Merchants Mut. Ins. Group v. Orthopedic Professional Ass'n

• Decision Date: 06 April 1984
• Docket Number: No. 83-232,83-232
• Parties: MERCHANTS MUTUAL INSURANCE GROUP v. ORTHOPEDIC PROFESSIONAL ASSOCIATION et al.
• Court: New Hampshire Supreme Court

Page 840

480 A.2d 840

124 N.H. 648

MERCHANTS MUTUAL INSURANCE GROUP v. ORTHOPEDIC PROFESSIONAL ASSOCIATION et al.

No. 83-232.

Supreme Court of New Hampshire.

April 6, 1984.

Devine, Millimet, Stahl & Branch P.A., Manchester (Joseph M. McDonough, III, Manchester, on brief, and Donald E. Gardner, Manchester, orally), for plaintiff.

Law Offices of James J. Kalled, Ossipee (Robert G. Whaland, Manchester, on brief and orally), for defendants.

DOUGLAS, Justice.

In this appeal, the plaintiff, Merchants Mutual Insurance Group (Merchants) petitioned for declaratory judgment to determine its coverage obligation to the defendant Walter N. Garger under the uninsured motorist endorsements of three separate insurance policies with respect to injuries resulting from a non-physical contact accident involving an unidentified vehicle. The Master (Mayland H. Morse, Jr., Esq.) found that Garger is entitled only to the minimum of $20,000 coverage under the uninsured motorist provisions of each of two of the policies, but that, since Merchants is entitled to off set against its uninsured motorist liability the amounts paid to Garger under a worker's compensation contract issued by Merchants to the defendant Orthopedic Professional Association, there are, in fact, no benefits available to the defendants under either of the policies. The Trial Court (Cann, J.) approved the master's recommendation, and the defendants appealed.

According to the record, on November 10, 1979, the defendant Walter N. Garger was injured in a non-contact accident involving an unidentified vehicle. Garger alleges that while driving eastbound on Route 11-A in Alton, New Hampshire, he was forced off the road by another vehicle, which then fled the scene. At the time of the accident, Garger was en route to the Huggins Hospital in Wolfeboro where he was a staff surgeon. It is undisputed that, at the time of the accident, he was acting within the scope of his employment for the defendant, Orthopedic Professional Association.

As a result of the accident, Garger collected $163,306 in worker's compensation benefits under a policy issued by Merchants Mutual to Orthopedic Professional Association. The worker's compensation policy coverage is not in issue in this appeal except to the extent that the off-set provisions included in each of the three disputed policies reduce Garger's uninsured motorist benefits by the amount of workmen's compensation he received.

Following the accident, Garger submitted a claim to Merchants Mutual for uninsured motorist benefits under three separate policies. The first policy is an automobile liability policy, issued to Orthopedic Professional Association by Merchants Mutual. The policy provides $20,000 per person in uninsured motorist coverage. The second policy is an automobile liability policy issued by Merchants Mutual to Garger's wife. It provides uninsured motorist coverage in the amount of $100,000 per person. The third policy, issued to Orthopedic Professional Association by Merchants Mutual, is a "Special Multi-peril" policy with an uninsured motorist endorsement. That policy's uninsured motorist benefits are in dispute as they were not typed onto the declarations page. The parties agree that Garger is an insured under the first two policies. Merchant's Mutual denies that Garger is an insured under the special multi-peril policy's uninsured motorist endorsement.

The principal issues raised on appeal concern the validity of two provisions included in each of the three disputed policies. First, each of the three uninsured motorist endorsements limits hit-and-run coverage to accidents involving physical contact; second, each policy also includes a standard "limits of liability" provision which reduces the amount payable under each policy by the amount paid to the insured under the worker's compensation laws.

The first issue is whether the master erred in finding that Soule v. Stuyvesant Ins. Co., 116 N.H. 595, 364 A.2d 883 (1976), only voided a physical contact requirement up to the minimum statutory limits of uninsured motorist coverage in effect at the time of the accident. The master found that coverage in excess of the statutory minimum is not affected by Soule but is dependent upon the terms and conditions of the relevant policy. He determined that the uninsured motorist endorsements of Merchants Mutual's policies require physical contact and that "[s]ince there was no hit, there was no 'hit and run' vehicle to which the excess limits of the uninsured motorist endorsement of the ... polic[ies] might apply." The master concluded that "therefore, there becomes available here only the minimum of $20,000 coverage under each of the ... policies." We find that the master erred as a matter of law and, therefore, reverse. See 590 Realty Co. Ltd. v. City of Keene, 122 N.H. 284, 285, 444 A.2d 535, 535 (1982).

In Soule, we held that the "policy requirement of physical contact is an impermissible restriction of coverage...." Id. 116 N.H. at 597, 364 A.2d at 884. We reasoned that the "New Hampshire Legislature chose not to insert a physical contact requirement into RSA 268:15-a as has been done in some jurisdictions" but, instead, extended "coverage to all accidents caused by uninsured motorists or hit-or-run motorists without any requirement of physical contact." Id. at 596-97, 364 A.2d at 884. Thus, we concluded that "the exclusion was an 'unreasonable restriction' on the statutory scope of coverage." Beliveau v. Norfolk & Dedham Mut. Fire Ins. Co., 120 N.H. 73, 76, 411 A.2d 1101, 1103 (1980) (emphasis added) (quoting Soule v. Stuyvesant, 116 N.H. 595, 364 A.2d 883 (1976)).

The statutory scope of coverage had previously been enlarged in 1969 when the legislature amended the uninsured motorist statute to permit an insured to purchase coverage in excess of the statutory minimum. Laws 1969, 418:1. Since the statute permits the insured to purchase uninsured motorist coverage up to the same limits as liability coverage, RSA 268:15-a (now codified at RSA 264:15), any attempt to reduce those higher purchased limits by applying a physical contact requirement is ineffective because the statute does not require physical contact. See Soule v. Stuyvesant Ins. Co., 116 N.H. 595, 597, 364 A.2d 883, 884 (1976). "Policy provisions designed to reduce the coverage to less than that prescribed by the express or implied provisions of the statute are void." Id. at 596, 364 A.2d at 884.

Accordingly, we hold that the physical contact requirement contained in the uninsured motorist endorsements of the three policies is void as an impermissible restriction on coverage. The defendant is entitled to the full coverage, up to the policy limits.

The second issue concerns the validity of the "limits of liability" clause contained in each policy. It provides:

"Any amount payable under the terms of this insurance because of bodily injury sustained in an accident by a person who is an insured under this coverage shall be reduced by ....

(2) The amount paid and the present value of all amounts payable on account of such bodily injury under any workmen's compensation law ...."

The effect of this provision is to reduce the uninsured motorist coverage provided in each of the policies, by the amount of any worker's compensation received by the insured. Whether uninsured motorist coverage may be "set off" by worker's compensation benefits was considered in Hackman v. American Mutual Liab. Ins. Co., 110 N.H. 87, 261 A.2d 433 (1970). In Hackman, we held that the uninsured motorist carrier could reduce its coverage by the amount of any worker's compensation received by the insured. This case questions the continued validity of that holding.

The material facts of Hackman are identical to those of the instant case. The insured in that case, as a result of an automobile accident, collected worker's compensation benefits from his employer's carrier. He then sought to receive the benefits of an automobile liability policy with an uninsured motorist endorsement issued by the same carrier. The uninsured motorist policy contained a worker's compensation set-off provision. We held that the provision permitting an uninsured motorist liability carrier to deduct payments made by a worker's compensation carrier did not violate the uninsured motorist statute, RSA 268:15 (now codified at RSA 264:15), because under the worker's compensation statute, RSA 281:14, the compensation carrier is entitled to a lien, for the amounts paid in benefits, against any damages recovered from a third-party tortfeasor. Id. at 92, 261 A.2d at 436.

This court reasoned in Hackman that since the statute's "design and purpose ... was to provide protection only up to the minimum statutory limits for bodily injuries caused by financially irresponsible motorists ... [and] not ... to provide the insured with greater insurance protection than would have been available had the insured been injured by an operator with a policy containing minimum statutory limits," the reduction was permissible under the statute. Id. at 91-92, 261 A.2d at 436 (quoting Maryland Cas. Co. v. Howe, 106 N.H. 422, 424, 213 A.2d 420, 422 (1965)).

The result in Hackman was predicated on the rationale that the uninsured motorist statute was not designed to provide greater insurance protection than the statutory minimum. The rationale underlying that decision, however, has been seriously undermined by amendments to the uninsured motorist statute and by the recent emergence of a substantial body of case law construing the statute; thus, the decision no longer has validity.

This court has taken a harsh view of attempts to reduce uninsured motorist benefits below the statutory scope of coverage. In Courtemanche v. Lumbermens Mut. Cas. Co., 118 N.H. 168, 385 A.2d 105 (1978), we held that a clause which reduced recovery under the policy by amounts received under other applicable policies violated the uninsured motorist statute...