American Family Insurance Co. v. Barnett

Opinion by

Judge PIERCE.

Defendants, Gail F. and Gary Barnett, seek review of a declaratory judgment which held that the limit of payable benefits clause in their automobile insurance policy was valid and was properly applied to deduct, as collateral source payments, the payments they received from Social Security disability insurance. We affirm.

Defendants first argue that the collateral source limitation contained in § 13-21-111.6, C.R.S. (1987 Repl.Yol. 6A) is unconstitutional in that it applies retroactively to reduce existing substantive rights, impairs contractual rights in violation of the contracts clause, and operates to deny equal protection of the law. In any event, they contend that the statute is inapplicable to Social Security disability benefits.

We conclude that the setoff is proper under the insurance policy itself. There is, therefore, no need to review the constitutional questions regarding the application of the statute to these facts.

The policy here defines “bodily injury” as “bodily injury to or sickness, disease or death of any person.” It then cautions the insured that any amount due pursuant to payable coverage “will be reduced by any payment made to [the injured person] under the Uninsured Motorist coverage of this policy.”

The limits of liability clause for uninsured and underinsured motorists coverage states, in pertinent part, that covered losses caused by an underinsured motorist is excess over any collectible auto liability insurance payments, but that any amounts payable will be reduced by a “payment made or amount payable because of bodily injury under any worker’s compensation or disability benefits law or any similar law.”

Defendants argue that this language is ambiguous since the limitations clause does not specifically reserve a setoff of Social Security disability benefits. Also, they argue that the language “because of bodily injury” necessarily excludes such benefits since they are intended to compensate for lost earnings rather than pain and suffering. Finally, defendants contend that the policy cannot, consistent with public policy, be applied to allow Social Security disability benefits as a valid offset.

I.

The determination as to whether a contract provision is ambiguous is a question of law for the court to decide. McLaughlin v. Allen, 689 P.2d 1169 (Colo.App.1984). The provision at issue here is preceded by the language of limitation which reasonably contemplates a setoff of Social Security disability benefits. It is, therefore, not reasonably susceptible to more than one meaning and will be enforced as written. See Northern Insurance Co. v. Ekstrom, 784 P.2d 320 (Colo.1989); see also Britton v. Safeco Insurance Co., 104 Wash.2d 518, 707 P.2d 125 (1985) (holding identical setoff clause to be clear and unambiguous regarding this issue).

II.

This clause, as applied to offset benefits received from social security disability insurance, is not unconscionable or in violation of public policy.

For a court to determine whether a setoff for benefits under federal or state law is allowable, it is necessary to inquire whether the governmental benefit serves the same purpose as the insurance coverage and whether the governmental benefit is payable as a result of the same accident. Perkins v. Riverside Insurance Co., 141 Mich.App. 379, 367 N.W.2d 336 (1985).

Here, the benefits under defendants’ uninsured motorists coverage and under Social Security disability insurance are payable because of defendants’ accident. Both benefits serve the same purpose. Social Security disability benefits compensate an insured for income lost from bodily injury. Perkins v. Riverside Insurance Co., supra. On the other hand, uninsured motorist coverage assures the availability of insurance protection for any loss, including lost wages, caused by financially irresponsible motorists. Kral v. American Hardware Mutual Insurance Co., 784 P.2d 759 (Colo.1989); Newton v. Nationwide Mutual Fire Insurance Co., 197 Colo. 462, 594 P.2d 1042 (1979). In both cases, the intended protection is against financial loss, and thus, the criteria for permitting a setoff are present here.

A limitations clause in an insurance policy such as this would be considered unconscionable if, unlike here, the result is a reduction of uninsured or underinsured motorist coverage in contravention of the established statutory mínimums. See Nationwide Mutual Insurance Co. v. Hillyer, 32 Colo.App. 163, 509 P.2d 810 (1973). The statutory minimum here is $25,000 for one person, see § 42-7-103, C.R.S. (1984 RephVol.), and the offset of benefits will not lower defendants’ recovery anywhere near this minimum.

The situation here is, likewise, distinguishable from Newton v. Nationwide Mutual Fire Insurance Co., supra. At issue in Newton was the validity of a policy provision which allowed the insurer to subtract from amounts payable under uninsured motorists coverage any amounts owing from PIP claims and required under the No-Fault Act. Such provision was declared void as against public policy because it allowed an insurer to provide less than the statutorily required minimum coverage of uninsured motorists coverage.

Here, by contrast, the trial court found that defendant recovered from her insurer the applicable uninsured motorist limits which were double the minimum required by statute, in addition to no-fault and Social Security disability benefits. This is consistent with the legislative intent to assure the availability of insurance protection against financial loss, and to “permit insureds to protect themselves against [such] loss, up to policy limits, resulting from the negligent conduct of financially irresponsible motorists.” Kral v. American Hardware Mutual Insurance Co., supra; see also Alliance Mutual Casualty Co. v. Duerson, 184 Colo. 117, 518 P.2d 1177 (1974).

Judgment affirmed.

CRISWELL, J., concurs. DUBOFSKY, J., dissents.