Travelers Ins. Co. v. National Farmers Union Property & Cas. Co.
| Decision Date | 22 May 1972 |
| Docket Number | No. 5--5900,5--5900 |
| Citation | 252 Ark. 624,480 S.W.2d 585 |
| Parties | The TRAVELERS INSURANCE CO., Appellant, v. NATIONAL FARMERS UNION PROPERTY AND CASUALTY CO. et al., Appellees. |
| Court | Arkansas Supreme Court |
Terral, Rawlings, Matthews & Purtle, Little Rock, for appellant.
Catlett & Henderson, Wright, Lindsey & Jennings, Little Rock, for appellees.
This appeal presents two basic questions. They are: (1) Is the particular clause in the uninsured motorist coverage of the liability policy issued by National Farmers Union Property and Casualty Company (hereafter called NFU) to Calvin E. McCord, deceased, providing that any amount payable under that coverage because of bodily injury shall be reduced by the amount paid and the present value of all amounts payable on account of such injury under any workmen's compensation law valid? (2) Is the workmen's compensation carrier for Calvin McCord's employer entitled to subrogation against uninsured motorist benefits payable to McCord's administratrix? We answer both questions in the negative.
McCord was killed while performing his duties as an employee of Mitchell Machinery Company when he was struck by a vehicle driven by Kenneth Green, an uninsured motorist. Travelers Insurance Company had paid $3,558.82 in workmen's compensation benefits to McCord's dependents at the time the judgment appealed from was rendered in the circuit court. It was stipulated that a sum in excess of $10,000 was payable under the workmen's compensation coverage. It was also stipulated that McCord's administratrix was entitled to recover a sum in excess of $10,000 from the uninsured motorist.
Denise McCord, as administratrix of McCord's estate, filed a suit against NFU seeking to recover the $10,000 uninsured motorist coverage, without any deduction for workmen's compensation benefits. Travelers Insurance Company intervened seeking subrogation by virtue of its workmen's compensation payments. The circuit court, upon motions for summary judgment by NFU and McCord's administratrix, dismissed Travelers' intervention on the ground that it was not entitled to subrogation, gave NFU credit for all workmen's compensation payments made by Travelers up to the date of the judgment, and rendered judgment for the administratrix against NFU for the balance of the uninsured motorist coverage. All parties appealed.
The circuit judge made a painstaking and thorough analysis of the possible results which might be reached on these questions of first impression in this jurisdiction. We agree with him that the intervention of Travelers should have been dismissed, but we do not agree that NFU was entitled to any credit for workmen's compensation payments.
Travelers contends that it is entitled to subrogation under Ark.Stat.Ann. § 81--1340(a) (Repl.1960). Principal reliance is placed upon § 81--1340(a)(1), wherein it is provided that the making of a claim for workmen's compensation 'shall not affect the right of the employee, or his dependents, to make claim or maintain an action in court against any third party for such injury' and that when the compensation carrier joins in the action, it shall have a lien upon two-thirds of the net proceeds. A literal reading of these words without further exploration of the section might lead one to the conclusion that it was the intent of the act to provide a lien in favor of the compensation carrier on any amounts the employee or his dependents were entitled to recover from any source because of the employee's injury. We have held, however, that uninsured motorist coverage is a form of accident or indemnity insurance. Farm Bureau Mut. Ins. Co. of Arkansas v. Mitchell, 249 Ark. 127, 458 S.W.2d 395; MFA Mutual Ins. Co. v. Bradshaw, 245 Ark. 95, 431 S.W.2d 252. If, under the broad general language of § 81--1340(a)(1), the uninsured motorist insurer is a 'third party' against whom the compensation carrier may join the injured employee or his dependents in asserting a claim because of the injury, there would be no reason why the employee's health and accident and hospital insurance proceeds would not also be subject to a lien in favor of an intervening workmen's compensation carrier. We cannot believe that the words 'third party' are subject to any such broad interpretation. Examination of the remainder of this section of the statute makes it quite clear that a 'third party' is one against whom an 'action for damages by reason of injury' or an 'action in tort' may be brought by the employee or his dependents. § 81--1340(a)(2) and (b).
We cannot accept the theory that the recovery on the uninsured motorist coverage is a tort recovery subject to the lien just because liability depends upon a tortious injury. This would mean that the coverage is a type of liability insurance on the uninsured motorist--a premise we have rejected. Farm Bureau Mut. Ins. Co. of Arkansas v. Mitchell, supra. An action against the carrier of uninsured motorist coverage is in no sense an action in tort. It is clearly an action upon a contract by the insured as one of the contracting parties against the insurer as the other. See Farm Bureau Mut. Ins. Co. of Arkansas v. Mitchell, supra. A workmen's compensation carrier has no more right under the subrogation statute to benefit from this type of insurance which a covered employee elects to take at his own expense than it would from the proceeds of health, accident or hospital insurance. We find the language of a New York court particularly applicable here. In Commissioners of State Insurance Fund v. Miller, 4 A.D.2d 481, 166 N.Y.S.2d 777 (1957) that court said:
The Fund argues that this makes no difference, that it has a lien on all tort recoveries, and that defendant's insurer has agreed to stand in the shoes of the tort-feasor. Defendant's insurer cannot, however, be deemed the alter ego of the tort-feasor. It does not insure the tort-feasor against liability; it insures its policyholder against the risk of inadequate compensation for his compensable injuries. Its liability to defendant is contractual, although premised in part upon the contingency of a third party's tort liability.
The compensation carrier has a right to expect an injured employee to pursue whatever remedies he may have against a third-party tort-feasor, and if the employee fails to do so, the compensation carrier may protect its lien by pursuing his remedies for him (Workmen's Compensation Law, § 29(2)). It has no right to expect an employee to supplement his common law remedies and the compensation carrier's statutory lien, by purchasing his own insurance. If the employee does choose to expend his own funds to provide additional protection for himself, whether by paying for an accident and health policy, or by having a Medical Payments or Uninsured Drivers Benefits clause added to his liability policy, the compensation carrier does not thereby acquire additional rights. It does not become a third-party beneficiary of the employee's insurance contract. Nor is it subrogated to the employee's contractual rights if the employee fails to assert them.
See also, Rhodes v. Automotive Ignition Co., 218 Pa.Super. 281, 275 A.2d 846 (1971); 12 Couch on Insurance (Second Edition) 585, § 45:650. Since Travelers had no right of subrogation, it had no right to intervene.
The trial court's holding allowing credit for workmen's compensation is based upon a portion of a policy 'condition' reading:
6. Limits of liability:
(a) The limit of liability stated in the schedule as applicable to 'each person' is the limit of the company's liability for all damages, * * * because of bodily injury sustained by one person as the result of any one accident and, subject to the above provision respecting each person, the limit of liability stated in the schedule as applicable to 'each accident' is the total limit of the company's liability for all damages, including damages for care or loss of services, because of bodily injury sustained by two or more persons as the result of any one accident,
(b) any amount payable under the terms of this endorsement because of bodily injury sustained in an accident by a person who is an insured under this coverage shall be reduced by * * *
(2) 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.
NFU is entitled to credit under this clause unless it is void as contrary to public policy or is contrary to the uninsured motorist act. Ark.Stat.Ann. § 66--4003 (Repl.1966) reads:
No automobile liability insurance, covering liability arising out of the ownership, maintenance, or use of any motor vehicle shall be delivered or issued for delivery in this State with respect to any motor vehicle registered or principally garaged in this State unless coverage is provided therein or supplemental thereto,...
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