Watts v. Michigan Dept. of State, Motor Vehicle Acc. Claim Fund

• Decision Date: 24 June 1975
• Docket Number: No. 17,17
• Citation: 394 Mich. 350,231 N.W.2d 43
• Parties: Boisey WATTS and Mary Watts, Plaintiffs-Appellants, v. MICHIGAN DEPARTMENT OF STATE, MOTOR VEHICLE ACCIDENT CLAIMS FUND, Defendant-Appellee.
• Court: Michigan Supreme Court

Page 43

231 N.W.2d 43

394 Mich. 350

Boisey WATTS and Mary Watts, Plaintiffs-Appellants, v. MICHIGAN DEPARTMENT OF STATE, MOTOR VEHICLE ACCIDENT CLAIMS FUND, Defendant-Appellee.

No. 17.

Supreme Court of Michigan.

June 24, 1975.

Sommers, Schwartz, Silver, Schwartz., Tyler & Gordon, P.C., Jeffery N. Shillman, Southfield, for plaintiffs-appellants.

Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., Joseph B. Bilitzke, Carl K. Carlsen, Asst. Attys. Gen., Mich. Dept. of State, MVACF-Legal Secondary Complex, Lansing, for defendant-appellee.

Before the Entire Bench except SWAINSON and LINDEMER, JJ.

LEVIN, Justice.

Boisey and Mary Watts sustained personal injuries in an automobile accident with an uninsured motorist. Their insurance policy provided $10,000 uninsured motorist coverage for each person.

The Watts instituted arbitration proceedings pursuant to the policy. A settlement was reached, the arbitration proceedings were discontinued, and the Watts' insurance company paid the settlement amounts of $5,000 to Boisey Watts and $7,500 to Mary Watts.

Subsequently, the Watts obtained a judgment of $15,000 for Boisey Watts and $16,000 for Mary Watts in an action against the uninsured motorist. The Motor Vehicle Accident Claims Fund paid them the excess of each of those amounts over the $10,000 per person policy limit.

The Court of Claims held that the Watts were also entitled to payment from the Fund of the excess of the $10,000 policy limit over the amounts of the settlements with their insurer, an additional $5,000 to Boisey Watts and $2,500 to Mary Watts.

The Court of Appeals, 50 Mich.App. 147, 212 N.W.2d 808 (1973), relying on Brunner v. Secretary of State, 48 Mich.App. 535, 210 N.W.2d 786 (1973), reversed and held that the Fund was liable only for the excess of the judgment over the policy limit.

The Motor Vehicle Accident Claims Act provides:

'(2) No payment shall be made out of the fund in respect to a claim or judgment for damages or in respect to a judgment against the secretary, of Any amount paid or payable by an insurer by reason of the existence of a policy of insurance * * *.

'(3) No amount sought to be paid out of the fund shall be sought in lieu of making a claim or receiving A payment that is payable by reason of the existence of a policy of insurance * * *.' (Emphasis supplied) M.C.L.A. § 257.1122; M.S.A. § 9.2822.

The Fund contends that the use of both 'paid' and 'payable' in the statute evidences a legislative intent to distinguish between the money potentially payable under the policy (the amount 'payable') and the money actually paid in settlement with the insurer (the amount 'paid'), and to prohibit payment from the Fund of the difference, if any, between those amounts. When an insured settles with his insurer for less than the policy limit the difference remains 'payable'. Therefore, the Fund is not liable for the amount which, had there been no settlement, the insured Might have recovered under the policy. The Fund finds support for its argument in clause (3) of the statute where the word 'payable' is used again.

The Fund further argues that any other interpretation would (i) allow plaintiffs to '(limit) their recovery against the insurance company in order to claim against the Motor Vehicle Accident Claims Fund'; (ii) be a 'bonanza' for insurance companies; (iii) render the term 'payable' superfluous; and (iv) defeat the purpose of a Pari materia amendment of the Insurance Code, requiring automobile insurance pllicies to include uninsured motorist coverage unless specifically rejected by the insured (M.C.L.A. § 500.3010; M.S.A. § 24.13010), enacted to reduce claims against the Fund.

The Watts counter that there is only one 'amount' referred to in the statute; that amount is either 'payable' or 'paid' depending upon the point in time.

In Green v. Blicharski, 32 Mich.App. 15, 19, 188 N.W.2d 113, 114 (1971), the Court of Appeals rejected the Fund's claim that the excess of the policy limit over the amount awarded by the arbitrator remained 'payable':

'It is immediately apparent that we are called upon to determine the difference between the meaning of the terms 'paid' and 'payable' as used in the statute * * *.

'There is none. The amount 'payable' is the amount 'paid'. This, of course, is by reason of the arbitration clause in the policy. After the arbitration award was made according to the terms of the policy, there was nothing more 'payable'.'

The Fund seeks to distinguish Green on the ground that the plaintiffs in that case pursued their claim through award. In such a case, says the Fund, it has less cause for concern that an insured, with the thought of obtaining additional amounts from the Fund up to the limits of its liability, may exert less than full efforts against the insurer.

The Fund raises the spectre of collusive low settlements agreed to by insured persons and their insurers.

In Brunner v. Secretary of State, supra, the settlement was not small. Plaintiff settled with his insurer for $8,500 under a policy providing $10,000 uninsured motorist coverage; he then obtained a judgment for.$19,000 against the uninsured motorist.

In this case the settlements were not small and there is no reason to believe they were not made in good faith Had the Watts not settled, the Fund's liability might have been greater. If a person injured by an uninsured motorist obtains a greater amount in settlement than the arbitrator would award, settlement works to the advantage of the Fund.

In Steele v. Wilson, 29 Mich.App. 388, 395, 185 N.W.2d 417 (1971), the plaintiffs negotiated settlements with several potential third-party defendants, then commenced an action against the uninsured motorist and sought recovery from the Fund. The Court of Appeals held that the actions against the uninsured motorist and the Fund were not barred by the negotiated settlements:

'Public and judicial policies favor settlement. By and large, settlement represents a tactical evaluation of the situation by both parties. * * * For both parties, settlement eliminates the doubt and the possible harshness concomitant with an unfavorable verdict.'

Steele rejected the Fund's contention that it 'should be the sole arbiter of whether or not settlement should be allowed. If we were to adopt (this) contention it would preempt both the plaintiffs' and the court's right to see to it that litigation is terminated amicably, speedily, and with minimum use of the expensive litigatory machinery.'

Public policy favor...