Levy v. Am. Family Mut. Ins. Co.
| Decision Date | 03 February 2011 |
| Docket Number | No. 09CA2451,No. 07CV7137,09CA2451,07CV7137 |
| Parties | Susan Levy, Plaintiff-Appellant and Cross-Appellee, v. American Family Mutual Insurance Company, Defendant-Appellee and Cross-Appellant. |
| Court | Colorado Court of Appeals |
ORDERS AFFIRMED IN PART, REVERSED IN PART,
AND CASE REMANDED WITH DIRECTIONS
Opinion by JUDGE GRAHAM
Plaintiff insured, Susan Levy, appeals the district court's order declaring that American Family Mutual Insurance Company (American Family), the insurer of a vehicle in which she was a passenger, was entitled to deduct the amount of medical payments previously paid on her behalf from an arbitration award for damages under the insurance policy. American Family cross-appeals the district court's orders granting prejudgment interest and costs in favor of Levy. We affirm the order entitling American Family to deduct previously paid medical payments, reverse the orders granting prejudgment interest and costs in favor of Levy, and remand.
In 2004, Levy was a passenger in a vehicle owned by Constance Gouge-Richardson. Gouge-Richardson had an insurance policy (policy) with American Family. Levy was injured in an automobile accident caused by Jessica Fink, who was insured by USAA. Pursuant to the medical payment coverage of the insurance policy, American Family paid $18,838 to various medical providers for Levy's medical expenses. The policy included a medical payment subrogation clause, which read:
Levy sought American Family's permission to settle with Ms. Fink and USAA. In response, American Family sent a letter that stated, "American family [sic] has waived its rights of subrogation against both USAA and their insured Jessica Sink [sic]." Levy received $23,763.77 from her settlement with Ms. Fink and USAA.
Levy also filed a complaint in the district court seeking money damages from American Family under the uninsured/underinsured motorist (UM/UIM) coverage of the policy. She exercised her right under the policy to seek binding arbitration.
The arbitration panel determined that Levy's damages totaled $77,500. The arbiters also found that Levy's medical expenses from the accident totaled $25,000, which was included in the $77,500 award. The arbitration panel later modified its award to include the following language:
At the commencement of the hearings in these matters, the parties agreed that, after award, they would modify and conform the award according to the terms of the insurance contract between the parties.
Both parties agree that the district court was the proper forum for modification and confirming the award. American Family filed a motion for declaration of applicable law and for confirmation of modified award in which it requested the district court to declare that it was entitled to reduce the arbitration award by the $18,838 it had paid for Levy's medical expenses. Levy opposed this reduction.
The district court concluded that American Family was entitled to reduce the arbitration award by the amount American Family had paid for Levy's medical expenses. It found that the subrogation clause in the policy gave American Family the right to recover the medical payments. Therefore, the court concluded Levy could not have recovered her past medical expenses from the tortfeasor and should not recover them under the policy's UM/UIM coverage. The court also concluded that the subrogation provision was not in violation of public policy pursuant to DeHerrera v. American Family Mutual Insurance Co., 219 P.3d 346 (Colo. App. 2009). The court further found that American Family did not waive its subrogation rights between it and Levy in the letter expediting Levy's settlement opportunities.
Thus, in the order of confirmation, the district court found that Levy was entitled to receive $77,500, less $23,763.77 (the amount received from the tortfeasor's insurance company), less $18,838 (the amount paid by American Family for medical payments), for a net payment of $34,898.23.
Meanwhile, Levy filed a motion for prejudgment and postjudgment interest on the arbitration award, as well as for costs. American Family opposed the motion. The district court concluded that Levy was entitled to prejudgment and postjudgment interest in the total amount of $16,421.44, as well as costs in the amount of $1,514.88.
Levy appeals the district court's order determining that American Family was entitled to reduce the arbitration award by the amount it had paid for her medical expenses. American Family cross-appeals the district court's orders granting prejudgment interest and costs in favor of Levy.
Levy contends the district court erred in concluding that American Family was entitled to reduce the arbitration award by the amount it previously paid for her medical expenses. We disagree.
A district court's legal conclusions regarding a motion to confirm or vacate an arbitration award are reviewed de novo. Barrett v. Inv. Mgmt. Consultants, Ltd., 190 P.3d 800, 802 (Colo. App. 2008).
We also review the interpretation of an insurance contract de novo. DeHerrera, 219 P.3d at 349. We give the words and phrases in an insurance contract their plain, everyday meaning, and construe them to carry out the intent of the parties. Id. at 349-50.
Initially, we assume that this issue is properly before us because both parties concede that they agreed to allow the district court to determine if the insurance policy entitled American Family to reduce the arbitration award by the amount of the medical payments made after the arbitration panel rendered its award. If the parties had not reserved this issue, the district court would not have had grounds to modify the arbitration award. See Magenis v. Bruner, 187 P.3d 1222, 1224 (Colo. App. 2008) (); see also § 13-22-224, C.R.S. 2010 ().
Both parties agree that American Family waived its rights to subrogation. Nonetheless, they disagree about the effect of this waiver. Levy argues that based upon its waiver American Family is not entitled to reduce the arbitration award by the amount it paid for her medical expenses. American Family responds that when it waived its subrogation rights, the waiver did not affect its right to avoid making duplicative medical payments to Levy, or, put another way, medical payments in addition to the reimbursed medical payments Levy recovered from Fink's insurer.
We agree with American Family that the waiver did not affect its right to avoid duplicative payments as set forth below.
We first reject Levy's contention that the contract exception to the collateral source rule prevents American Family from reducingthe arbitration award by the $18,838 it paid for her medical expenses.
Under the common law collateral source rule, "plaintiffs were allowed to recover the full damages awarded against defendants even though the plaintiffs also received compensation from collateral sources." Van Waters & Rogers, Inc. v. Keelan, 840 P.2d 1070, 1074 (Colo. 1992). The rationale for the rule is that "[t]o the extent that either party received a windfall, it [is] considered more just that the benefit be realized by the plaintiff in the form of double recovery rather than by the tortfeasor in the form of reduced liability." Id. Payments from insurance policies have traditionally been considered a collateral source. Yeiser v. Ferrellgas, Inc., 214 P.3d 458, 460 (Colo. App. 2008) (cert. granted Aug. 31, 2009).
The General Assembly modified the collateral source rule by enacting section 13-21-111.6, C.R.S. 2010. See Volunteers of Am. v. Gardenswartz, 242 P.3d 1080, 1084 (Colo. 2010). In contrast to the common law rule, the statute contains a "contract exception" that states:
the verdict shall not be reduced by the amount by which such [injured] person, his estate, or his personal representative has been or will be wholly or partially indemnified or compensatedby a benefit paid as a result of a contract entered into and paid for by or on behalf of such person.
Based upon this exception, Levy reasons that since her medical expenses could have been recovered against the tortfeasor, she should be able to recover them from American Family under the UM/UIM coverage.
This issue was addressed in Quinones v. Pennsylvania General Insurance Co., 804 F.2d 1167 (10th Cir. 1986). There, even in the absence of a collateral source limiting statute like Colorado's, the court refused to apply the collateral source rule because it would have resulted in a double payment of medical benefits by the insurer. In Quinones, the plaintiff, who had been injured by an uninsured motorist, filed suit against his own insurance company seeking damages under the insurance policy's UM provisions. Id. at 1169. The case was tried to a jury, which determined the plaintiff's damages. Id at 1171. The federal district court for New Mexico refused to instruct the jury that the plaintiff's...
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Toy v. Am. Family Mut. Ins. Co.
...were not duplicative because they compensated the insured for different losses. Id. at 1309. Defendant relies on Levy v. Am. Family Mut. Ins. Co., 293 P.3d 40 (Colo. App. 2011), for its argument that the UIM exclusions prevent double recovery. Defendant is correct inasmuch as Colorado court......