Howard Justice v. Am. Family Mut. Ins. Co.

4 N.E.3d 1171

Howard JUSTICE, Appellant (Plaintiff below),

v.AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Appellee (Defendant below).

No. 49S02–1303–PL–221.

Supreme Court of Indiana.

March 13, 2014.

Ryan O. Farner, Indianapolis, IN, Attorney for Appellant.

Rick D. Meils, John W. Mervilde, Indianapolis, IN, Attorneys for Appellee.

MASSA, Justice.

This case raises a question of contract interpretation: in an insurance policy, does the phrase “limits of liability of this coverage” refer to the policy limit or to the insured's total damages? We believe it is the former, but because this particular set-off would reduce the policy limit below the statutory minimum, we reverse the trial court.

Facts and Procedural History

Kathleen Wagner, an underinsured motorist, collided with an IndyGo city bus driven by Howard Justice. To compensate him for the damages he sustained as a result of the accident, Justice received $77,469.56 in workers' compensation from IndyGo's insurer, GAB Robbins. That workers' compensation award comprised $51,829.81 paid to Justice's medical providers, $18,939.75 for his lost wages and temporary disability, and $6,700 for his permanent partial impairment. Pursuant to those payments, GAB Robbins asserted a lien in the amount of $77,469.56 against Justice's bodily injury claim. Justice settled this lien for $5,511.06, bringing his net workers' compensation to $71,958.50. Justice also received $25,000 from Wagner's insurer, bringing his total recovery to $96,958.50.

At the time of the accident, Justice carried an underinsured motorist policy issued by American Family Mutual InsuranceCompany that provided coverage up to $50,000 per person and $100,000 per accident. The underinsured motorist endorsement provided:

We will pay compensatory damages for bodily injury which an insured person is legally entitled to recover from the owner or operator of an underinsured motor vehicle. The bodily injury must be sustained by an insured person and must be caused by accident and arise out of the use of the underinsured motor vehicle.

...

EXCLUSIONS

...

Underinsured Motorists Coverage shall not apply to the benefit of any insurer or self-insurer under any workers' compensation or disability benefits law or any similar law.

LIMITS OF LIABILITY

The limits of liability of this coverage as shown in the declarations apply, subject to the following:

1. The limit for each person is the maximum for all damages sustained by all persons as the result of bodily injury to one person in any one accident.

2. Subject to the limit for each person, the limit for each accident is the maximum for bodily injury sustained by two or more persons in any one accident.

We will pay no more than these maximums no matter how many vehicles are described in the declarations, insured persons, claims, claimants or policies or vehicles are involved in the accident.

The limits of liability of this coverage will be reduced by:

1. A payment made or amount payable by or on behalf of any person or organization which may be legally liable, or under any collectible auto liability insurance, for loss caused by an accident with an underinsured motor vehicle.

2. A payment under the Liability coverage of this policy.

3. A payment made or amount payable because of bodily injury under any workers' compensation or disability benefits law or any similar law.

Appellee's App. at 26 (emphasis added).

Justice submitted an underinsured motorist claim to American Family, which denied coverage. Justice subsequently sued American Family for breach of contract, arguing he was entitled, under the terms of the policy, to $25,000—the difference between Justice's underinsured motorist policy limit of $50,000 and the $25,000 he received from Wagner's insurer. American Family moved for summary judgment, arguing Justice was not entitled to recover under the policy because the $71,958.50 he received in workers' compensation benefits operated as a “setoff” against the $50,000 policy limit, thus reducing American Family's liability to zero. After a hearing, the trial court granted American Family's motion.

Justice appealed, arguing: (1) the setoff should not apply at all because his policy expressly excluded coverage of injuries eligible for workers' compensation benefits; (2) even if the setoff did apply, the plain language of the policy required it to apply against his total damages, not the policy limit; and (3) the policy language was ambiguous and should be construed in favor of the insured. A unanimous panel of our Court of Appeals agreed with Justice's second argument and reversed. Justice v. Am. Family Mut. Ins. Co., 971 N.E.2d 1236, 1240 (Ind.Ct.App.2012) (citing Beam v. Wausau Ins. Co., 765 N.E.2d 524, 533 (Ind.2002)).

We granted transfer, thereby vacating the opinion below. Ind. Appellate Rule 58(A); Justice v. Am. Family Mut. Ins. Co., 985 N.E.2d 338 (Ind.2013) (table).

Standard of Review

Where, as here, the relevant facts are not in dispute, we review the trial court's grant of summary judgment de novo. Woodruff v. Ind. Family & Soc. Servs. Admin., 964 N.E.2d 784, 790 (Ind.2012). Summary judgment is appropriate only where the moving party demonstrates there are no genuine issues of material fact and he is entitled to judgment as a matter of law. Ind. Trial Rule 56(C); see also Travelers Indem. Co. of Am. v. Jarrells, 927 N.E.2d 374, 376 (Ind.2010). If he makes that showing, the burden shifts to the non-moving party to demonstrate the existence of a genuine issue of material fact. Reed v. Reid, 980 N.E.2d 277, 285 (Ind.2012). Like the trial court, we construe all evidence and resolve all doubts in favor of the non-moving party, Holiday Hospitality Franchising, Inc. v. AMCO Ins. Co., 983 N.E.2d 574, 577 (Ind.2013), so as not improperly to deny him his day in court. Miller v. Dobbs, 991 N.E.2d 562, 564 (Ind.2013).

Insurance contracts “are governed by the same rules of construction as other contracts.” Colonial Penn Ins. Co. v. Guzorek, 690 N.E.2d 664, 667 (Ind.1997). The interpretation of an insurance contract is a question of law, and we address it de novo. Dunn v. Meridian Mut. Ins. Co., 836 N.E.2d 249, 251 (Ind.2005). Similarly, “the interpretation of a statute is a question of law,” and we consider it de novo. State v. Int'l Bus. Machs. Corp., 964 N.E.2d 206, 209 (Ind.2012).

A. The Workers' Compensation Exclusion Clause Does Not Void the Setoff Provision.

Justice first argues the workers' compensation setoff provision cannot apply to reduce benefits payable under his underinsured motorist policy because the policy expressly excludes coverage of injuries eligible for workers' compensation. In essence, Justice claims American Family voided the workers' compensation setoff provision by excluding payments from applying to the benefit of a workers' compensation insurer: “Underinsured Motorists Coverage shall not apply to the benefit of any insurer or self-insurer under any workers' compensation or disability benefits law or any similar law.” Appellee's App. at 26.

Justice cites Walkup v. Wabash, 702 N.E.2d 713 (Ind.1998) as controlling authority on this point, but that case addressed a different issue than the one before us today. Walkup did involve a similar accident; David Walkup was injured in a collision with an uninsured driver. Id. at 713. Walkup's employer, Wabash National Corporation, had general liability coverage through Cincinnati Insurance Company but self-insured its workers' compensation and thus paid $8,599 in workers' compensation benefits directly to Walkup's health care providers. Id. When Walkup sued the uninsured driver, Wabash asserted a lien on his anticipated recovery.¹Id. at 714. Meanwhile, Walkup sought to recover from Cincinnati Insurance under the uninsured motorist coverage provision of Wabash's policy, which contained an exclusion clause stating the coverage did not apply to “[t]he direct or indirect benefit of any insurer o[r] self-insurer under any worker's compensation, disability benefits or similar law.” Id. at 715. Walkup ultimately accepted Cincinnati Insurance's offer of $18,000, and Wabash tried to recover from this settlement through its original lien. Id. at 714. We held “that recovery by an injured worker under an uninsured motorist policy that excludes coverage of claims eligible for worker's compensation benefits is not subject to a lien in favor of the worker's employer or its worker's compensation carrier.” Id. at 713.

But the question we resolved in Walkup—whether an employer or worker's compensation insurer may assert a lien against funds an injured worker recovers from his uninsured motorist policy—is entirely distinct from the question before us today—whether an uninsured motorist insurer may apply the insured's worker's compensation recovery as a setoff against the policy's liability limit. Walkup, based upon the language of the policy at issue in that case, answered the first question in the negative, but it was silent on the second. Thus, we do not find it instructive here.

B. The Policy Language Unambiguously Provides for a Setoff Against the Policy Limit.

Justice next argues the language in the “LIMITS OF LIABILITY” section of his policy is clear and requires the setoff be applied not against the policy limit but against his total damages. Alternatively, he argues the policy language is ambiguous and must therefore be construed in his favor—specifically, such that the setoff applies against his total damages and thus he may recover $25,000 from American Family. We are not convinced.

An insurance policy is a contract like any other, Holiday Hospitality, 983 N.E.2d at 577, but we do apply some specialized rules of construction in recognition of the frequently unequal bargaining power between insurance companies and insureds. Everett Cash Mut. Ins. Co. v. Taylor, 926 N.E.2d 1008, 1012 (Ind.2010); Wagner v. Yates, 912 N.E.2d 805, 811 (Ind.2009). One such rule, as Justice correctly points out, requires that...