Truck Insurance Exchange v. Rutherford , 837 Utah Adv. Rep. 13 ( 2017 )

This opinion is subject to revision before final
publication in the Pacific Reporter
2017 UT 25IN THE
SUPREME COURT OF THE STATE OF UTAH
TRUCK INSURANCE EXCHANGE,
Appellant,
v.
DANNY L. RUTHERFORD,
Appellee.
No. 20150858
Filed April 27, 2017
On Direct Appeal
Third District, Salt Lake
The Honorable Laura Scott
No. 150901805
Attorneys:
Jaryl L. Rencher, Benjamin K. Lusty, Salt Lake City, for appellant
Mark D. Dean, Brett N. Anderson, Kristy L. Bertelsen,
Salt Lake City, for appellee
JUSTICE HIMONAS authored the opinion of the Court, in which
CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE LEE,
JUSTICE DURHAM, and JUSTICE PEARCE joined.
JUSTICE HIMONAS, opinion of the Court:
INTRODUCTION
¶ 1 Danny Rutherford suffered extensive injuries when the
work van he was driving was hit by a vehicle that had run a red
light. Mr. Rutherford sought compensation from both his
employer‘s workers‘ compensation insurer and Truck Insurance
Exchange (TIE), which provides Mr. Rutherford‘s employer with
underinsured motorist coverage. Mr. Rutherford seeks double
recovery, arguing that Utah Code section 31A-22-305.3(4)(c)(iii)—
TRUCK INSURANCE v. RUTHERFORD
Opinion of the Court
which states that underinsured motorist coverage ―may not be
reduced by benefits provided by workers‘ compensation
insurance‖—means that underinsured motorist insurance must
compensate Mr. Rutherford in full, up to the limits of the policy,
irrespective of whether workers‘ compensation insurance has
already covered a portion of the claim. In response, TIE argues
that under section 305.3(4)(c)(i) of the same statute—which states
that underinsured motorist coverage ―is secondary to the benefits
provided by‖ workers‘ compensation—it should not have to pay
benefits that workers‘ compensation has or should have covered.
We hold that TIE‘s status as a secondary insurer means that it
must fully compensate Mr. Rutherford within its policy limits, but
only for damages in excess of what workers‘ compensation paid,
so as to avoid an inappropriate double recovery. We therefore
reverse the district court‘s contrary grant of summary judgment.
BACKGROUND
¶ 2 Mr. Rutherford was driving a company van in the course
of his employment when he was struck by an underinsured
driver, leaving him with significant injuries. In the wake of his
accident, Mr. Rutherford filed several claims for insurance
compensation.
¶ 3 The first claim, to Mid Century Insurance, was for
workers‘ compensation benefits for medical expenses, lost income,
and permanent disability. Although Mr. Rutherford‘s medical
expenses exceed $250,000, Mid Century Insurance has paid only
$183,628.81 for medical expenses. It has also paid benefits for lost
wages and permanent disability. Mr. Rutherford also recovered
$50,000 from the other driver‘s insurance, although Mid Century
Insurance subsequently recovered about $28,000 of that total in a
subrogation action. Finally, because Mr. Rutherford was acting in
the scope of his employment when the crash occurred, he also
filed a claim with TIE, which insures Mr. Rutherford‘s employer.
Mr. Rutherford sought to recover full benefits under TIE‘s
underinsured motorist (UIM) policy for medical expenses, lost
income, lost vocational capacity, future medical expenses, pre-
and post-judgment interest, and general damages.
¶ 4 Both Mr. Rutherford and TIE filed motions for summary
judgment. TIE sought a declaration that it was not liable to pay
Mr. Rutherford medical expenses, lost income, or permanent or
2
Cite as: 2017 UT 25Opinion of the Court
temporary disability benefits, which it argued Mid Century
Insurance should pay or has already paid. Mr. Rutherford argued
that Utah Code section 31A-22-305.3(4)(c) and the collateral source
rule prohibited TIE from deducting workers‘ compensation
benefits when determining its liability to Mr. Rutherford. The
district court granted summary judgment for Mr. Rutherford,
holding that Mr. Rutherford‘s interpretation ―is more consistent
with the underlying purpose‖ of Utah‘s insurance statutes. The
district court also relied on our prior holdings in Thamert v.
Continental Casualty Co., 621 P.2d 702 (Utah 1980), and Lieber v. ITT
Hartford Insurance Center, Inc., 2000 UT 90, 15 P.3d 1030, in which
we stated that a UIM insurer ―should not be permitted to offset
payments received by the plaintiff as workmen‘s compensation.‖
Thamert, 621 P.2d at 704; see also Lieber, 2000 UT 90, ¶ 24. TIE
timely appealed. We have jurisdiction over this matter under
Utah Code section 78A-3-102(3)(j).
STANDARD OF REVIEW
¶ 5 Summary judgment is appropriate when ―there is no
genuine dispute as to any material fact and the moving party is
entitled to judgment as a matter of law.‖ UTAH R. CIV. P. 56(a). We
review the district court‘s grant or denial of summary judgment
for correctness, drawing all reasonable inferences from the facts in
the light most favorable to the nonmoving party. Massey v.
Griffiths, 2007 UT 10, ¶ 8, 152 P.3d 312.
ANALYSIS
¶ 6 At issue in this case are two provisions of Utah‘s
underinsured motorist coverage statute: Utah Code section
31A-22-305.3(4)(c)(i), which says that underinsured motorist
coverage ―is secondary to the benefits provided by‖ workers‘
compensation, and section 305.3(4)(c)(iii), which provides that
underinsured motorist coverage ―may not be reduced by benefits
provided by workers‘ compensation insurance.‖ TIE argues that
the use of ―secondary‖ in section 305.3(4)(c)(i) means it should be
able to offset its potential liability by any payments
Mr. Rutherford has received from his workers‘ compensation
policy. To hold that a UIM insurer could not take into account
what the injured driver has already received, TIE argues, would
read the term ―secondary‖ out of the statute. Mr. Rutherford, on
the other hand, focuses on section 305.3(4)(c)(iii), arguing that the
3
TRUCK INSURANCE v. RUTHERFORD
Opinion of the Court
plain language of the statute prohibits TIE from reducing its UIM
benefits by any workers‘ compensation benefits.
¶ 7 Our primary goal when interpreting statutes is to
―evince the true intent and purpose of the Legislature.‖ Duke v.
Graham, 2007 UT 31, ¶ 16, 158 P.3d 540 (citation omitted). And it is
legal dogma that the best evidence of legislative intent is ―the
plain language of the statute itself.‖ State v. Martinez, 2002 UT 80,
¶ 8, 52 P.3d 1276. But when a statute ―adopts a legal term of art
. . . with a settled meaning in the law, we interpret the statute to
embrace the meaning of the term as it is understood in that
context.‖ Hansen v. Hansen, 2012 UT 9, ¶ 19, 270 P.3d 531.
Applying these principles, we conclude that the statute provides
that the UIM insurer must pay benefits until the insured is fully
compensated, but that it does not need to duplicate the workers‘
compensation benefits where doing so would provide the insured
with double recovery.
¶ 8 We begin our analysis with the meaning of ―secondary‖
in section 305.3(4)(c)(i). We first note that, like ―primary
coverage,‖ ―secondary coverage‖ is a well-established term of art
in the insurance context. See Li v. Enter. Rent-A-Car Co. of Utah,
2006 UT 80, ¶ 21, 150 P.3d 471 (noting term-of-art meaning of
―primary coverage‖ and distinguishing it from ―secondary
coverage‖). ―Secondary coverage‖ is synonymous with ―excess
coverage,‖ id., which is ―[a]n agreement to indemnify against any
loss that exceeds the amount of coverage under another policy.‖
Excess coverage, BLACK‘S LAW DICTIONARY (7th ed. 1999). We
applied this term-of-art meaning of secondary coverage in Lopez v.
United Automobile Insurance Co., in which an injured driver
attempted to recover underinsured motorist coverage benefits.
2012 UT 10, 274 P.3d 897. We held that because the UIM statute
provided that UIM coverage was ―secondary to the liability
coverage of an owner or operator of an underinsured motor
vehicle,‖ the driver was ―entitled to be compensated by [the UIM
insurer] only for damages in excess of those for which she was
compensated by the other motorist‘s insurer.‖ Id. ¶ 31 & n.41. It is
clear, then, that the term ―secondary‖ in section 305.3(4)(c)(i)
means that UIM coverage applies only after the workers‘
compensation benefits have been exhausted. For example, if the
workers‘ compensation insurer and the UIM insurer both provide
coverage up to $100,000 and the insured‘s damages are $150,000,
4
Cite as: 2017 UT 25Opinion of the Court
the insured would exhaust workers‘ compensation benefits to the
tune of $100,000 and then receive $50,000 from the UIM insurer.
¶ 9 But TIE‘s status as a secondary insurer does not mean
that it can reduce its coverage by the benefits provided by
workers‘ compensation insurance in violation of Utah Code
section 31A-22-305.3(4)(c)(iii). In keeping with the meaning of
―coverage‖ as the ―amount available to meet liabilities,‖
WEBSTER‘S NEW COLLEGIATE DICTIONARY (8th ed. 1973), TIE cannot
lower its policy limits in response to the benefits that workers‘
compensation pays. See State Farm Mut. Auto. Ins. Co. v. Schatken,
737 S.E.2d 229, 235–37 (W. Va. 2012) (interpreting similar statutory
language to hold that ―coverage‖ was not reduced where insured
could recover up to the UIM policy limits but was prevented from
getting double recovery). Take, for example, a situation where the
UIM insurer offers coverage up to $100,000 and workers‘
compensation offers coverage up to $50,000. If the insured has
damages of $125,000, workers‘ compensation will first pay
$50,000. The UIM insurer may not then argue that the workers‘
compensation benefits reduce its coverage—that is, they do not
reduce the $100,000 UIM policy to $50,000. But the workers‘
compensation benefits do reduce the benefits that the UIM insurer
must pay—after deducting the workers‘ compensation award of
$50,000, the UIM insurer must pay only the remaining $75,000 of
the insured‘s damages. And TIE must still ensure that
Mr. Rutherford is fully compensated even within categories
where TIE‘s coverage overlaps with workers‘ compensation. As
TIE agreed during oral argument, because workers‘ compensation
covers only 66⅔ percent of the employee‘s average weekly wages
at the time of the injury, see UTAH CODE § 34A-2-412, TIE is
obligated to pay the remaining 33⅓ percent to ensure that 100
percent of Mr. Rutherford‘s damages are covered. This setup
ensures complete recovery for the insured while avoiding double
recovery.
¶ 10 Our prior cases addressing recovery from workers‘
compensation and UIM insurers do not, as Mr. Rutherford claims,
contradict this conclusion. In both Lieber v. ITT Hartford Insurance
Center, Inc., 2000 UT 90, 15 P.3d 1030, and Thamert v. Continental
Casualty Co., 621 P.2d 702 (Utah 1980), we simply held that a
driver could recover at least some damages under both UIM and
workers‘ compensation coverage. In Thamert, we rejected the UIM
5
TRUCK INSURANCE v. RUTHERFORD
Opinion of the Court
insurer‘s argument that the exclusive remedy clause of the
Workers‘ Compensation Act barred the injured driver from
seeking UIM benefits at all. 621 P.2d at 703–04. Similarly, in Lieber,
we held that the district court erred when it interpreted Utah‘s
uninsured motorist coverage statute ―to preclude recovery of both
workers‘ compensation and uninsured motorist benefits in every
case.‖ 2000 UT 90, ¶ 11.1
¶ 11 But whether an injured driver can recover both workers‘
compensation and UIM benefits is not at issue in this case, as even
TIE does not dispute that ―under the present statute, an injured
driver can recover workers‘ compensation benefits and also at
least some UIM benefits.‖ The dispute in this case is not whether
Mr. Rutherford can recover at all from TIE, but whether he can
recover in excess of 100 percent of his damages by recovering
under TIE‘s policy for the same benefits he received from
workers‘ compensation. We hold that he cannot. After
Mr. Rutherford‘s workers‘ compensation benefits are exhausted,
TIE must pay the remainder of his damages up to its policy limits
or until Mr. Rutherford is fully compensated.
¶ 12 Our conclusion is bolstered by the fact that double
recovery is generally disfavored in insurance law. See Ohio Cas.
Ins. Co. v. Brundage, 674 P.2d 101, 102 (Utah 1983) (stating that
driver ―should not have received a double recovery‖ after already
receiving special damages from insurance payment); Christensen v.
Farmers Ins. Exch., 669 P.2d 1236, 1239 (Utah 1983) (stating that
―this Court will not sanction‖ an injured driver‘s attempt to obtain
double recovery); see also Cincinnati Ins. Co. v. Samples, 192 S.W.3d
311, 316 (Ky. 2006) (―The purpose of UIM coverage is to place the
insured in the same position he would have occupied had the
tortfeasor been fully insured, not in a better position. [The
insured] could not recover damages duplicating his workers‘
compensation benefits against [the negligent driver]; thus, he
cannot recover those same damages against [the UIM insurer].‖
(citation omitted)); Gross v. Gen. Cas. Ins. Co., 438 N.W.2d 378, 380
(Minn. Ct. App. 1989) (―A basic premise of insurance law is that a
double recovery is generally to be avoided.‖).
1Neither case addressed the full amount of the insured‘s
damages, so double recovery was not at issue.
6
Cite as: 2017 UT 25Opinion of the Court
¶ 13 Mr. Rutherford makes two arguments why he should be
allowed double recovery notwithstanding the language of the
UIM statute and the policy of this state disfavoring double
recovery in the insurance context. First, he argues that he is
entitled to double recovery under the collateral source rule, a
common law doctrine that ―provides that a wrongdoer is not
entitled to have damages, for which he is liable, reduced by proof
that the plaintiff has received or will receive compensation or
indemnity for the loss from an independent collateral source.‖
DuBois v. Nye, 584 P.2d 823, 825 (Utah 1978). However, this rule is
not applicable where, as here, the beneficiary of the insurance
proceeds is the victim‘s employer‘s insurer and not the
wrongdoer (or the wrongdoer‘s insurer). The public policy
concerns against allowing a tortfeasor to benefit from an insurer‘s
payments simply do not apply in this situation. See Gibbs
M. Smith, Inc. v. U.S. Fid. & Guar. Co., 949 P.2d 337, 345 (Utah
1997) (stating that collateral source rule is not applicable where
party who stands to benefit from payment is not the wrongdoer).
In any event, section 305.3(4)(c)(i)‘s language about secondary
coverage represents the legislature‘s displacement of the
common-law collateral source rule with a statute that expressly
forbids an employee who has recovered benefits from workers‘
compensation from recovering the same exact benefits from UIM
insurance. See Wilson v. IHC Hosps., Inc., 2012 UT 43, ¶¶ 31–32, 289
P.3d 369 (discussing how legislature ―altered the common law‖ of
the collateral source rule by statutorily modifying it for medical
malpractice cases).
¶ 14 Mr. Rutherford‘s second argument as to why he is
entitled to double recovery is rooted in Utah Code section 31A-1-
201(1), which provides that the insurance code ―shall be liberally
construed to achieve the purposes stated in Section 31A-1-102.‖
Mr. Rutherford interprets this provision to require that
ambiguities in insurance statutes should be resolved in favor of
maximizing the insured‘s recovery. There are several problems
with this argument. To begin with, statements of purpose are of
limited value when interpreting a statute, as they ―may be used to
clarify ambiguities‖ but ―are not a substantive part of the statute.‖
Price Dev. Co. v. Orem, 2000 UT 26, ¶ 23, 995 P.2d 1237.
Additionally, we have walked back some of the ―hyperbole‖ from
our previous opinions regarding the canon of liberal construction,
7
TRUCK INSURANCE v. RUTHERFORD
Opinion of the Court
clarifying that it is ―simply a tie-breaker‖ to be used in ―the rare
case where [the judicial] process yields genuine doubt—in a dead
heat without an apparent winner.‖ Lane Myers Constr., LLC v. Nat’l
City Bank, 2014 UT 58, ¶¶ 26–27, 342 P.3d 749 (alteration in
original) (citation omitted). Where we can resolve any doubt
about the insurance code‘s meaning ―under the language and
structure of the statute,‖ as we do today, ―we find no need for a
tie-breaker, and thus no relevance for the principle of liberal
construction of the Act.‖ Id. ¶ 27.
¶ 15 Aside from the fact that the statutory language is clear
without resorting to a statement of purpose, we note that of the
eleven purposes listed in section 102, none involves encouraging
compensation in close cases.2 Mr. Rutherford does not attempt to
connect his ―tie goes to the insured‖ argument to any purpose
listed in the statute, and ―[t]o the extent [the insured] is
advocating policies beyond those embraced in the statutory
scheme, he should take them to the legislature or the insurance
The purposes of the Insurance Code are to:
2
(1) ensure the solidity of insurers doing business in
Utah; (2) ensure that policyholders, claimants, and
insurers are treated fairly and equitably; (3) ensure that
Utah has an adequate and healthy insurance market,
characterized by competitive conditions, the spirit of
innovation, and the exercise of initiative; (4) provide for
an insurance department that is expert in the field of
insurance and able to enforce the Insurance Code
effectively; (5) encourage cooperation between the
Insurance Department and other Utah regulatory
bodies, as well as other federal and state governmental
entities; (6) preserve and improve state regulation of
insurance; (7) maintain freedom of contract and
enterprise; (8) encourage self regulation of the
insurance industry; (9) encourage loss prevention as
part of the insurance industry; (10) keep the public
informed on insurance matters; and (11) achieve other
purposes stated elsewhere in the Insurance Code.
UTAH CODE § 31A-1-102.
8
Cite as: 2017 UT 25Opinion of the Court
commissioner, not to this court.‖ McArthur v. State Farm Mut.
Auto. Ins. Co., 2012 UT 22, ¶ 19, 274 P.3d 981.
¶ 16 Even if an ambiguous statute did lay out a purpose
encouraging double recovery in such cases, it would have to be
balanced against the other enumerated purposes, some of which
weigh in favor of the insurance company. See id. ¶ 14 (―[T]he UIM
provisions of the Code, like most all others, represent an attempt
by the legislature to balance competing policy considerations, not
to ‗advanc[e] a single objective at the expense of all others.‘‖
(second alteration in original) (citation omitted)); id. ¶ 23 (noting
countervailing purposes listed in the UIM statute); supra ¶ 15 n.2.
¶ 17 Because the text and structure of the UIM statute are
unambiguous in preventing double recovery, we do not look to
the ―liberally construed‖ provision of the insurance code. In
harmonizing sections 305.3(4)(c)(i) and (4)(c)(iii), we hold that the
district court erred in granting summary judgment to
Mr. Rutherford because, as a matter of law, TIE is not obligated to
pay benefits that duplicate Mr. Rutherford‘s workers‘
compensation benefits.
CONCLUSION
¶ 18 We hold that, under Utah Code section 31A-22-305.3, a
UIM insurer must pay damages in excess of the primary insurer‘s
coverage and it may not reduce its policy limits by the benefits
paid by workers‘ compensation. But in order to avoid an insured‘s
double recovery, a UIM insurer need not duplicate benefits
already paid by workers‘ compensation. In light of our holding,
we reverse the grant of summary judgment to Mr. Rutherford and
remand this matter to the district court for proceedings consistent
with our opinion.
9