Dugas v. Lumbermens Mut. Cas. Co.

• Decision Date: 05 March 1991
• Docket Number: No. 14016,14016
• Citation: 217 Conn. 631,587 A.2d 415
• Parties: Thomas P. DUGAS v. LUMBERMENS MUTUAL CASUALTY COMPANY.
• Court: Connecticut Supreme Court

Page 415

587 A.2d 415

217 Conn. 631

Thomas P. DUGAS v. LUMBERMENS MUTUAL CASUALTY COMPANY.

No. 14016.

Supreme Court of Connecticut.

Argued Dec. 6, 1990.

Decided March 5, 1991.

Michael Brodinsky, North Haven, with whom, on the brief, was Andrew V. O'Shea, Newington, for the appellant (defendant).

Juri E. Taalman, Norwich, with whom was Nicholas G. Sarantopoulos, Danielson, for the appellee (plaintiff).

Before PETERS, C.J., and CALLAHAN, COVELLO, HULL and BORDEN, JJ.

CALLAHAN, Associate Justice.

The principal issue in this appeal is whether, in calculating the amount due an insured under uninsured motorist coverage, the insurer may deduct the entire amount of reparations benefits previously paid to the insured, or whether the deduction for previously paid reparations benefits must be reduced to reflect the insurer's contribution to attorney's fees incurred by the insured in effecting a recovery from the tortfeasor. The trial court concluded that the carrier was required to contribute to the insured's legal fees. The Appellate Court affirmed the trial court's judgment. We now reverse.

The parties stipulated to the following facts. On April 17, 1982, the plaintiff, Thomas P. Dugas, was injured in an accident involving two automobiles. The automobile driven by the plaintiff was insured under a policy issued by the defendant, Lumbermens Mutual Casualty Company. That policy provided uninsured motorist coverage in the amount of $40,000, basic reparations benefits in the required amount of $5000 and added reparations benefits in the amount of $20,000. The total of reparations benefits paid to the plaintiff by the defendant was $13,316.63. The plaintiff, with the assistance of his attorney, recovered $20,000 from the tortfeasor's insurer. The amount recovered was the limit of the tortfeasor's liability insurance policy.

The parties stipulated that the plaintiff's damages were at least $40,000. It was agreed, therefore, that the amount due the plaintiff under the uninsured motorist coverage of his policy was $20,000. ¹ It was also stipulated that the defendant was entitled to be reimbursed from that amount for the reparations benefits it had previously paid to the plaintiff. The parties disagreed, however, over the amount of the reimbursement. The defendant claimed that it was entitled to recover the entire $13,316.63 it had previously paid, while the plaintiff contended that the defendant should recover only two thirds of the reparations benefits it had paid, or $8877.75. The plaintiff argued that the defendant must contribute one third of its recovery of reparations payments toward the legal expenses incurred by the plaintiff in effecting a recovery from the tortfeasor.

This dispute was presented to an arbitrator pursuant to the mandatory arbitration clause in the plaintiff's insurance policy. The arbitrator ruled in favor of the defendant. The plaintiff subsequently made an application to correct or vacate the arbitrator's decision in the Superior Court. The trial court, Noren, J., granted the plaintiff's application and vacated the arbitration award. On appeal, the Appellate Court remanded the case to the trial court for a de novo review of the arbitrator's interpretation and application of the law. See Dugas v. Lumbermens Mutual Casualty Co., 14 Conn.App. 153, 156, 540 A.2d 89 (1988). The trial court, Shaughnessy, J., found for the plaintiff on remand, and the Appellate Court affirmed the trial court's judgment on alternative grounds. Dugas v. Lumbermens Mutual Casualty Co., 22 Conn.App. 27, 33, 576 A.2d 165 (1990). In its opinion the Appellate Court stated that § 38-175a-6(d)(3) of the Regulations of Connecticut State Agencies, ² upon which the defendant relied in arguing for a complete recovery of previously paid reparations benefits, "cannot be read to be valid without reference to the attorney's fee provision of [General Statutes] § 38-325(b)." ³ Id. On the basis of what it perceived as the public policy underlying § 38-325(b), the Appellate Court concluded that the regulation would be void unless interpreted as incorporating the attorney's fees provision embodied in § 38-325(b). Id., at 39, 576 A.2d 165.

We granted the defendant's petition for certification limited to the following issues: (1) whether the Appellate Court properly considered the validity of § 38-175a-6(d)(3) of the Regulations of Connecticut State Agencies; ⁴ and (2) whether the Appellate Court properly concluded that the insurance regulation was void unless the attorney's fees provision of § 38-325(b) was read into the regulation. Dugas v. Lumbermens Mutual Casualty Co., 216 Conn. 803, 577 A.2d 715 (1990). Because our decision depends upon the relationship between the regulation at issue and § 38-325(b), we need to consider the background and evolution of these and other statutory and regulatory provisions related to uninsured motorist coverage.

In 1967, the legislature enacted General Statutes § 38-175c, ⁵ which provides that all automobile liability policies must include uninsured motorist coverage. In 1972, the legislature passed the no-fault insurance statutes, including General Statutes §§ 38-326 and 38-327, which require all motorists to obtain uninsured motorist and basic reparations coverage, and § 38-325(b), which provides that an insured who receives reparations benefits must reimburse the insurer for the benefits received if he subsequently obtains, by judgment or settlement, an award of damages from the tortfeasor. As originally enacted, § 38-325(b) did not allow the insured to deduct from the reparations benefits reimbursed to the insurer an amount reflecting the insurer's share of the legal fees incurred by the insured in recovering from the tortfeasor. In 1980, the legislature amended § 38-325(b) to allow insureds to reduce the amount of the reimbursement by an amount reflecting the insurer's contribution to the attorney's fees expended by the insured in obtaining the damage award. See Public Acts 1980, No. 80-131.

In 1975, the insurance commissioner, pursuant to his power under General Statutes § 38-175a ⁶ to adopt regulations concerning the terms of uninsured motorist coverage, amended § 38-175a-6(d)(3) of the Regulations of Connecticut State Agencies in order to allow insurers to seek reimbursement for reparations benefits from amounts paid or payable to their insured by reason of uninsured motorist coverage provided by the insurer. The amended regulation was approved by the legislative regulation review committee. In 1986, the insurance commissioner again amended § 38-175a-6. That amendment, however, did not affect the provisions of the regulation at issue in this case. The legislative regulation review committee reviewed and approved the 1986 amendment to the regulation.

With this background in mind, we turn to the dispositive issue in this appeal, namely whether the defendant, under § 38-175a-6(d)(3) of the regulations, is entitled to full reimbursement of the $13,316.63 it paid the plaintiff in reparations benefits, or whether the defendant can collect only two thirds of that amount ($8877.75). The Appellate Court concluded that the defendant is entitled to collect only the latter amount because § 38-175a-6(d)(3) was repealed by implication when the legislature amended § 38-325(b) in 1980 to allow the reduction of the reimbursement for reparations benefits ⁷ from damage awards in order to reflect attorney's fees paid by the insured to recover from the tortfeasor. Although the Appellate Court did not explicitly state that it concluded that § 38-175a-6(d)(3) was repealed by implication by the amendment of § 38-325(b), this conclusion is implicit in its opinion.

The plain language of § 38-175a-6(d)(3) of the regulations does not provide for a deduction for attorney's fees from the reimbursement for reparations benefits out of uninsured motorist benefits payable to the insured by his own insurer. The regulation states that "[t]he policy may also provide that ... any amount of any basic reparations benefits paid or payable under the policy will reduce the damages which the insured may recover under this coverage...." (Emphasis added.) The Appellate Court did not conclude, and the plaintiff does not contend, that prior to 1980 the regulation provided for a setoff for attorney's fees or that the 1975 revision of the regulation was void ab initio because it did not include such a provision. Rather, the Appellate Court concluded that the public policy underlying the 1980 amendment to § 38-325(b) applied not only to the reimbursement to the insurer of reparations benefits from damage awards from tortfeasors, but also to the reimbursement of those same benefits from uninsured motorist coverage benefits payable by the insurer to the insured. ⁸ Dugas v. Lumbermens Mutual Casualty Co., supra, 22 Conn.App. at 37, 576 A.2d 165. The court concluded that the regulation would be void as against public policy if interpreted as not providing for a setoff for attorney's fees from the reimbursement for reparations payments under such circumstances, and therefore construed the regulation as allowing the setoff. ⁹ Id., at 39, 576 A.2d 165.

This case differs from prior cases in which we have addressed the validity of regulations issued by the insurance commissioner. The party challenging a regulation typically claims that the regulation was inconsistent with or beyond the legislature's grant of authority to the commissioner at the time the relevant provisions of the regulation were issued. See, e.g., Travelers Ins. Co. v. Kulla, 216 Conn. 390, 579 A.2d 525 (1990); Roy v. Centennial Ins. Co., 171 Conn. 463, 370 A.2d 1011 (1976); Citrano v. Berkshire Mutual Ins. Co., 171 Conn. 248, 368 A.2d 54 (1976). In contrast, the Appellate Court in this case held that § 38-175a-6(d)(3), the relevant portions of which were issued in 1975, only became invalid when § 38-325(b) was amended in 1980. Dugas v. Lumbermens Mutual...