Tibbetts v. Dairyland Ins. Co

• Decision Date: 15 July 2010
• Docket Number: Docket No. Pen-08-435.
• Citation: 999 A.2d 930,2010 ME 61
• Parties: Gary TIBBETTSv.DAIRYLAND INSURANCE CO. et al.
• Court: Maine Supreme Court

999 A.2d 930

2010 ME 61

Gary TIBBETTSv.DAIRYLAND INSURANCE CO. et al.

Docket No. Pen-08-435.

Supreme Judicial Court of Maine.

Argued: May 19, 2010.

Decided: July 15, 2010.

Arthur J. Greif, Esq. (orally), Julie D. Farr, Esq., Gilbert & Greif, P.A., Bangor, ME, for Gary Tibbetts.

Jon A. Haddow, Esq. (orally), Farrell, Rosenblatt & Russell, Bangor, ME, for Dairyland Insurance Company.

James D. Poliquin, Esq. (orally), Norman, Hanson & DeTroy, LLC, Portland, ME, for MMG Insurance Company.

Panel: SAUFLEY, C.J., and LEVY, SILVER, MEAD, GORMAN, and JABAR, JJ.

SILVER, J.

[¶ 1] Gary Tibbetts appeals from a judgment entered in the Superior Court (Penobscot County Murphy, J.) following a jury trial that awarded him damages for injuries stemming from a motor vehicle collision. The issues we address on appeal involve the payment of underinsured motorist insurance. Dairyland Insurance Co. cross-appeals in part because it contests the allocation of payment among the underinsured motorist insurance carriers. This is an issue requiring clarification, and we discuss it below. We affirm the judgment except as to the award of medical payments benefits pursuant to Count III, which is vacated.

I. FACTUAL AND PROCEDURAL BACKGROUND

[¶ 2] Tibbetts was injured on June 15, 2006, when the motorcycle he was operating collided with a car. Tibbetts owned a motorcycle repair business and had taken a customer's motorcycle home that evening, extending his ride because of the nice weather. Tibbetts testified that repairs that he planned to do the next morning would require that the motorcycle have a warm engine. During his ride, a car pulled out in front of Tibbetts, causing an accident that resulted in serious injuries to him.

[¶ 3] The driver's insurance company paid Tibbetts the full limits of its liability coverage, $100,000. Tibbetts initiated this action to collect his remaining damages under various uninsured/underinsured motorist (UM) policies. ¹ The jury returned a verdict for Tibbetts awarding $325,000 in total damages. The jury specifically found that Tibbetts's use of the motorcycle, which the parties stipulated constituted a test drive, had been with permission of the owner.

[¶ 4] Five insurance policies potentially provide UM coverage for Tibbetts. Dairyland had issued three motorcycle insurance policies: to Clark, the owner of the motorcycle; to Tibbetts; and to Tibbetts's girlfriend and business partner in a policy that included Tibbetts as an insured. MMG Insurance Company had issued an automobile policy covering Tibbetts. Finally, National Indemnity Company had issued a “garage policy” providing liability insurance. Following a court determination that National Indemnity's failure to provide UM coverage violated 24-A M.R.S. § 2902 (2009), National Indemnity settled with Tibbetts for $30,000, leaving the three Dairyland policies and the MMG policy remaining at issue in the case. All the parties agree that pursuant to policy language, the Dairyland policy issued to the motorcycle's owner (Clark policy) is the primary UM policy, while the other Dairyland policies and the MMG policy are excess policies.

[¶ 5] In addition to its UM coverage, the Dairyland Clark policy provides for medical payments benefits of up to $5000 per person, but only covers people who are occupying the motorcycle with the insured's permission. The policy excludes medical payments for “[a]nyone occupying a motorcycle used in the business of selling, repairing, servicing, storing or parking motor vehicles.” The other Dairyland policies each provide coverage of up to $1000 per person for medical payments, but exclude coverage for occupants of motorcycles being put to a business use.

[¶ 6] During trial, the court instructed the jury regarding mitigation of damages. In the course of that instruction, the court misstated a burden of proof, stating that the burden was on the plaintiff to prove that he could have reduced his damages. Tibbetts did not object.

[¶ 7] In its judgment, the court reduced the $325,000 verdict award by $130,000 received in settlements, and used the resulting figure, $195,000, to calculate prejudgment interest. Because $195,000 was less than the $250,000 limit provided by the primary Dairyland Clark policy, the court ordered Dairyland to pay the full amount. The court additionally found that although Tibbetts was engaged in a test drive of Clark's motorcycle at the time of the accident, that activity was not encompassed by the policy's exclusion of medical payment coverage for motorcycles used in a motor vehicle sales or repair business. Consequently, the court concluded that Dairyland was responsible for paying $5000 in medical benefits under its policy. In a subsequent hearing, the court addressed an additional count of the complaint claiming a violation of the prompt payment statute, and after holding that there was no violation, the court entered its final judgment on July 25, 2008.

II. DISCUSSION

[¶ 8] Tibbetts and Dairyland both raise a number of issues on appeal. We address the arguments that the court erred: (1) in its instruction to the jury regarding mitigation of damages; (2) by deducting a settlement with an excess insurer from the verdict award; (3) by deducting the settlement amounts from the total damages awarded instead of applying them to offset the primary UM policy coverage limits; and (4) by awarding medical payment benefits based on its finding that the policy's business use exclusion did not apply. The remaining issues raised by Tibbetts do not merit discussion.

A. Jury Instruction

[¶ 9] Tibbetts argues that the court erred when instructing the jury regarding the duty to mitigate damages because it erroneously substituted the word “plaintiff” for “defendant” when discussing the burden of proof. “We review jury instructions in their entirety to determine whether they fairly and correctly apprised the jury in all necessary respects of the governing law.” WahlcoMetroflex, Inc. v. Baldwin, 2010 ME 26, ¶ 14, 991 A.2d 44, 47-48 (quotation marks omitted). Tibbetts did not object to the mitigation instruction at trial, and therefore the instruction is reviewed for obvious error. See Searles v. Fleetwood Homes of Pa., Inc., 2005 ME 94, ¶ 33, 878 A.2d 509, 519.

[¶ 10] Tibbetts has failed to demonstrate obvious error. Under an obvious error review, Tibbetts must prove “a seriously prejudicial error tending to produce a manifest injustice.” State v. Elliott, 2010 ME 3, ¶ 22, 987 A.2d 513, 520. Tibbetts is correct in his assertion that the court misstated the party bearing the burden of proof. See Lee v. Scotia Prince Cruises Ltd., 2003 ME 78, ¶ 22, 828 A.2d 210, 216 (stating that a defendant has the burden to show that the plaintiff failed to mitigate damages). However, there is no evidence that the jury considered the absence of mitigation of damages, and because “[a] finding of obvious error is a serious one that should be utilized sparingly and must be limited only to extreme circumstances,” the error is not “of the exceptional kind that seriously affected the fairness or integrity of the proceeding.” See Reno v. Townsend, 1997 ME 198, ¶ 5, 704 A.2d 309, 311 (quotation marks omitted).

B. Offset of UM Insurer Settlement

[¶ 11] Tibbetts does not challenge the court's deduction of the tortfeasor's payment from the damages award, which the statute explicitly requires. See 24-A M.R.S. § 2902(4). However, Tibbetts argues that because National Indemnity was an excess insurer and therefore not required to pay any money, the court erred by deducting its $30,000 pre-trial settlement from the verdict award. We disagree, and affirm the calculation.

[¶ 12] The goal of the UM statute “was to provide an injured insured the same recovery which would have been available had the tortfeasor been insured to the same extent as the injured party.” Jipson v. Liberty Mut. Fire Ins. Co., 2008 ME 57, ¶ 8, 942 A.2d 1213, 1216 (quotation marks omitted). The statute does not support double recovery or a windfall to the plaintiff. See id. ¶ 9, 942 A.2d at 1216 (“There is no Maine authority to support [the plaintiff]'s contention that an insured injured by a single tortfeasor may recover a total that is greater than the insured's UM coverage limit.”). In keeping with this goal, any compensatory payments received by the plaintiff reduce the gap in coverage, and are offset against the judgment.

C. Offset Method

[¶ 13] In its cross-appeal, Dairyland challenges the court's application of the offset of the $130,000 received from the tortfeasor and from National Indemnity. It argues that under our decision in Cobb v. Allstate Ins. Co., 663 A.2d 38 (Me.1995), the settlements should be applied to offset the primary UM policy's coverage limits, so that the Dairyland Clark policy, as the primary policy, gains the full benefit of the offset. We disagree, affirm the court's allocation, and clarify the offset method applicable in UM insurance cases.

[¶ 14] Under the court's allocation the $325,000 judgment was reduced by the $130,000 settlement amounts, producing a judgment for $195,000. Because this judgment amount was within the Dairyland Clark policy's liability limits of $250,000, Dairyland was ordered to pay the entire judgment amount. Under Dairyland's proposed approach, which we will refer to as the “liability offset” approach, the court would instead subtract the $130,000 from the Clark policy's $250,000 liability limitation, producing a maximum liability of $120,000. Dairyland would then pay the $120,000 under its Clark policy, and the excess insurers would pay the remaining $75,000 according to their percentage share.

[¶ 15] “We have long held that insurers may offset the amount of coverage available in UM policies to the insured by the amount actually paid by the tortfeasor,” Jipson, 2008 ME 57, ¶ 9, 942 A.2d at 1216, and the statute in fact mandates this offset see 24-A M.R.S. § 2902(4). The statute does not, however, clarify the allocation of the offset...