Poulos v. Aetna Cas. & Sur. Co.

• Decision Date: 31 October 1977
• Docket Number: No. 75-228-A,75-228-A
• Citation: 379 A.2d 362,119 R.I. 409
• Court: Rhode Island Supreme Court
• Parties: William POULOS v. AETNA CASUALTY & SURETY CO. ppeal.

Page 362

379 A.2d 362

119 R.I. 409

William POULOS v. AETNA CASUALTY & SURETY CO.

No. 75-228-Appeal.

Supreme Court of Rhode Island.

Oct. 31, 1977.

[119 R.I. 415] DiMascolo & DiPetrillo, Anthony DiPetrillo, Providence, for plaintiff.

Hinckley, Allen, Salisbury & Parsons, Thomas D. Gidley, Providence, for defendant.

OPINION

BEVILACQUA, Chief Justice.

This is a civil action founded on an insurance contract. The case was heard in Superior Court without a jury upon an agreed statement of facts. Judgment was entered for the defendant, and the plaintiff brought this appeal.

On March 27, 1970, plaintiff Poulos, then an employee of a Rhode Island corporation, was severely injured when he was struck by a bridge gate which had, in turn, been struck by a car negligently operated by an underinsured Massachusetts motorist. ¹ The plaintiff was hospitalized until May 16, 1970, and for several shorter periods thereafter. Although the record does not establish the amount of plaintiff's actual losses, it is agreed that they exceed his recovery. He received $24,981 in workmen's compensation disability benefits from his employer's workmen's compensation insurer, which also paid $8,410 of his medical bills; and he received $5,000 from the tortfeasor's liability insurer, which was paid over to the workmen's compensation insurer. ²

The plaintiff also recovered from his own automobile liability insurer, defendant Aetna Casualty and Surety Company (Aetna) under his uninsured motorist coverage, and it is the amount of that payment which forms the basis of the present dispute. The policy states that Aetna will pay, up to $20,000, "all sums which the Insured * * * shall be legally entitled to recover as damages from the owner or operator of an uninsured highway vehicle * * *." Under a "Limits of Liability" section, the policy provides that "(a)ny amount payable under the Uninsured Motorists Coverage * * * shall be reduced by * * * the amount paid and the present value of all amounts payable on account of such bodily injury under any workmen's compensation law, disability benefits law or any similar law." Aetna took the position that it could deduct amounts received as workmen's compensation benefits from the $20,000 maximum liability of the policy, so long as it paid the amount mandated by the uninsured motorist statute, G.L.1956 (1968 Reenactment) § 27-7-2.1. ³ Aetna therefore paid plaintiff $10,000. The plaintiff then instituted this action in Superior Court, claiming that the workmen's compensation deduction clause was void as against public policy and that defendant Aetna had breached its contract to pay plaintiff $20,000. The trial justice decided that the workmen's compensation deduction clause was a valid contractual limitation which authorized deduction of benefits down to the $10,000 statutory minimum. Judgment was entered for defendant, and plaintiff now appeals.

The question before this court is whether a clause reducing payments under an uninsured motorist policy by the amount paid or payable to the insured as workmen's compensation benefits is contrary to public policy where the clause applies only to that amount of coverage which is in excess of the amount mandated by the statute but allows deduction regardless of whether the insured has been fully compensated for actual loss.

We have held that contracts for uninsured motorist coverage must be construed in light of the public policy as mandated by the Legislature. Allstate Ins. Co. v. Fusco, 101 R.I. 350, 223 A.2d 447 (1966). In Pickering v. American Employers Ins. Co., 109 R.I. 143, 152, 282 A.2d 584, 590 (1971), this court found that in enacting § 27-7-2.1 the Legislature intended to protect an insured against his actual loss. "(W)e emphasize that our statute allows recovery of the full amount of the coverage so long as the amount of the recovery does not exceed the amount of the insured's actual loss." Id. at 153, 282 A.2d at 590.

The defendant argues that since the Pickering case addressed an insurer's attempt to limit its liability to less than the $10,000 then mandated by the statute, the language of Pickering applies only where the insurer seeks to pay less than the statutory minimum. We cannot agree. If the purpose of the statute is to provide protection against actual loss, then a deduction for workmen's compensation benefits which leaves the policyholder without full protection against this actual loss violates the public policy of the statute even though the insured received the $10,000.

In support of its argument defendant relies heavily on cases allowing insurance companies to use this standard deduction clause to limit policy payments to less than the statutory minimum. Rhode Island has prohibited such an interpretation of the deduction clause. Aldcroft v. Fidelity & Cas. Co., 106 R.I. 311, 259 A.2d 408 (1969). More important, this court has rejected the underlying construction of the public policy of the uninsured motorist statute upon which such cases rest. Compare, e. g., Ullman v. Wolverine Ins. Co., 48 Ill.2d 1, 269 N.E.2d 295 (1970) with Pickering v. American Employers Ins. Co., supra. Deductions which allow the insurer to pay less than the amount fixed by the uninsured motorist statute have been allowed where the court has found the purpose of the statute is to provide protection, regardless of the source, only up to the statutory limit. Hackman v. American Mut. Liab. Ins. Co., 110 N.H. 87, 90, 261 A.2d 433, 436 (1970). Such deductions have also been allowed by some courts which find that the legislative purpose is to place the injured policyholder in the same position he would have been if the tortfeasor had carried liability insurance; they reason that allowing the deduction best accomplishes this purpose, since injured motorists who recover from insured motorists are required by workmen's compensation statutes to repay the compensation carrier. E. g., Ullman v. Wolverine Ins. Co., supra; contra, Standard Accident Ins. Co. v. Gavin, 184 So.2d 229 (Fla.App.1966); Peterson v. State Farm Mut. Auto. Ins. Co., 238 Or. 106, 393 P.2d 651 (1964).

However, unlike the Hackman court, this court has found that § 27-7-2.1 does not establish a maximum standard of protection. "There is no ceiling upon the insured's right of recovery." Pickering v. American Employers Ins. Co., supra, 109 R.I. at 152, 282 A.2d at 590. Moreover, this court has not interpreted the purpose of the uninsured motorist statute as an attempt to equate the position of one who recovers from his own insurance company with the position of one who recovers liability insurance from the tortfeasor's insurance company. In the Pickering case we pointed out that "(u)ninsured motorists insurance is not liability insurance." Id. at 147, 282 A.2d at 587. It is a compensation policy intended to protect the insured against his actual losses. Id. at 152, 282 A.2d at 590.

Aetna also contends that its deduction clause furthers the public policy against double recovery. It points to our holding in McArthur v. Dutee W. Flint Oil...