Haman v. MacO Insurance Co.

JUSTICE REGNIER

delivered the Opinion of the Court.

¶1 Following a jury award in favor of Respondent Robert Haman, Appellant Montana Association of Counties Joint Powers Insurance Authority (MACo) filed a motion for a reduction of judgment in the Eighth Judicial District Court, Cascade County. The District Court denied MACo’s motion, and MACo appeals. We affirm.

¶2 We restate the sole issue on appeal as follows:

¶3 Did the District Court err when it determined that MACo was not entitled to a collateral source reduction of the jury’s award?

BACKGROUND

¶4 Robert Haman, a Cascade County Deputy Sheriff, was injured in the course and scope of his employment on July 23, 1998. Haman’s injury occurred when his vehicle was struck by a vehicle driven by Kevin Kofod. At the time of the accident, Kofod was insured by State Farm Mutual Insurance Company. The vehicle operated by Haman was owned by Cascade County and insured by MACo. Haman was personally insured by Great Northwest Insurance Company, Inc. (Great Northwest).

¶5 On May 30,2001, Haman filed a complaint against Kofod, alleging that Kofod’s negligence was the cause of his injuries. Haman’s complaint also named MACo and Great Northwest as defendants, in their capacity as underinsured motorist carriers. Haman subsequently settled his claims against Kofod and Great Northwest on January 31, 2002, and April 19,2002, respectively. The case proceeded to jury trial on June 10, 2002. On June 12, 2002, the jury awarded Haman damages in the amount of $173,000. The jury’s award was then reduced by $130,000, to reflect the settlements Haman reached with Kofod and Great Northwest, leaving a remaining judgment of $43,000 against MACo.

¶6 Following the accident, Haman also received medical benefits from Montana Association of Counties Joint Powers Insurance Authority Workers’ Compensation Trust (Workers’ Compensation Trust) in the amount of $31,054.70. MACo and Workers’ Compensation Trust are separate and distinct insurance pools. As a result of Haman’s receipt of benefits from Workers’ Compensation Trust, MACo filed a motion requesting that the jury’s award be reduced, pursuant to the collateral source reduction statute, on June 28, 2002. The District Court denied MACo’s motion on September 19, 2002. MACo appealed on October 22, 2002.

STANDARD OF REVIEW

¶7 We review a district court’s conclusions of law to determine whether the court’s interpretation of the law is correct. Brumit v. Lewis, 2002 MT 346, ¶ 12, 313 Mont. 332, ¶ 12, 61 P.3d 138, ¶ 12.

DISCUSSION

¶8 Did the District Court err when it determined that MACo was not entitled to a collateral source reduction of the jury’s award?

¶9 Section 27-1-308, MCA (1997), addresses collateral source reductions in actions arising from bodily injury or death. Section 27-1-308(1), MCA (1997), provides:

In an action arising from bodily injury or death when the total award against all defendants is in excess of $50,000 and the plaintiff will be fully compensated for his damages, exclusive of court costs and attorney fees, a plaintiff’s recovery must be reduced by any amount paid or payable from a collateral source that does not have a subrogation right. [Emphasis added.]

MACo alleges that although Workers’ Compensation Trust is a collateral source that paid medical benefits to Ha man, Workers’ Compensation Trust does not have a subrogation right regarding such payments. Therefore, MACo asserts that it is entitled to a collateral source reduction of the jury’s award, pursuant to § 27-1-308(1), MCA (1997).

¶10 The right of subrogation is addressed in § 39-71-414(1), MCA (1997), of the Workers’ Compensation Act. Section 39-71-414(1), MCA (1997), provides, in pertinent part:

If an action is prosecuted as provided for in 39-71-412 or 39-71-413 and except as otherwise provided in this section, the insurer is entitled to subrogation for all compensation and benefits paid or to be paid under the Workers’ Compensation Act.

Thus, pursuant to § 39-71-414(1), MCA(1997), Workers’ Compensation Trust has a right of subrogation if Haman’s action was brought under §§ 39-71-412 or 413, MCA (1997).

¶11 The parties concede that § 39-71-413, MCA (1997), is inapplicable to the case at bar. Therefore, if Haman’s complaint was not brought pursuant to § 39-71-412, MCA (1997), then Workers’ Compensation Trust does not have a right of subrogation under § 39-71-414(1), MCA (1997).

¶12 Section 39-71-412, MCA (1997), provides:

The right to compensation and medical benefits as provided by this chapter is not affected by the fact that the injury, occupational disease, or death is caused by the negligence of a third party other than the employer or the servants or employees of the employer. Whenever such event occurs to an employee while performing the duties of his employment and such event is caused by the act or omission of some persons or corporations other than his employer or the servants or employees of his employer, the employee ... shall, in addition to the right to receive compensation under this chapter, have a right to prosecute any cause of action he may have for damages against such persons or corporations.

¶13 Section 39-71-412, MCA (1997), authorizes an employee to pi’osecute an action against a third party, other than his or her employer or fellow employee, whose negligence was the cause of his or her injury. See also State Compensation Ins. Fund v. McMillan, 2001 MT 168, ¶ 7, 306 Mont. 155, ¶ 7, 31 P.3d 347, ¶ 7. In the instant case, Haman filed a complaint against Kofod, in which he asserted that Kofod’s negligence was the cause of his injuries. Such an action is clearly the type of action contemplated in § 39-71-412, MCA (1997). However, Haman’s complaint also named MACo (Cascade County’s underinsured motorist carrier) and Great Northwest (his personal underinsured motorist carrier) as defendants. This Court has previously concluded that underinsured motorist coverage is first-party coverage which is a carrier’s direct promise to its insured to pay the insured for a loss. Dill v. Thirteenth Judicial Dist. Court, 1999 MT 85, ¶ 19, 294 Mont. 134, ¶ 19, 979 P.2d 188, ¶ 19. Accordingly, MACo contends that Haman’s action against MACo is not a third-party action within the scope of § 39-71-412, MCA (1997).

¶14 While MACo correctly points out that underinsured motorist coverage is first-party coverage as between the insured and the insurer, this distinction is not dispositive of the instant issue. That is, when an underinsured motorist carrier accepts a premium from its insured for underinsured motorist coverage, it contractually establishes its own liability for the tort of another. Dill, ¶ 19. Here, Cascade County provided underinsured motorist coverage to its employees through MACo. Great Northwest provided underinsured motorist coverage to Haman. Therefore, by accepting premiums from Cascade County and Haman for underinsured motorist coverage, MACo and Great Northwest contractually established their own liability for the torts of another.

¶15 Haman filed his complaint against Kofod as the tort-feasor, and against MACo and Great Northwest as underinsured motorist carriers. While Kofod’s negligence was the direct cause of Haman’s injuries, MACo and Great Northwest were also liable for such injuries, because of their roles as underinsured motorist carriers. That is, MACo and Great Northwest “stood in the shoes” of Kofod, for the purpose of fulfilling their contractual obligations as underinsured motorist carriers. Consequently, Haman’s action, brought against a third party tort-feasor, and those “standing in the shoes” of the tort-feasor, was brought pursuant to § 39-71-412, MCA (1997).

¶16 In light of our above holding that Haman’s action was brought pursuant to § 39-71-412, MCA (1997), Workers’ Compensation Trust has a right of subrogation under § 39-71-414(1), MCA (1997). This holding is consistent with Schuff v. A. T. Klemens & Son, 2000 MT 357, ¶ 109, 303 Mont. 274, ¶ 109, 16 P.3d 1002, ¶ 109, in which we stated that: “Under § 39-71-414, MCA, a workers’ compensation insurer ‘is entitled to subrogation for all compensation and benefits paid or to be paid under the Workers’ Compensation Act.’ ” Further, because Workers’ Compensation Trust has a right of subrogation under § 39-71-414(1), MCA (1997), the benefits it paid to Haman cannot be deducted as a collateral source under § 27-1-308(1), MCA (1997). See also Schuff, ¶ 109. Accordingly, the District Court did not err when it determined that MACo was not entitled to a collateral source reduction of the jury’s award.

¶17 For the foregoing reasons, the judgment of the District Court is affirmed.

CHIEF JUSTICE GRAY, JUSTICES WARNER and COTTER concur.