Gentry v. Wise, 94-957

Decision Date20 September 1995
Docket NumberNo. 94-957,94-957
PartiesBen E. GENTRY and Laura Lee Gentry, Appellants, v. Keith H. WISE, Defendant, and Chrysler Insurance Company, Appellee.
CourtIowa Supreme Court

Randall J. Shanks, Council Bluffs, for appellants.

Jacob J. Peters of Peters Law Firm, P.C., Council Bluffs, for appellee.

Considered by McGIVERIN, C.J., and LARSON, CARTER, LAVORATO and SNELL, JJ.

McGIVERIN, Chief Justice.

This case presents the question of the enforceability of a set-off clause in defendant Chrysler Insurance Company's uninsured motorist policy which Chrysler says authorizes a reduction in coverage for past and future social security disability benefits that insured, plaintiff Ben E. Gentry, has received and will receive in the future. The district court enforced the set-off clause. We agree that the clause is enforceable but only to the extent that the social security disability benefits are attributable to injuries plaintiff sustained in a certain automobile accident and thus "duplicative" of the uninsurance coverage. Accordingly, we modify and affirm the district court's order and remand for a determination of which social security disability benefits, if any, are duplicative of Chrysler's uninsurance coverage.

I. Background facts and proceedings. This interlocutory appeal arises out of a coverage dispute between the insured, plaintiff Ben E. Gentry, and the insurer, defendant Chrysler Insurance Company (Chrysler), under Chrysler's uninsured motorist policy.

A. Events leading to present action. Plaintiff Gentry made a claim against Chrysler for severe injuries he suffered as a result of his involvement in an automobile accident on February 1, 1991. The accident occurred when Keith H. Wise negligently drove his vehicle into the vehicle Gentry was driving. The vehicle Gentry was driving was owned by his employer, Bluffs Dodge, Inc. (Bluffs), and insured by defendant Chrysler.

At the time of the collision, Wise had no insurance covering his liability.

Gentry, however, had several forms of insurance and benefits available. Because he was in the course and scope of his employment at the time of the accident, he had workers' compensation insurance coverage from his employer, Bluffs. He ultimately received $266,394 as a settlement of his workers' compensation claim.

In addition to workers' compensation insurance, Gentry also qualified for social security disability benefits. The social security administration granted him social security disability payments based upon the primary diagnosis of fractures of his hip, pelvis, left arm, and left leg, which were injuries from the automobile accident; and a secondary diagnosis of coronary artery disease, which was a problem unrelated to the accident. 1 He began receiving social security disability benefits on July 1, 1991, in the sum of $340 per month. After Gentry settled his workers' compensation claim, the social security disability benefits were increased to $899 per month effective, January 3, 1994. He will continue to receive the benefits until he reaches age 62.

B. Present action and adjudication of law points. Gentry was also an insured under the Chrysler motor vehicle liability policy which Chrysler provided for Gentry's employer, Bluffs. Chrysler's liability policy provided uninsured motorist coverage to a limit of $350,000, subject to reduction of coverage for "[a]ll sums paid or payable under any workers' compensation, disability benefits or similar law."

Relying on this policy, Gentry claimed a right to uninsured motorist benefits from Chrysler, less the amount of workers' compensation benefits he had received. After Chrysler refused his claim, he and his wife, Laura Lee Gentry, filed the present action against Chrysler. Gentrys initially included Wise as a defendant in the suit, but Wise ultimately made a restitution payment to Gentry in the amount of $2,000.

After filing an answer to the petition, Chrysler filed an application for adjudication of law points, see Iowa R.Civ.P. 105, requesting that the district court find that its policy language entitled it to a reduction in its coverage for workers' compensation benefits ($266,394), responsible party payments ($2,000), and social security disability payments received (currently $899 per month) and to be received in the future by Gentry. Plaintiff's resistance denied that Gentry's social security disability benefits should be deducted from Chrysler's uninsured motorist coverage liability.

In ruling on the law points application, the court decided that Chrysler was entitled to a credit for past and future disability benefits Gentry has been granted from the social security administration, as well as for the workers' compensation and restitution received.

Gentry applied for permission to take an appeal in advance of the final judgment, see Iowa R.App.P. 2(a), and we granted the interlocutory appeal. On appeal, Gentry does not contest Chrysler's deduction from the uninsured motorist coverage of the workers' compensation and restitution payments.

Therefore, the sole issue presented is whether the district court correctly allowed Chrysler a credit on the uninsured motorist coverage for Gentry's past and future social security disability benefits. 2

We review the issue for errors at law. Continental W. Ins. Co. v. Krebill, 492 N.W.2d 405, 406 (Iowa 1992) (citing Iowa R.App.P. 4).

II. Applicable policy provisions and law. The set-off clause in Chrysler's uninsured motorist policy provides:

A. COVERAGE

1. We will pay all sums the "insured" is legally entitled to recover as damages from the owner or driver of an "uninsured motor vehicle."

....

C. EXCLUSIONS

This insurance does not apply to any of the following:

....

2. The direct or indirect benefit of any insurer or self-insurer under any workers' compensation, disability benefits or similar law.

....

D. LIMIT OF INSURANCE

1. ... [T]he most we will pay for all damages resulting from any one "accident" is the LIMIT OF INSURANCE for UNINSURED ... MOTORISTS COVERAGE....

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 the policy's LIABILITY COVERAGE.

(Emphasis added.)

In construing this provision of Chrysler's uninsured motorist policy, we recognize Iowa Code section 516A.2 (1991) 3 forms a basic part of the policy and is treated as if it had actually been written into the policy. Tri-State Ins. Co. v. De Gooyer, 379 N.W.2d 16, 17 (Iowa 1985). Section 516A.2, second sentence, permits an insurer to write exclusions and limitations into an auto policy relating to uninsured coverage, so long as those conditions are designed to avoid duplication of insurance or other benefits. Jackson v. Farm Bureau Mut. Ins. Co., 528 N.W.2d 516, 517 (Iowa 1995) (citing Poehls v. Guaranty Nat'l Ins. Co., 436 N.W.2d 62, 65 (Iowa 1989)). That sentence provides: "[Uninsurance coverage] may include terms, exclusions, limitations, conditions, and offsets which are designed to avoid duplication of insurance or other benefits." Iowa Code § 516A.2.

In construing section 516A.2 as part of an insurance policy on previous occasions, we have recognized the section contains two requirements for a valid or enforceable off-set from coverage: (1) the payment or payments which are the object of the off-set must be "insurance or other benefits" and (2) the off-set must "avoid duplication." McClure v. Employers Mut. Cas. Co., 238 N.W.2d 321, 328 (Iowa 1976) (McClure I ). This court will, therefore, uphold Chrysler's set-off of Gentry's social security disability benefits provided McClure I 's criteria are satisfied.

III. Analysis of validity of Chrysler's disability set-off clause. In order to resolve the issue presented in this case we must answer two questions: (1) whether the social security disability payments Gentry has received and will receive are "insurance or other benefits;" and (2) whether Chrysler's offset from its uninsured motorist coverage of the social security disability payments Gentry has received and will receive will "avoid duplication." Id.

A. Social security disability payments are benefits within the scope of section 516A.2. The Iowa legislature has not defined "insurance or other benefits." See Iowa Code § 516A.2. Also, guidance from other courts is generally lacking in this area because only one reported decision has considered the issue. See Barnett v. American Family Mut. Ins. Co., 843 P.2d 1302 (Colo.1993). Relying then on principles of statutory construction and interpretation, see Mewes v. State Farm Automobile Insurance Co., 530 N.W.2d 718, 722 (Iowa 1995), two primary reasons persuade us that the phrase "insurance or other benefits" in section 516A.2 encompasses social security disability benefits, and therefore that Chrysler's policy provision allowing for an offset for disability benefits is enforceable.

One reason persuading us that Chrysler may deduct social security disability benefits from its uninsurance coverage limit is our holding in McClure I, 238 N.W.2d at 329. There we held "that the words 'insurance or other benefits' in the second sentence of [section] 516A.2 encompass [workers'] compensation" benefits. Id. We reasoned that the second sentence of section 516A.2, read in light of section 516A.1, requiring insurers to make uninsured and underinsured motorist coverage available to all insureds, constituted a manifestation of legislative intent that workers' compensation benefits may be deducted from uninsured motorist insurance. Id. at 328-29.

We find no reasonable basis to distinguish this rationale in support of the deduction of workers' compensation benefits from the deduction of social security disability benefits. Like the Iowa Workers' Compensation Act, Iowa Code chapter 85, the federal Social Security Act, see...

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