Tunny v. Erie Ins. Co.

• Decision Date: 30 June 2003
• Docket Number: No. 41A04-0211-CV-557.,41A04-0211-CV-557.
• Citation: 790 N.E.2d 1009
• Parties: Bruce TUNNY, Appellant-Defendant, v. ERIE INSURANCE COMPANY, Appellee-Plaintiff.
• Court: Indiana Appellate Court

790 N.E.2d 1009

Bruce TUNNY, Appellant-Defendant, v. ERIE INSURANCE COMPANY, Appellee-Plaintiff.

No. 41A04-0211-CV-557.

Court of Appeals of Indiana.

June 30, 2003.

Richard R. Skiles, Skiles Hansen Cook & DeTrude, Indianapolis, IN, Attorney for Appellant.

Thomas C. Hays, Carol M. Wyatt, Lewis & Wagner, Indianapolis, IN, Attorneys for Appellee.

OPINION

SULLIVAN, Judge.

Bruce Tunny appeals from the trial court's grant of summary judgment which ordered that Erie Insurance ("Erie") pay him $6,914.38 as final payment on his underinsured motorist ("UIM") coverage. The issue which he presents for our review is whether the trial court erred in determining that Erie was entitled to reduce the limits of the UIM coverage by the amount of attorney fees paid by Tunny's employer's worker's compensation carrier to Tunny's attorney, Richard Skiles.

We reverse.

On September 30, 1998, Tunny was injured in an automobile collision while he was acting in the scope of his employment with Tunny Brothers Masonry. His vehicle was struck by a vehicle driven by Yi Cheng Zheng. GRE Insurance Company ("GRE"), Tunny Brothers Masonry's worker's compensation carrier, paid $29,383.52 to or on Tunny's behalf for medical bills and temporary total disability. Pursuant to Indiana Code § 22-3-2-13 (Burns Code Ed. Supp.2002), GRE held a lien against the payment made to Tunny.

Tunny was given a permanent partial impairment ("PPI") rating of 10% by his physician, which was eventually compromised to 5% by Tunny and GRE. Tunny was paid $3,750.00 by GRE for his PPI.¹ GRE maintained a lien on that payment also.

Without filing suit, Tunny received $50,000.00 from Zheng's insurer, American Economy Insurance Company, as settlement for Tunny's claims against Zheng. Tunny used this settlement to reimburse GRE for the payments it had made to him and on his behalf. Out of the $29,383.52 which comprised reimbursement for the lien for medical bills and temporary total disability, seventy-five percent, or $22,037.64, went to GRE to satisfy its lien, and the remaining $7,345.88 was paid to Skiles, as required by I.C. § 22-3-2-13, to compensate Skiles for protecting GRE's lien. Tunny also reimbursed GRE $2,500.00 as two-thirds of the PPI payment made to him, and Skiles received $1,250.00 from the proceeds of the settlement for protecting GRE's lien for the PPI disbursement made to Tunny.

Tunny and Erie arbitrated Tunny's entitlement to UIM benefits. The arbitrator found Tunny's total damages to be $112,500.00. However, the UIM coverage had a limit of $100,000.00. Tunny and Erie could not agree on the amount which Erie owed Tunny for his UIM coverage, and on April 20, 2001, Erie filed a Complaint for Declaratory Judgment to have the trial court determine the amount of set-off that Erie was entitled to deduct from the policy limit. On May 2, 2001, Erie issued a check for $35,154.12 to Tunny and Skiles. Erie calculated the amount as follows:

$ 100,000.00 Limit of UIM coverage (50,000.00) Amount paid by or for Zheng (7,500.00) Amount payable for 10% PPI rating (7,345.88) Amount GRE paid to Skiles for recovering on the first lien _________ $ 35,154.12

On March 27, 2002, Erie filed a motion for summary judgment upon its complaint for declaratory judgment. On August 14, 2002, the trial court issued its ruling on the motion and determined that Erie was entitled to a dollar for dollar set-off for the amount of the benefits received by Tunny from GRE but which Tunny did not repay to GRE. That amount was $8,595.88, the entire amount of attorney fees which had been paid to Skiles according to the requirements of I.C. § 22-3-2-13.

Tunny claims that the trial court erred in determining that Erie was entitled to reduce the award by the amount of attorney fees which GRE paid to Skiles. He asserts that the recovery of the worker's compensation carrier's lien is for the benefit of the carrier, and not the injured party. He claims that allowing the limit of the UIM coverage to be reduced by the amount of the attorney fees already paid by GRE dilutes his recovery and provides a windfall to Erie. Further, he asserts that Skiles is entitled to keep GRE's contribution as reimbursement from GRE which is separate to that which Skiles will receive as compensation for representing Tunny in his collections from Zheng and Erie.

When reviewing an entry of summary judgment, we apply the same standard as the trial court. Bowen v. Monroe Guar. Ins. Co., 758 N.E.2d 976, 977 (Ind.Ct.App. 2001). Summary judgment is appropriate when the evidence designated to the trial court demonstrates that no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C). When material facts are not in dispute, our review is limited to determining whether the trial court correctly applied the law to the undisputed facts. Bowen, 758 N.E.2d at 977. Even though some special rules of construction of insurance contracts have been developed because of the disparity in bargaining power between insurers and insureds, if a contract is clear and unambiguous, the language therein must be given its plain meaning. Beam v. Wausau Ins. Co., 765 N.E.2d 524, 528 (Ind.2002), reh'g denied. Where ambiguities exist, insurance policies are to be construed strictly against the insurer and the policy language is viewed from the standpoint of the insured. Id. Only if reasonable persons would differ as to the meaning of the terms will a contract be found to be ambiguous. Id. In insurance contracts, an ambiguity is not affirmatively established simply because controversy exists and one party asserts an interpretation contrary to that asserted by the opposing party. Id.

Beginning our review with the contract for UIM coverage which was entered into between Erie and Tunny, we are called upon to interpret the language used by Erie. The reduction provision contained in the insurance policy states:

"The limits of protection available under this uninsured/underinsured motorists coverage will be reduced by:

1. The amounts paid by or for those liable for bodily injury or property damage to anyone we protect.

2. The amounts paid or payable under any workers [sic] compensation, disability benefits or similar law.

3. The amount of any liability protection paid or payable to anyone we protect. This includes all sums paid under the liability coverage of this policy." Appendix at 82 (emphasis supplied).

Tunny claims that the italicized language is ambiguous and that it must be interpreted in his favor.

In Wildman v. Nat'l Fire and Marine Ins. Co., 703 N.E.2d 683 (Ind.Ct.App.1998),trans. denied, this court reviewed nearly identical language in a reduction clause in an insurance contract. At issue in Wildman was the use of the phrase "`[a]ny amount payable under this coverage shall be reduced by all sums paid or payable under any worker's compensation disability benefits or similar law.'"²Id. at 686. This court determined that the phrase "sums paid or payable" was subject to various interpretations by reasonable people. Id. at 687. The court noted that one could interpret the phrase to mean the amount of worker's compensation benefits originally received by the insured or the benefits retained after subtraction of the compensation carrier's lien. Id. Therefore, the phrase was held to be ambiguous and to be construed in favor of the insured. Id. This court then held that the insurer was entitled to reduce the payment by only the amount of worker's compensation benefits received by the worker and not subject to a repayment obligation. Id.

In the present case, Erie's argument at the summary judgment hearing leads us to conclude that the phrase "amounts paid or payable under any workers [sic] compensation" is also ambiguous. Erie argued that it could reduce the limit of the policy by $7,500.00, the amount of the PPI payment which Tunny would have received had he not compromised the claim. As an alternative argument, Erie asserted that it could reduce the limit of the policy by $1,250.00, the amount which Skiles retained as his statutorily mandated fee from GRE after Tunny settled with Zheng's insurer and reimbursed GRE for the PPI payment. In this case, not only could reasonable people interpret the language differently, the insurer itself had two alternative, yet reasonable interpretations of the language. However, even after determining that the contractual language is ambiguous and must be construed in favor of Tunny, we must also determine whether the trial court correctly interpreted the language in deciding that Erie could reduce the limit of the policy by the amount which GRE was statutorily required to pay to Skiles.

Before determining whether the trial court correctly interpreted the insurance contract, we must begin with a review of the public policy underlying worker's compensation and the reimbursement to insurers of benefits which have been paid. The purpose behind worker's compensation is to aid workers and their dependents and shift the economic burden for employment related injuries from the employee to the employer and consumers of its product and services. Spangler, Jennings & Dougherty P.C. v. Indiana Ins. Co., 729 N.E.2d 117, 120 (Ind.2000). Worker's compensation is intended to provide an expeditious remedy which will guarantee the injured party some recovery for an industrial accident. Id. at 120-21. The Worker's Compensation Act also provides a way to seek compensation from third-parties who caused the injuries. Id. at 120. An employee may accept worker's compensation benefits while pursuing a third-party action. Id.

Indiana Code § 22-3-2-13 allows an injured employee to choose between worker's compensation and third-party judgments in some situations so that recovery may be maximized. Spangler, Jennings & Dougherty P.C.,729 N.E.2d at 121. If the final judgment in the third-party suit is less than the amount of the worker's compensation and...