repaid with money recovered from the responsible party's insurance company. Id. at 684-85. Wildman argued that his employer's insurer, National, should be able to "set-off only those worker's compensation benefits Wildman actually retained, not the amount of benefits he received and then repaid to the worker's compensation carrier" pursuant to the statutory lien. Id. at 685.

The setoff provision regarding worker's compensation in the National policy stated: "Any amount payable under this coverage shall be reduced by all sums paid or payable under any worker's compensation disability benefits or similar law." Id. at 686. The court focused on the meaning of the phrase "sums paid or payable" in that provision and determined that:

Reasonable people reading this language may conclude that this phrase means the amount of worker's compensation benefits originally received by the insured; equally reasonable people may determine that the reduction applies only to those benefits retained after subtraction of the compensation carrier's statutory lien. Because reasonable people may disagree as to whether it includes worker's compensation benefits received subject to a repayment obligation, we conclude that the reduction clause in National's policy is ambiguous. We resolve this ambiguity by construing the language in favor of the insured, Wildman, and against the insurer, National, and hold that National is entitled only to set-off the worker's compensation benefits received which are not...