Lumbermens Mut. Cas. Co. v. Huntley, 14391

• Decision Date: 21 July 1992
• Docket Number: No. 14391,14391
• Citation: 223 Conn. 22,610 A.2d 1292
• Court: Connecticut Supreme Court
• Parties: LUMBERMENS MUTUAL CASUALTY COMPANY v. Jill HUNTLEY.

Page 1292

610 A.2d 1292

223 Conn. 22

LUMBERMENS MUTUAL CASUALTY COMPANY v. Jill HUNTLEY.

No. 14391.

Supreme Court of Connecticut.

Argued March 25, 1992.

Decided July 21, 1992.

Michael Brodinsky, North Haven, for appellant (plaintiff).

Herbert Watstein, Bristol, for appellee (defendant).

Before PETERS, C.J., and CALLAHAN, GLASS, BORDEN and BERDON, JJ.

BERDON, Associate Justice.

The principal issue in this appeal is whether an insurer, who provides underinsured motorist coverage, may limit its liability by taking credit for a personal payment made by an underinsured tortfeasor to an insured. The defendant insured, Jill E. Huntley, was seriously injured when her car was struck by an automobile operated by Michael R. Panus. After he had exhausted the limits of his liability policy, Panus personally paid the defendant the sum of $50,000 pursuant to a settlement agreement. The defendant's insurer, the plaintiff, Lumbermens Mutual Casualty Company, sought credit for the payment in the form of a reduction of its liability for underinsured motorist coverage. This appeal follows the trial court's confirmation of the arbitration panel's award in favor of the defendant. ¹ We now reverse.

The parties agreed to the following facts. On May 25, 1989, the defendant was driving home when an automobile driven by Panus crossed over into her lane and struck her vehicle head-on. On April 18, 1991, in her suit against Panus, the trial court rendered a judgment of $1,000,000 in favor of the defendant. Panus was insured by Allstate Insurance Company, which paid the full $100,000 limit of its policy to the defendant. Panus, himself, then paid an additional $50,000 to the defendant.

The defendant's underinsured motorist policy issued by the plaintiff provided coverage up to $300,000. Following Panus' personal payment, a dispute arose between the defendant and the plaintiff as to whether the plaintiff could reduce its liability to the defendant by $50,000, the amount of the tortfeasor's personal payment, in addition to the $100,000 reduction for the amount paid by the tortfeasor's liability carrier. The defendant's insurance policy provided that: "Any amounts otherwise payable for damages under this [underinsured] coverage shall be reduced by all sums: 1. Paid because of the 'bodily injury' by or on behalf of persons or organizations who may be legally responsible."

Pursuant to the terms of the policy, the parties submitted to arbitration the sole legal issue of whether General Statutes § 38-175c, now reorganized and recodified as General Statutes § 38a-336(b) and (d), ² and § 38-175a-6(d)(1) of the Regulations of Connecticut State Agencies ³ permit the plaintiff to reduce its coverage by the $50,000 paid by the tortfeasor. The parties stipulated to the fact that the tortfeasor had personally paid the sum of $50,000 to the defendant. In a split decision, the arbitrators decided that the plaintiff was not entitled to deduct the $50,000 payment by the tortfeasor.

The trial court denied the plaintiff's application to vacate the arbitrators' award. Relying on American Universal Ins. Co. v. DelGreco, 205 Conn. 178, 530 A.2d 171 (1987), ⁴ the trial court concluded that the plaintiff could not take credit for the tortfeasor's payment because it was a personal payment, not a payment made by his automobile insurance liability carrier.

On appeal, the plaintiff claims that the trial court improperly upheld the arbitrators' decision that the tortfeasor's personal payment could not be deducted from its payment of underinsured motorist coverage to the defendant. The plaintiff argues that the setoff of the tortfeasor's payment is warranted both by § 38-175a-6(d) of the regulations, which specifically permits "reduction of limits to the extent that damages have been ... paid by or on behalf of any person responsible for the injury," and by the defendant's insurance policy, which requires reduction of all sums paid "by or on behalf of persons or organizations who may be legally responsible." We agree with the plaintiff that an underinsured motorist carrier may limit its liability by taking credit for a tortfeasor's personal payment to the insured, and we reverse the trial court.

In reviewing compulsory arbitration cases, this court must conduct a de novo review of the arbitrators' interpretation and application of the law. American Universal Ins. Co. v. DelGreco, supra, at 191, 530 A.2d 171. The defendant argues that § 38-175a-6(d)(1) of the regulations, to the extent that it allows for the setoff, is inconsistent with the language and intent of § 38-175c(b)(1), which requires an insurance carrier to pay its insured "after the limits of liability under all bodily injury liability bonds or insurance policies ... have been exhausted...." The defendant contends that the legislature, in amending § 38-175c to include subsection (b)(1), impliedly repealed § 38-175a-6(d)(1) of the regulations. ⁵

We begin our analysis with the history and relationship between § 38-175c and § 38-175a-6(d)(1) of the regulations. Section 38-175c, which provides that all automobile liability policies must include uninsured motorist coverage, was first enacted in 1967 and did not prohibit the reduction of uninsured motorist coverage by the amount of a tortfeasor's personal payment. Public Acts 1967, No. 510. Pursuant to General Statutes § 38-175a, ⁶ the insurance commissioner adopted regulations, effective January 1, 1968, which provide in pertinent part: "the [automobile liability insurance] policy may provide for the reduction of limits to the extent that damages have been ... paid by or on behalf of any person responsible for the injury...." Section 38-175a-6(d)(1); ⁷ Fidelity & Casualty Co. v. Darrow, 161 Conn. 169, 286 A.2d 288 (1971).

In 1979, § 38-175c was amended to include subsection (b)(1), which requires an insurance carrier to provide underinsured motorist coverage "after the limits of liability under all bodily injury liability bonds or insurance policies ... have been exhausted...." The legislative history indicates that § 38-175c was amended solely for the purpose of providing underinsured motorist coverage. Public Acts 1979, No. 79-235; 22 S.Proc., Pt. 5, 1979 Sess., p. 1354; 22 H.R.Proc., Pt. 16, 1979 Sess., p. 5341. ⁸ The regulations that apply to uninsured motorist coverage also apply to underinsured motorist coverage. ⁹ In 1983, § 38-175c was amended further to require that underinsured motorist coverage equal liability coverage. Public Acts 1983, No. 83-461. Neither amendment, in 1979 or in 1983, prohibited the setoff of a tortfeasor's personal payment.

With this background in mind, we approach the issue of whether the plaintiff is entitled to a credit for the tortfeasor's payment. First, as we noted above, the sole reason for amending § 38-175c to include subsection (b)(1) was to provide for underinsured motorist coverage and not to prohibit an insurance carrier from reducing underinsured motorist coverage when appropriate. The obvious purpose of the language on which the defendant relies--namely, that the insurer must pay its insured "after the limits of liability ... have been exhausted"; § 38-175c(b)(1)--is to trigger the point at which the underinsured motorist policy takes effect.

Second, although this is a question of first impression, our conclusion that an underinsured motorist carrier may limit its liability by taking credit for a tortfeasor's personal payment to the insured is supported by our previous analysis and interpretation of both General Statutes § 38-175c and § 38-175a-6(d) of the regulations. In Wilson v. Security Ins. Co., 213 Conn. 532, 538-39, 569 A.2d 40, cert. denied, --- U.S. ----, 111 S.Ct. 52, 112 L.Ed.2d 28 (1990), ¹⁰ we determined that § 38-175a-6 of the regulations, which also allows setoffs for workers' compensation benefits, is consistent with the coverage requirements of § 38-175c, the statute at issue in the present case. We also observed that General Statutes § 38-175c "does not require that uninsured motorist coverage be made available when the insured has been otherwise protected ... or when the uninsured motorist has other resources available to protect the insured. Nor does the statute provide that the uninsured motorist coverage shall stand as an independent source of recovery for the insured, or that the coverage limits shall not be reduced under appropriate circumstances .... Roy v. Centennial Ins. Co., 171 Conn. 463, 472-73, 370 A.2d 1011 (1976)." (Internal quotation marks omitted; emphasis in original.) Wilson v. Security Ins. Co., supra, 213 Conn. at 538, 569 A.2d 40. We further noted that "[s]ection 38-175c does not specifically prohibit the adoption of a regulation permitting the reduction of uninsured motorist coverage, whereas § 38-175a explicitly authorizes the commission to adopt regulations relating to the insuring agreements, exclusions, conditions and other terms applicable to ... uninsured motorists coverages." (Internal quotation marks omitted.) Id. Here, as in Wilson, we conclude that § 38-175a-6(d)(1) of the Regulations of Connecticut State Agencies, which allows the setoff of a tortfeasor's personal payment, is consistent with the coverage requirements of General Statutes § 38-175c.

Furthermore, the legislature is presumed to be aware of the judicial construction placed upon its enactments. Nationwide Ins. Co. v. Gode, 187 Conn. 386, 395 n. 7, 446 A.2d 1059 (1982). ¹¹ Since 1979, when underinsured motorist coverage was mandated § 38-175c has been amended five times, yet, the legislature has never taken action to prohibit an underinsured motorist carrier from reducing payment to its insured in accordance with the regulations. We can find nothing to support the claim that the legislature intended a contrary construction of the statute. We hold that an uninsured motorist carrier may limit its liability by taking credit for a payment made by a tortfeasor to the insured.

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