Sandberg v. American Family Ins. Co.

• Decision Date: 14 September 2006
• Docket Number: No. 20050396.,20050396.
• Citation: 2006 ND 198,722 N.W.2d 359
• Parties: Laura SANDBERG, Plaintiff and Appellant v. AMERICAN FAMILY INSURANCE COMPANY, Defendant and Appellee.
• Court: North Dakota Supreme Court

Page 359

722 N.W.2d 359

2006 ND 198

Laura SANDBERG, Plaintiff and Appellant v. AMERICAN FAMILY INSURANCE COMPANY, Defendant and Appellee.

No. 20050396.

Supreme Court of North Dakota.

September 14, 2006.

Jeffrey S. Weikum, Pagel Weikum Law Firm, Bismarck, N.D., for plaintiff and appellant.

Lawrence E. King, Zuger Kirmis & Smith, Bismarck, N.D., for defendant and appellee.

MARING, Justice.

[¶ 1] Laura Sandberg appeals from a summary judgment dismissing her action for uninsured motorist coverage against her uninsured motor vehicle insurer, American Family Insurance Company. We conclude American Family was not adversely affected by Sandberg's settlement with Workforce Safety and Insurance ("WSI"), and there are disputed issues of material fact regarding American Family's statutory right to reduce damages payable to Sandberg for uninsured motorist coverage by the amount paid or payable to her for workers' compensation benefits. We reverse and remand.

I

[¶ 2] In April 1999, Sandberg was employed as a loss prevention officer for Wal-Mart. She was injured in a motor vehicle-pedestrian accident during the course of her employment, while attempting to stop a suspected shoplifter from leaving the Wal-Mart parking lot in a motor vehicle. She initially received benefits for her injury from WSI; however, WSI subsequently determined Sandberg had misrepresented her physical condition and made false statements to WSI regarding her claim. In September 2000, WSI ordered that Sandberg forfeit all future benefits in connection with her claim and repay $4,108.33 in previously paid benefits. Sandberg did not appeal that decision, and in April 2001, without obtaining American Family's consent, she executed a settlement with WSI in which she agreed to a "full and complete settlement" of all future workers' compensation benefits and WSI agreed not to pursue collection of any previously paid benefits unless Sandberg received a settlement in a third-party action. Under the agreement, WSI "retain[ed] its subrogated interest in [Sandberg's] third party action for all benefits paid on [her] claim" under N.D.C.C. § 65-01-09.

[¶ 3] Neither the driver nor the vehicle involved in the accident had motor vehicle liability insurance, and Sandberg thereafter sought uninsured motorist coverage under her policy with American Family. American Family denied her claim, and she sued American Family for breach of contract and bad faith. The district court concluded Sandberg was not entitled to uninsured motorist coverage under N.D.C.C. § 26.1-40-15.6(7) and her policy with American Family, because she had not obtained American Family's consent to the settlement with WSI and the settlement adversely affected American Family. The court thereafter granted summary judgment dismissing Sandberg's action against American Family.

II

[¶ 4] We review this appeal in the posture of summary judgment, which is a procedure for promptly resolving a controversy on the merits without a trial if there are no disputed issues of material fact or inferences that reasonably can be drawn from undisputed facts, or if the only issues to be resolved are questions of law. Ernst v. Acuity, 2005 ND 179, ¶ 7, 704 N.W.2d 869. A party moving for summary judgment must show there are no disputed issues of material fact. Green v. Mid Dakota Clinic, 2004 ND 12, ¶ 5, 673 N.W.2d 257. On appeal, we view the evidence in the light most favorable to the opposing party, and that party must be given the benefit of all favorable inferences. Hurt v. Freeland, 1999 ND 12, ¶ 7, 589 N.W.2d 551. Whether a district court properly granted summary judgment is a question of law that we review de novo on the entire record. Ernst, at ¶ 7.

III

[¶ 5] Sandberg argues her settlement with WSI does not preclude her from pursuing a claim for uninsured motorist coverage against American Family. She argues WSI is not a person who may be legally liable for her injuries and her settlement with WSI did not adversely affect American Family under N.D.C.C. § 26.1-40-15.6(7).

[¶ 6] American Family's policy with Sandberg allows the limits of her uninsured coverage to be reduced by "[a] payment made or amount payable because of bodily injury under any workers' compensation or disability benefits law or any similar law." The policy also provides that the uninsured coverage "does not apply to bodily injury to a person . . . [w]ho makes or whose legal representative makes a settlement without [American Family's] written consent."

[¶ 7] Our statutory provisions for uninsured and underinsured coverage are contained in N.D.C.C. §§ 26.1-40-15.1 through 26.1-40-15.7, and include language more restrictive than American Family's policy with Sandberg. Section 26.1-40-15.4(1)(a), N.D.C.C., provides that "[a]ny damages payable to or for any insured for uninsured or underinsured motorist coverage must be reduced by: . . . [t]he amount paid, or payable under any workers' compensation or other similar law, exclusive of nonoccupational disability benefits." Section 26.1-40-15.6(7), N.D.C.C., provides that "uninsured and underinsured coverages . . . do not apply to bodily injury, sickness, disease, or death resulting therefrom of an insured . . . [w]hen the insured, without the written consent of the insurer, shall make any agreement or settlement with any person who may be legally liable therefor, if such agreement adversely affects the rights of the insurer."

[¶ 8] Those statutory provisions for uninsured motorist coverage require that an unauthorized settlement adversely affect the insurer and are part of American Family's uninsured coverage with Sandberg. See Milbank Mut. Ins. Co. v. Dairyland Ins. Co., 373 N.W.2d 888, 891-92 (N.D.1985); Richard v. Fliflet, 370 N.W.2d 528, 534-35 (N.D.1985). Uninsured motorist coverage is essentially a function of statute just like underinsured motorist coverage. See Score v. American Family Mut. Ins. Co., 538 N.W.2d 206, 209 (N.D.1995). Sections 26.1-40-15.1 to 26.1-40-15.7, N.D.C.C., outline the current minimum statutory requirements for uninsured motorist coverage. An insurer may provide coverage terms more favorable to its insured than are required by N.D.C.C. §§ 26.1-40-15.1 to 26.1-40-15.7, but not less favorable. N.D.C.C. § 26.1-40-15.7(5). See DeCoteau v. Nodak Mut. Ins. Co., 2000 ND 3, ¶ 17, 603 N.W.2d 906. The minimum scope of coverage provided under the contract of insurance, and our analysis of the issues raised in this appeal, is therefore controlled by the statutory language.

[¶ 9] Statutory interpretation is a question of law, fully reviewable on appeal. GO Comm. ex rel. Hale v. City of Minot, 2005 ND 136, ¶ 9, 701 N.W.2d 865. The primary objective in interpreting a statute is to determine the legislature's intent. Amerada Hess Corp. v. State ex rel. Tax Comm'r, 2005 ND 155, ¶ 12, 704 N.W.2d 8. Words in a statute are given their plain, ordinary, and commonly understood meaning, unless defined by statute or unless a contrary intention plainly appears. N.D.C.C. § 1-02-02. Statutes are construed as a whole and are harmonized to give meaning to related provisions. N.D.C.C. § 1-02-07. The language of a statute must be interpreted in context and according to the rules of grammar, giving meaning and effect to every word, phrase, and sentence. N.D.C.C. §§ 1-02-03 and 1-02-38(2). We construe statutes to give effect to all of the provisions, so that no part of the statute is rendered inoperative or superfluous. N.D.C.C. § 1-02-38(2) and (4).

[¶ 10] The plain language of N.D.C.C. § 26.1-40-15.6(7) provides that uninsured coverage does not apply when the insured, without the written consent of the insurer, makes any agreement or settlement with any person who may be legally liable for the insured's bodily injury, sickness, disease, or death if the agreement adversely affects the rights of the insurer. Generally, consent-to-settlement language like N.D.C.C. § 26.1-40-15.6(7) allows an insurer to avoid its obligation to provide uninsured motorist coverage to an insured when the insured makes an unauthorized settlement with an uninsured tortfeasor, or with insured tortfeasors or their insurance carriers in accidents involving multiple tortfeasors, because the insurer has a right of subrogation against those entities and the insured's unauthorized settlement operates as a release of the insurer's subrogation rights. See 2 Allan I. Widiss & Jeffrey E. Thomas, Uninsured and Underinsured Motorist Insurance §§ 17.2 and 18.2 (3d ed.2005); 9 Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 124:6 (3d ed.2005).

[¶ 11] American Family does not claim it has a right of subrogation under N.D.C.C. § 26.1-40-15.5, but that the settlement with WSI adversely affected its rights because WSI would be liable for future medical expenses, disability benefits and potentially a permanent impairment award. The analysis of whether American Family was adversely affected therefore focuses on the meaning of "payable" under N.D.C.C. § 26.1-40-15.4. Sandberg argues "payable" does not include future workers' compensation benefits. American Family argues "payable" includes Sandberg's future WSI benefits for the purpose of applying its statutory right to a reduction in uninsured motorist benefits payable under N.D.C.C. § 26.1-40-15.4(1)(a).

[¶ 12] Under N.D.C.C. § 26.1-40-15.4(1)(a) an insurer is given a statutory right to reduce any damages payable to the insured for uninsured motorist coverage by the amount "paid or payable" to the insured under any workers' compensation law. An insurer's right to reduce damages payable to the insured for uninsured motorist coverage by the amount paid or payable for workers' compensation is a right to a reduction in the amount paid to or for the insured, and not a right of subrogation against the person responsible for the loss. See DeCoteau, 2000 ND 3, ¶ 13, 603 N.W.2d 906 (holding N.D.C.C. § 26.1-40-15.4(1) was intended to permit an offset against damages payable for benefits...