Greenfield v. Cincinnati Ins. Co.

Decision Date03 August 2007
Docket NumberNo. 06-0032.,06-0032.
Citation737 N.W.2d 112
PartiesRanee GREENFIELD and Stuart Greenfield, Appellants, v. The CINCINNATI INSURANCE COMPANY, Appellee.
CourtIowa Supreme Court

R. Ronald Pogge, David S. Gorham, and Barrie J. Terrones of Hopkins & Heubner, P.C., Des Moines, for appellants.

Patrick J. McNulty and Lisa R. Perdue of Grefe & Sidney, P.L.C., Des Moines, for appellee.

APPEL, Justice.

In this case, the proceedings take us to an intersection of insurance and workers' compensation law. Specifically, we must decide whether an injured employee's recovery under the underinsured motorist provision of her employer's automobile policy is reduced in whole or in part by workers' compensation benefits she received for injuries arising out of the same accident. The district court offset the workers' compensation recovery against jury awards for medical expenses, lost wages, and past and future loss of function, but refused to allow an offset against jury verdicts for past and future pain and suffering and loss of spousal consortium. For the reasons set forth below, we affirm in part, reverse in part, and remand the matter to the district court for further proceedings.

I. FACTUAL BACKGROUND AND PRIOR PROCEEDINGS.

Ranee Greenfield and other passengers traveled by van to Des Moines in order to testify at a hearing regarding the operations of East Lane Care Center (East Lane), Ranee's employer. A motor vehicle driven by Zachary Hedgecock ran a red light and struck the van, causing it to roll at least once. Although Ranee was wearing her seat belt, another unbelted passenger was thrown into her upon impact.

Ranee was transported to Iowa Methodist Medical Center, where she complained of head, neck, and chest pain. She was treated with ibuprofen and released. While the majority of her symptoms dissipated or disappeared during her recovery, her chest pain continued. Ranee eventually was diagnosed as suffering from fractures in the costochondral cartilage in her chest. In order to combat her pain, she was twice treated at the Mayo Clinic Pain Center in Rochester, Minnesota.

Ranee filed a workers' compensation claim against her employer and its workers' compensation carrier, Cincinnati Insurance Company (Cincinnati). The parties settled the claim in a "Compromise Special Case Settlement Agreement" pursuant to Iowa Code section 85.35 (2005). The total amount of the settlement was $154,404.28, which consisted of a $17,109.61 payment for medical expenses, $37,294.67 in indemnity payments, and a $100,000 lump sum payment.

Ranee and her husband, Stuart Greenfield, also settled their personal injury claims against the tortfeasor for his liability insurance coverage limit of $30,000. This settlement, however, was subrogated to the interest of Cincinnati, as Ranee's workers' compensation insurer, pursuant to Iowa Code section 85.22(1). As a result, Cincinnati received $19,728.00.

The Greenfields further pursued a claim against East Lane's underinsured motorist carrier (UIM), which also happened to be Cincinnati. This claim was not resolved, and the matter proceeded to trial.

The jury returned a verdict in favor of the Greenfields, awarding Ranee $123,000 and Stuart $50,000 in damages. The special jury verdict in favor of Ranee allocated $10,000 for medical expenses, $25,000 for past pain and suffering, $30,000 for future pain and suffering, $20,000 for past loss of function, $30,000 for future loss of function, $8,000 for lost wages, and $0 for future loss of earning capacity. The special jury verdict in favor of Stuart allocated $20,000 for past loss of consortium and $30,000 for future loss of consortium.

After trial, the district court filed a judgment entry and order in the case. The order applied a provision in Cincinnati's UIM policy with East Lane which allowed a credit/offset for benefits received by Ranee from her workers' compensation settlement and tortfeasor recovery. In applying the offset provision, the district court determined that the offset was limited by the policy language to duplicative "elements of loss." The district court determined that jury awards for medical expenses, lost wages, and past and future loss of function were "elements of loss" covered by the workers' compensation settlement. The district court also determined that the verdict must be further offset by the Greenfields' recovery from Hedgecock. The Greenfields' settlement with Hedgecock, however, did not allocate the proceeds between them or their injuries. Nevertheless, the district court decided to allocate the $30,000 offset equally between the Greenfields. After removing duplicative "elements of loss" from the jury verdict and applying the $30,000 offset, the district court reduced the award to Ranee to $40,000 and the award to Stuart to $35,000.

Both parties filed motions to reconsider. The district court sustained its prior ruling except with respect to the allocation of the tortfeasor recovery, which was reallocated entirely against Ranee's recovery. Ranee's award was, therefore, reduced to $25,000, with Stuart's award increased to $50,000.

Ranee and Stuart filed a timely notice of appeal.1 On appeal, the Greenfields argue that the district court erred in allowing the workers' compensation benefits to be offset against the jury awards for past and future loss of function and in allowing Cincinnati to receive "a double credit" by not reducing the amount of the workers' compensation offset by the funds reimbursed to Cincinnati under Iowa Code section 85.22(1).

Cincinnati filed a timely notice of cross appeal. In its cross appeal, Cincinnati asserted that the district court erred in not applying an offset of the total workers' compensation recovery against the total jury award. Cincinnati also maintained that the district court erroneously refused to apply an offset against the jury's special verdicts for past and future pain and suffering.

II. STANDARD OF REVIEW.

The interpretation of an insurance policy is a matter of law. A.Y. McDonald Indus., Inc. v. Ins. Co. of N. Am., 475 N.W.2d 607, 618 (Iowa 1991). This court's review, therefore, is for errors at law. Iowa R.App. P. 6.4.

III. DISCUSSION.
A. Offsets of Workers' Compensation Recoveries Under Reduction-of-Benefits Provisions of Underinsured Motorist Policies.
1. Statutory Authorization of Reduction-of-Benefits Provisions.

Iowa Code section 516A.1 requires all automobile insurance policies, absent a written rejection by the insured, to include coverage for uninsured and underinsured motorist claims. Iowa Code section 516A.2(1) further provides that "... forms of coverage may include terms, exclusions, limitations, conditions, and offsets which are designed to avoid duplication of insurance or other benefits." When such language is included in policies covering underinsured motorists, it is referred to generically as a reduction-of-benefits provision.

In Gentry v. Wise, 537 N.W.2d 732 (Iowa 1995), this court emphasized that reduction-of-benefits provisions were permissible under Iowa Code section 516A.2 (1) so long as their design is to avoid duplication of coverage. Gentry, 537 N.W.2d at 735. Where an insurance contract does not contain a reduction-of-benefits provision authorized by statute, however, reduction of benefits may be denied. Detroit Auto Inter-Ins. Exch. v. Ayvazian, 62 Mich.App. 94, 233 N.W.2d 200 (1975); Progressive Am. Ins. Co. v. Vasquez, 129 N.C.App. 742, 502 S.E.2d 10, aff'd in part, rev'd in part, 350 N.C. 386, 515 S.E.2d 8 (1998).

2. Offsets of Recoveries from Workers' Compensation.

In McClure v. Employers Mut. Cas. Co., 238 N.W.2d 321 (Iowa 1976) [hereinafter McClure I], this court considered whether the Iowa legislature, in enacting Iowa Code section 516A.2(1), authorized offsets of workers' compensation benefits. The question was not free from doubt as Iowa Code section 516A.2(1) does not expressly authorize offsets of workers' compensation benefits, but only offsets to avoid duplication of "insurance or other benefits."

The McClure I court concluded that notwithstanding the failure to specifically authorize reduction of coverage as a result of workers' compensation payments, the Iowa legislature intended to allow insurance companies to offset workers' compensation benefits against uninsured and underinsured motorist claims. While offsets are permissive under Iowa Code section 516A.2(1), they are not mandatory. The particular policy language at issue is controlling. Cincinnati, therefore, is entitled to an offset of workers' compensation benefits to avoid duplication only to the extent that its reduction-of-benefits provision authorizes such offsets.

B. Meaning of Language in Cincinnati's Reduction-of-Benefits Provision in its Underinsured Motorist Policy.
1. Overview of Reduction-of-Benefits Provisions.

In light of McClure I, a central question in this case is the meaning of Cincinnati's policy language as it relates to underinsured motorist claims. The applicable language is as follows:

3. No one will be entitled to receive duplicate payments for the same elements of "loss" under this Coverage and any Liability Coverage Form.

We will not make a duplicative payment under this Coverage for any element of "loss" for which payment has been made by or for anyone who is legally responsible.

We will not pay for any element of "loss" if a person is entitled to receive payment for the same element of "loss" under any workers' compensation, disability benefits or similar law.

(Emphasis added.) The Cincinnati policy further contains language defining "loss." According to the policy, "loss" means "direct or accidental loss or damage."

The reduction-of-benefits language in Cincinnati's policy relating to underinsured motorist claims differs significantly from that relating to claims involving uninsured motorists (UM). The reduction-of-benefits provision related to uninsured motorists is as follows:

2. With respect to damages resulting from...

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