Washington Ins. Guar. Ass'n v. Mullins, 26850-3-I

Decision Date16 September 1991
Docket NumberNo. 26850-3-I,26850-3-I
Citation62 Wn.App. 878,816 P.2d 61
PartiesWASHINGTON INSURANCE GUARANTY ASSOCIATION, a statutory, involuntary association, Appellant, v. David K. MULLINS and Kathleen Mullins, husband and wife, Respondent, and Frank Coluccio Construction Company, Inc., a Washington corporation, Appellant.
CourtWashington Court of Appeals

Arnold J. Barer, Seattle, for Washington Ins. Guar.

Russell Austin, Seattle, for David and Kathleen Mullins.

James J. Phillips, Bellevue, for Frank Coluccio Const.

GROSSE, Chief Judge.

Washington Insurance Guaranty Association (WIGA) and Frank Coluccio Construction Company (Coluccio) appeal from an order denying their motions for summary judgment and granting David and Kathleen Mullins' motion for summary judgment in an action to determine rights under the Washington Insurance Guaranty Association Act. The main issue is whether the amount WIGA owes the Mullins should be reduced by the amount of David Mullins' benefits under RCW 41.26, the Washington Law Enforcement Officers' and Fire Fighters' Retirement System Act (LEOFF). Additionally, Coluccio appeals the determination that WIGA would be liable only up to the limit set by the Washington Insurance Guaranty Association Act, RCW 48.32 et seq. (the Act).

The facts are essentially undisputed. David Mullins was injured while working as a Seattle firefighter on and around a Coluccio construction site. Mullins applied for disability benefits from the LEOFF retirement system and was granted permanent disability status. Mullins then brought a personal injury action against Coluccio. Coluccio was insured for $3 million by Pacific Marine Insurance Co. (PacMar). In June of 1989 PacMar was adjudged insolvent and ordered to liquidate. WIGA therefore assumed its duty to defend the personal injury action pursuant to the Act.

WIGA subsequently brought an action for declaratory relief against Coluccio and Mullins. Specifically, WIGA sought a declaration that any amount it owed to Mullins under the Act should be reduced by the amount of Mullins' LEOFF benefits. WIGA also sought a declaration granting immunity to Coluccio for personal injury liability to the extent Mullins' claim is covered under the Act. Alternatively, WIGA sought a declaration that LEOFF benefits are not subject to the collateral source rule and may be considered in a personal injury action.

All parties moved for summary judgment. The trial court granted Mullins' motion holding that WIGA is not entitled to offset Mullins' LEOFF benefits and further held that the collateral source rule precludes Coluccio from offsetting those benefits against any judgment in the personal injury action. The trial court also held that WIGA's potential liability in the personal injury action is limited by statute to $300,000.

After WIGA and Coluccio filed notices of appeal in this action, the underlying personal injury action brought by Mullins against Coluccio went to trial. The jury returned a verdict in favor of Mullins in the sum of $208,415. However, the verdict was reduced by the jury's finding that Mullins was 80 percent contributorily negligent. The net result was an award of $41,683 to Mullins.

WIGA contends the trial court erred in granting summary judgment for Mullins in holding as a matter of law that Mullins' claim was a "covered claim" pursuant to RCW 48.32.030(4). The Act is designed to relieve the hardship caused insureds by the insolvency of an insurance company. Under RCW 48.32.010, the purpose of the Act

is to provide a mechanism for the payment of covered claims under certain insurance policies to avoid excessive delay in payment and to avoid financial loss to claimants or policyholders because of the insolvency of an insurer, to assist in the detection and prevention of insurer insolvencies, and to provide an association to assess the cost of such protection among insurers.

The Act is limited in scope and applies to

all kinds of direct insurance, except life, title, surety, disability, credit, mortgage guaranty, workers' compensation and ocean marine insurance.

(Emphasis added.) RCW 48.32.020.

A covered claim is:

an unpaid claim, including one for unearned premiums, which arises out of and is within the coverage of an insurance policy to which this chapter applies issued by an insurer, if such insurer becomes an insolvent insurer after the first day of April, 1971 ... "Covered claim" shall not include any amount due any reinsurer, insurer, insurance pool, or underwriting association, as subrogation recoveries or otherwise ...

RCW 48.32.030(4).

After an insurance company is determined to be insolvent and thus unable to pay a claim, WIGA steps into the shoes of the insolvent insurer. Washington Ins. Guar. Ass'n v. McKinstry Co., 56 Wash.App. 545, 549, 784 P.2d 190, review denied, 114 Wash.2d 1017, 791 P.2d 535 (1990). WIGA is deemed to be the insurer to the extent of its obligation on covered claims. To that extent WIGA has all rights, duties, and obligations of the insolvent insurer as if the insurer were not insolvent. RCW 48.32.060(1)(b). The Act limits WIGA's obligation to the amount of each covered claim in excess of $100 and less than $300,000. RCW 48.32.060(1)(a).

The Act contains a provision to prevent the duplication of recovery. RCW 48.32.100(1) states:

Any person having a claim against his insurer under any provision in his insurance policy which is also a covered claim shall be required to exhaust first his right under such policy. Any amount payable on a covered claim under this chapter shall be reduced by the amount of such recovery under the claimant's insurance policy.

This non-duplication provision of the Act was adopted to prevent a party from collecting under another policy (i.e., uninsured motorist) and then collecting for the same thing under the Act.

The trial court concluded this section of the Act did not entitle WIGA to offset Mullins' LEOFF benefits because the provision is limited by its terms to insurance policies available for the payment of a claim. 1 We agree with the trial court. When a statute is clear and unambiguous, the meaning of the statute must be derived solely from the language of the Act. In re Eaton, 110 Wash.2d 892, 898, 757 P.2d 961 (1988), citing Everett Concrete Prods., Inc. v. Department of Labor & Indus., 109 Wash.2d 819, 822, 748 P.2d 1112 (1988), and other cases. The non-duplication provision of the Act is plainly limited to those funds available under another insurance policy. RCW 48.32.100(1). LEOFF benefits are paid under state law, not under an insurance policy. Britton v. Safeco Ins. Co., 104 Wash.2d 518, 532, 707 P.2d 125(1985).

Moreover, the express mention of one thing in a statute implies exclusion of another.

[W]here a statute designates ... things whereupon the statute operates, the inference arises that the Legislature intended to omit other things not listed; "specific inclusions exclude implication." Sulkosky v. Brisebois, 49 Wn.App. 273, 277, 742 P.2d 193 (1987) (quoting Washington Natural Gas Co. v. PUD 1, 77 Wn.2d 94, 98, 459 P.2d 633 (1969))[.]

In re Eaton, 110 Wash.2d at 898, 757 P.2d 961; Kreidler v. Eikenberry, 111 Wash.2d 828, 835, 766 P.2d 438 (1989). Thus, the Act's express allowance of a set off for benefits available under another insurance policy precludes the inference that the Legislature intended WIGA to offset other types of benefits.

In an attempt to counter this result, WIGA cites Prutzman v. Armstrong, 90 Wash.2d 118, 122, 579 P.2d 359 (1978), which states that the non-duplication or exhaustion provision(s) "is apparently designed to limit WIGA liability to situations in which no other source of recovery for damages exists." However, when read in context, the statement in Prutzman is not persuasive here. In the Prutzman case the claimant failed to exhaust all of the funds available to her under her own uninsured motorist policy. Therefore, she fell squarely within the terms of RCW 48.32.100(1) as having other policy sources available. The court did not suggest that other set offs could be implied. See also Bethea v. Forbes, 519 Pa. 422, 548 A.2d 1215 (1988), 2 and Hetzel v. Clarkin, 244 Kan. 698, 772 P.2d 800 (1989). 3 WIGA's reading of Prutzman has been criticized in Washington Ins. Guar. Ass'n v. McKinstry, 56 Wash.App. at 550, 784 P.2d 190. There, the court held that "the statute provides for a reduction of WIGA's statutory obligation only where a claimant has another source of recovery for the claim against the insolvent insurer, not where a claimant has any other source of recovery." We agree with the McKinstry court. 4

WIGA also contends that because Mullins' injuries will be compensated by LEOFF benefits, his claim is not "unpaid" and is not a "covered claim" under RCW 48.32.030(4). WIGA contends it has no obligation to pay Mullins' claim to the extent he has been paid by the LEOFF system. The Federal District Court for the Eastern District of Pennsylvania adopted similar reasoning in part in Besack v. Rouselle Corp., 706 F.Supp. 385, 386 (E.D.Pa.1989). There the court held that a claimant who was paid benefits by a private worker's compensation insurer did not have a covered claim under Pennsylvania's insurance guaranty system because the claim was not "unpaid". It is apparent in Besack that the claimant received benefits under a private insurance policy. Additionally, the worker's compensation insurer had a subrogation right for the amount it paid. The insurance guaranty act in Pennsylvania, like Washington, excludes from the definition of "covered claim" any amount due the insurer as a subrogation recovery. Besack, 706 F.Supp. at 386, see RCW 48.32.030(4).

We do not find Besack's reasoning persuasive in this case. The definition of "covered claim" contained in the Washington Act makes it clear that a covered claim is one which arises under an insurance policy and has not been paid by the insurance company due to its insolvency....

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