Pinkham v. Morrill

• Decision Date: 16 March 1993
• Citation: 622 A.2d 90
• Parties: Katherine C. PINKHAM v. Daniel W. MORRILL and Bangor and Aroostook Railroad Company.
• Court: Maine Supreme Court

Page 90

622 A.2d 90

Katherine C. PINKHAM v. Daniel W. MORRILL and Bangor and Aroostook Railroad Company.

Supreme Judicial Court of Maine.

Argued Sept. 8, 1992.

Decided March 16, 1993.

Christopher C. Taintor (orally), James D. Poliquin (orally), Norman, Hanson & DeTroy, Portland, for plaintiff.

John D. McKay, David C. Webb (orally), Eaton, Peabody, Bradford & Vlague, Bangor, for defendants.

Before WATHEN, C.J., and ROBERTS, GLASSMAN, COLLINS and RUDMAN, JJ.

COLLINS, Justice.

New Hampshire Insurance Company (NHIC), proceeding in the name of Katherine C. Pinkham, its insured, pursuant to M.R.Civ.P. 17(c), ¹ appeals from the decision of the Superior Court (Penobscot County, Kravchuk, J.) granting a summary judgment in favor of the defendants Daniel W. Morrill and Bangor and Aroostook Railroad Company (B & A). The Superior Court, in granting the defendants' motion for a summary judgment pursuant to M.R.Civ.P. 56(c), ² concluded that the Maine Insurance Guaranty Association Act, 24-A M.R.S.A. §§ 4431-4452 (1990 & Supp.1991) (the Act), barred NHIC's subrogation action directly against the insureds of an insolvent insurance company to the extent of the payments made by NHIC. The Superior Court reached this conclusion despite the fact that the insureds' negligence had caused the injuries to Pinkham that entitled her to collect on her uninsured motorist coverage with NHIC. We affirm the judgment.

FACTS and PROCEDURE

This action arises out of an automobile accident occurring on January 20, 1988, on Interstate 95 in Bangor, in which a vehicle owned by defendant, B & A, and driven by defendant, Morrill, who was acting within the scope of his employment, collided with a vehicle owned and driven by plaintiff, Katherine C. Pinkham. In order to avoid colliding with another vehicle operated by defendant, Susan A. Curran, that had come to rest facing southbound in the northbound lane, Pinkham was forced to come to a complete stop. ³ Morrill, who was driving north behind Pinkham, negligently rear-ended Pinkham's vehicle forcing it to collide with Curran's vehicle.

Pinkham filed a complaint in the Superior Court seeking damages for medical expenses due to serious and possibly permanent injuries, physical pain, mental anguish, lost wages and earning capacity. All defendants answered and cross-claimed. On January 22, 1991, defendants, Morrill and B & A, moved the Superior Court for a continuance stating that B & A's insurer, American Universal Insurance Company, a Rhode Island corporation, had been declared insolvent and that Pinkham was thus required to exhaust her uninsured coverage before seeking recovery from the Pinkham subsequently settled an uninsured motorist claim with her insurer, NHIC. Her auto policy provided $300,000 of uninsured/underinsured motorist coverage. The settlement, $200,000 plus an annuity purchased for $99,917 guaranteeing her future periodic payments, represented payment in full for all of her injuries arising out of the events leading to the lawsuit. Pinkham assigned any rights that she had against defendants to her insurer, NHIC. NHIC subsequently served a notice on Pinkham pursuant to M.R.Civ.P. 17(c) of its intention to continue prosecuting the pending action against Curran, Morrill and B & A in her name. As framed by NHIC, the issue is whether the tortfeasors, Morrill and B & A, or the victim's uninsured motorist carrier, NHIC, is ultimately responsible for the damages paid to Pinkham.

Maine Insurance Guaranty Association (MIGA). The Superior Court granted defendants' motion.

Morrill and B & A subsequently filed a motion for a summary judgment arguing that 24-A M.R.S.A. § 4435(4) ⁴ of the Act prohibits subrogated recoveries against the MIGA, and that 24-A M.R.S.A. § 4443 ⁵ requires plaintiff to exhaust her uninsured motorist claim before pursuing a claim under the Act. See Ventulett v. Maine Ins. Guar. Ass'n, 583 A.2d 1022, 1024 (Me.1990) (§§ 4443(1) and 4435(4) of the Act make the MIGA a guarantor of last resort).

NHIC countered by arguing that it was not pursuing a subrogation action against the MIGA as representative of an insolvent insurer, but against the insureds themselves, defendants, Morrill and B & A. NHIC's contention is that the Act prohibits subrogated claims against the MIGA but not against the insureds directly and, therefore, its claim is proper.

The trial court found that "a valid insurance policy was issued by American Universal Insurance Company, covering defendants Morrill and B & A." The trial court reasoned that following the insolvency of American Universal, the MIGA, pursuant to 24-A M.R.S.A. § 4438(1)(B) (1990 & Supp.1991), ⁶ assumed all rights, duties and obligations of the insolvent insurer, including its obligation towards the plaintiff's claim. Under the facts and circumstances of this case, the trial court reasoned that the Act prohibited NHIC from bypassing the Act's restrictions and asserting a subrogated claim directly against the insureds of an insolvent insurance company. Accordingly, the trial court granted a summary judgment in favor of Morrill and B & A.

THE ACT

The Maine Insurance Guaranty Association Act creates a non-profit, unincorporated legal entity known as the Maine Insurance Guaranty Association, in which specified types of insurers (including NHIC) are required to maintain membership as a condition of their authority to conduct business in Maine. See 24-A M.R.S.A. § 4436. Member insurers are assessed fees which make up the assets of the Association. See 24-A M.R.S.A. § 4440. The Association uses the assets derived from these assessments to pay "covered claims" ⁷ and to defray the costs of administering the Act. See 24-A M.R.S.A. §§ 4438-4439. When a liability insurer becomes insolvent, the Association is deemed the insurer of the policyholder for "covered claims," up to an amount not to exceed the lesser of: (a) $300,000 or (b) the amount of the "obligation of the insolvent insurer under the policy or coverage from which the claim arises." ⁸ See 24-A M.R.S.A. § 4438(1)(A)-(B). A claimant who has other insurance coverage available beyond that of the insolvent insurer, i.e., uninsured motorist coverage, is required to first exhaust that coverage before making a claim against the MIGA. See 24-A M.R.S.A. § 4443(1). Any amount recovered from the uninsured motorist carrier is excepted from the claim against the MIGA, see 24-A M.R.S.A. § 4443(1), and the uninsured motorist carrier, if a member of the MIGA, is authorized to set off its payment on the covered claim against its assessment under the Act. See 24-A M.R.S.A. § 4440(5).

This case squarely presents the question of whether the Act bars subrogated actions by an insurer that has paid uninsured motorist benefits to its insured against the tortfeasor responsible for the damages for which such payment was made, if the insurance carrier providing liability coverage to the tortfeasor has become insolvent. We hold that the Act bars such subrogated claims to the extent paid in this case.

After conceding that NHIC is precluded by the express language of the Act from proceeding against the Association in its subrogated action, NHIC focuses on the lack of any specific language in the Act barring a subrogation action directly against the insured of an insolvent insurance company. NHIC argues that the Legislature's failure to expressly prohibit subrogation implicitly suggests an intention not to prohibit such claims. See Wescott v. Allstate Ins. Co., 397 A.2d 156, 169 (Me.1979). NHIC further notes the ease with which the Legislature could have included such prohibitory language and provides the example of Mass.Gen.Laws, Ch. 175D, § 1(2). See Cordani v. Roulis, 395 So.2d 1276 (Fla.App.1981) (Florida statute expressly forbids action against insured of insolvent insurer); Reinsurance Ass'n of Minnesota v. Dunbar Kapple, Inc., 443 N.W.2d 242 (Minn.App.1989) (claim against insured expressly barred by Minnesota and Illinois statutes).

NHIC acknowledges that policy considerations may exist that support a construction of the Act that precludes the assertion of subrogated claims directly against insureds of insolvent insurers. Nevertheless, NHIC contends that such considerations are offset by the "historical and common-sense principle that the economic impact of a tortiously-inflicted injury should fall most heavily on the tortfeasor." NHIC concludes on its initial point by arguing that absent clear legislative intent to protect tortfeasors at the expense of insurers having valid subrogated claims, no legitimate justification exists for interpreting the Act in a way that would bar NHIC's otherwise valid subrogated claim against defendants Morrill and B & A. We disagree.

As Morrill and B & A note, allowing NHIC's subrogated claim would be contrary to the clear purpose of the Act of protecting the insureds of insolvent insurance companies. Section 4432 of the Act expressly articulates the purpose of the Act as including the protection of policy holders such as B & A as follows:

The purpose of this subchapter is to provide a mechanism for the payment of covered claims under certain insurance policies, to avoid excessive delay in payment and to avoid financial loss to claimants or policy holders because of the insolvency of an insurer, to assist in the detection and prevention of insurer insolvencies, and to provide an association to assess the cost of such protection among insurers.

24-A M.R.S.A. § 4432 (1990) (emphasis added). As a further guide to construction, § 4434 provides that the subchapter "... shall be liberally construed to effect the purpose stated under section 4432, which shall constitute an aid and guide to interpretation." 24-A M.R.S.A. § 4434 (1990).

Morrill and B & A also point to portions of the legislative record in support of their argument. Review of the legislative history of the Act reveals the following debate. On January 28, 1970, Senator Logan from York explained that, "[...