Safeco Ins. Co. v. Woodley

• Decision Date: 17 July 2000
• Docket Number: No. 45841-8-I.,45841-8-I.
• Citation: 102 Wash. App. 384,8 P.3d 304
• Court: Washington Court of Appeals
• Parties: SAFECO INSURANCE COMPANY, Respondent, v. Denise Brackett WOODLEY, Appellant.

8 P.3d 304

102 Wash. App. 384

SAFECO INSURANCE COMPANY, Respondent, v. Denise Brackett WOODLEY, Appellant.

No. 45841-8-I.

Court of Appeals of Washington, Division 1.

July 17, 2000.

Publication Ordered August 31, 2000.

Susan Machler, Simeon Osborn, Osborn, Law Firm, Seattle, for Appellant.

J. Robert Leach, Anderson Hunter Law Firm, Everett, for Respondent.

COLEMAN, J.

Denise Woodley appeals a declaratory judgment permitting her insurer to offset her underinsured motorist benefits with the benefits the insurer had already paid under the medical and personal injury protection provisions of her policy and the full amount of her recovery from the tortfeasor's insurer. She contends that the offsets impermissibly reduce the underinsured motorist coverage mandated by RCW 48.22.030(3), that her policy did not unambiguously permit offsets for medical and personal injury protection payments, and that Safeco waived its right to offset these amounts. We conclude that Safeco is entitled to the offsets under Woodley's policy and did not waive this right. Because Woodley remains fully compensated by the reduced award, we affirm the trial court's decision below.

FACTS

Woodley was injured by a negligent motorist whose liability insurance had a $300,000 limit. She received this amount from the tortfeasor's insurer and $56,435 in medical and personal injury protection (PIP) benefits from her own insurer, Safeco Insurance Company. Claiming that her total damages exceeded $2 million, Woodley demanded further payment from Safeco up to the $1 million available under her underinsured motorist (UIM) coverage or arbitration under the policy. The parties agreed that Woodley was not at fault and was entitled to recover under her UIM coverage, but disagreed as to the amount of her damages. The arbitration panel ultimately awarded Woodley $450,000 in "total damages."¹

The day after the arbitrators' decision, Safeco informed Woodley that it intended to offset the award with the $300,000 she recovered from the tortfeasor and the medical and PIP benefits Safeco had previously paid. Woodley's UIM coverage authorized an offset for "all sums paid" by the tortfeasor.² Her medical and PIP coverage provided that payments made under those sections "shall be applied toward" any judgment or award the insured received under her UIM coverage.³ After receiving no response, Safeco tendered Woodley a check for $93,565, the amount of the arbitration award less the offsets. Five months later, Woodley moved to confirm the award. She did not dispute the deduction for the tortfeasor's direct payment but contested the medical and PIP offsets, claiming that the arbitrators had awarded her only general damages and future wage loss. The trial court confirmed the award with a reduction for the undisputed $300,000 offset, but refused to offset the medical and PIP payments.

On appeal, another panel of this court reversed, holding that Safeco was entitled to the medical and PIP offsets and the trial court erred in refusing to reduce the award. Woodley v. Safeco Ins. Co., 84 Wash.App. 653, 1997 WL 18551, vacated and withdrawn, 953 P.2d 822 (1998)

. This opinion was later withdrawn and the case remanded in light of the Supreme Court's decision in Price v. Farmers Ins. Co., 133 Wash.2d 490, 946 P.2d 388 (1997). In Price, the court held that in a proceeding to confirm an arbitration award, the trial court lacked jurisdiction to determine the propriety of PIP offsets, an issue that was not submitted to the arbitrators. The Price court indicated that such issues must be resolved by agreement or in a separate action under the trial court's general jurisdiction, noting that the insurer bore the burden of demonstrating that a coverage dispute existed which precluded entry of judgment on the arbitration award. Price, 133 Wash.2d at 501-02,

946 P.2d 388.

After Safeco commenced this declaratory judgment action, the trial court found that Safeco was entitled to offset the full amount of the tortfeasor's payment and its medical and PIP payments. The trial court ruled that the arbitration award included all damages caused by the accident, including losses for which Safeco had made payments under the medical and PIP coverage, and thus Woodley would receive a double recovery if offsets for these benefits were not made. Woodley appeals.

DISCUSSION

First, Woodley argues that Price should be overruled, contending that the decision will increase litigation between insurers and insureds and eliminate the many benefits of arbitration by imposing impractical, laborious, and costly burdens on UIM coverage disputes. We are bound, however, by the holding in Price and cannot overrule that court's decision. Woodley further claims that the provisions in her policy which permit the insurer to offset medical and PIP payments from her UIM recovery violate RCW 48.22.030(3), relying on Britton v. Safeco Ins. Co. of Am., 104 Wash.2d 518, 707 P.2d 125 (1985). In Britton, our Supreme Court held that an insurer could not offset a UIM award with the insured's government disability benefits, emphasizing that the disability benefits are a direct statutory entitlement and thus cannot be offset absent specific statutory authorization. Britton, 104 Wash.2d at 532,707 P.2d 125. In a subsequent decision, however, the court specifically "decline[d] to extend Britton to cases ... where the offset or reimbursement involves contractually provided PIP benefits and the purpose is to avoid a double recovery." Keenan v. Industrial Indem. Ins. Co., 108 Wash.2d 314, 321, 738 P.2d 270 (1987),overruled on other grounds by Price, 133 Wash.2d 490,

946 P.2d 388.

In Keenan, 108 Wash.2d at 317-22, 738 P.2d 270, the court permitted the insurer to offset a UIM award with paid PIP amounts, holding that the offset does not reduce UIM coverage in violation of RCW 48.22.030 if the insured remains fully compensated.⁴ The court further rejected the insured's argument that the offset would produce a "windfall" for the insurer in additional premiums, noting that the coverages insured against different risks.⁵ Keenan, 108 Wash.2d at 321-22, 738 P.2d 270. Thus, Keenan directly addressed the question of whether contractual PIP offsets violate the UIM statute when the insured remains fully compensated.

Woodley asserts that Keenan is distinguishable. She does not, however, explain how the language of the policy at issue in Keenan differs in relevant ways from the coverages at issue here or why the court's analysis should not be applied in this case. Instead, she relies on cases from other jurisdictions that, she contends, support her argument. Many of the cases Woodley cites have since been clarified or overruled to permit insurers to offset UIM awards with paid PIP or similar, no-fault benefits when the insured would otherwise receive a double recovery. See Ostransky v. State Farm Ins. Co., 252 Neb. 833, 566 N.W.2d 399 (1997)

; Schultz v. Farmers Ins. Group of Cos., 167 Ariz. 148, 805 P.2d 381 (1991); Ruder v. West America Ins. Co., 151 Ind.App. 433, 280 N.E.2d 68 (1972); see also Keenan, 108 Wash.2d at 319,

738 P.2d 270 (citing Tucci v. State Farm Ins. Co., 503 Pa. 447, 469 A.2d 1025 (1983); Hartford Accident & Indem. Co. v. Lackore, 408 So.2d 1040 (Fla.1982); and Bradley v. Mid-Century Ins. Co., 409 Mich. 1, 294 N.W.2d 141, 20 A.L.R.4th 1069 (1980)). In Keenan, the court acknowledged that other jurisdictions do not permit such offsets, but it found those cases to be unpersuasive. See Keenan, 108 Wash.2d at 320,

738 P.2d 270 (citing Grange Mut. Cas. Co. v. Lindsey, 22 Ohio St.3d 153, 489 N.E.2d 281 (1986); Newton v. Nationwide Mut. Fire Ins. Co., 197 Colo. 462, 594 P.2d 1042 (1979); and Van Tassel v. Horace Mann Ins. Co., 296 Minn. 181, 207 N.W.2d 348 (1973)). Thus, Woodley's reliance on these cases does not advance her argument.

Woodley also suggests that the UIM section of her policy does not permit medical or PIP offsets. These offsets are authorized, however, in the medical and PIP sections, which state that benefits received under those sections "shall be applied toward" her UIM recovery. Because the policy is construed as a whole, the location of these provisions in the medical and PIP sections, rather than the UIM section, is immaterial. See Wood, 97 Wash.App. at 727, 986 P.2d 833; Kitsap County v. Allstate Ins. Co., 136 Wash.2d 567, 575, 964 P.2d 1173 (1998). Woodley further argues that the medical and PIP sections' offset provisions are ambiguous. She does not, however, suggest an alternative interpretation of the provisions that would raise an ambiguity regarding their effect. As noted above, both the medical and PIP sections provide that benefits received under those sections "shall be applied toward" the insured's UIM recovery. In reading this language, the average person purchasing insurance would understand that medical and PIP benefits paid under the policy will reduce the insured's UIM recovery. Therefore, we reject the argument that the provisions are ambiguous.

Woodley next contends that the policy limits the insurer's right to recover PIP payments through a UIM offset when the insured has incurred substantial costs and attorney fees in pursuing a liability action, citing the following paragraphs from the PIP coverage section:

Our Right to Recover Payment

1. If we make a payment under this coverage and the person to or for whom payment was made has a right to recover damages from another we shall then have that right....

2. If we make a payment under this coverage and the person to or for whom payment is made recovers damages from another, that person shall hold in trust for us the proceeds of the recovery and shall reimburse us to the extent of our payment.

3. [W]e will not exercise our right of recovery if doing so reduces the covered person's payments, from all sources, below the loss and expenses incurred.

She concedes, however, that these paragraphs address the insurer's right to reimbursement...