Opinion
Appeal No. 01-A-01-9409-CV-00410
April 28, 1995
Appealed from the Circuit Court of Grundy County at Altamont, Tennessee, Grundy Circuit No. 4959, The Honorable Thomas W. Graham, Judge.
Affirmed and Remanded
Concur: Lewis, J., Daniel, J.
Stewart F. Kresge, Stanly T. Snodgrass, Nashville, Tennessee, Attorneys for Plaintiff/Appellee and Cross-Appellant
Nora A. McCarthy Luther, Anderson, Cleary Ruth, Chattanooga, Tennessee, Attorney for Appellant
This case involves an interpretation of the Tennessee Uninsured Motorist Statute, Tenn. Code Ann. § 56-7-1201, et seq. The appellant insurance company contended that it was entitled to set off its obligations under an uninsured motorist policy against sums paid by workers' compensation on behalf of its insured, as well as sums payable to the workers' compensation carrier as a result of the carrier's rights of subrogation against the underinsured motorist. The trial court did not agree that the appellant was entitled to reduce its obligations under its policy by payments that were not available to its insured. We affirm.
I.
There is no dispute as to the facts of this case, but only as to the obligations that arose as a result of those facts under three separate policies of insurance. A brief summary follows:
On August 9, 1991 Nathan Boyce was severely and permanently injured in a collision between his vehicle and an automobile driven by Roy Clayton Geary. At the time of the accident, Mr. Boyce was in the course and scope of his employment. On May 15, 1992, Mr. Boyce filed suit against Mr. Geary in the Circuit Court of Grundy County. Aetna Insurance Company, Mr. Boyce's uninsured motorist carrier, was served, but was not named as a defendant.
On May 29, 1992, the Fireman's Fund Insurance Company intervened, alleging that as the workers' compensation carrier for Mr. Boyce's employer, it was entitled to a subrogation lien against any recovery Boyce obtained against a responsible third party.
On March 9, 1993, Aetna Insurance Company filed an Answer and Cross-Claim. In its pleading, Aetna admitted that it had issued an insurance policy to Mr. Boyce which included uninsured motorist coverage with $300,000 single limits. It asserted that under the terms of its policy, it was entitled to reduce its obligation by "any and all sums available in the nature of liability insurance upon the defendants . . . or in the nature of workers' compensation insurance available to the plaintiff. . . ." Aetna asked the court for a judicial determination of its rights, and those of Fireman's Fund, "to the proceeds of any settlement or judgment paid by or on behalf of the original defendants."
Just before trial, plaintiff Boyce and defendant Geary entered into a stipulation whereby the defendant's liability and the plaintiffs damages of $600,000 were admitted. Upon objection by Aetna to the stipulated amount of damages, the court convened an evidentiary hearing, which resulted in a judgment for the stipulated amount.
At the time of trial, Fireman's Fund had paid $160,983 for Mr. Boyce's medical expenses. The extent of benefits he might be entitled to receive as a result of his permanent partial disability had not yet been determined. Mr. Geary was insured by Royal Insurance Company, with applicable liability limits of $100,000. Prior to suit, it had paid $2,300 for Mr. Boyce's property damage. The $97,700 in insurance that remained to satisfy other claims was deposited into court.
After trial and a series of motions that focused on the relative obligations of the insurers and the impact of the as-yet undetermined obligations of the workers' compensation carrier for Mr. Boyce's permanent partial disability, the court issued a Judgment, an Amended Judgment and a Second Amended Judgment, which is the judgment appealed from.
The Second Amended Judgment awarded to Fireman's Fund the $97,700 that had been deposited with the court by Mr. Geary's insurer. Aetna's obligation under the uninsured motorist policy was reduced by the sums already paid by Fireman's Fund for medical expenses, as well as by an additional $12,000 in future medical expenses. Aetna was also declared to be entitled to set off the benefits Mr. Boyce would receive upon judicial determination of the obligations of the workers' compensation carrier for his permanent partial diability. The court did not award Aetna any reduction in its obligation for the payment of the $97,700 to Fireman's Fund.
II.
In its argument on appeal, Aetna contends that the trial court erred in failing to give it credit for the $97,700 that was paid by the liability insurer. In support of its position, Aetna relies upon the language in its policy, and on prior court decisions intepreting the Uninsured Motorist Statute. The relevant portions of the uninsured motorist provisions in the policy read:
Any amounts otherwise payable for damages under this coverage shall be reduced by:
1. All sums paid because of the bodily injury . . . by or on. behalf of persons or organizations who may be legally responsible. This includes all sums paid under the Liability Coverage of this policy; and
2. All sums paid or payable under any workers' compensation, disability benefits or any similar law.
The Supreme Court of this State has upheld the validity of clauses in uninsured motorist policies reducing the insurer's obligation by the amount paid under workers' compensation. See Terry v. Aetna Casualty Surety Co., 510 S.W.2d 509 (1974).
However there is apparently as yet no authority in this state for the proposition that sums paid "by or on behalf of persons who may be legally responsible" may reduce the amount of coverage under an uninsured motorist policy, where the sum is not paid to the insured, but to the workers' compensation carrier in satisfaction of its subrogation lien.
The appellant insists the question should be determined in accordance with same principle the Court relied upon in the Terry case. That is, that the Tennessee Legislature has adopted a "limited coverage" theory in regard to offset provisions in the Uninsured Motorist Statute, rather than the "broad coverage" theory that has been adopted by the legislatures of the majority of the states.
The Terry Court said that the broad coverage theory "is based on a finding [that] the legislative purpose . . . is to provide full coverage up to the policy limits so long as payments under the uninsured motorist coverage, plus any payments received from other sources, do no exceed insured's actual damage." In contrast, the limited coverage theory "is based on a finding [that] the legislative purpose . . . is to provide insured a recovery only up to the statutory minimum required without regard to insured's actual damages unless such be less than the statutory minimum." Terry v. Aetna Casualty Surety Co., 510 S.W.2d 509, 513 (1974).
The Court found that the Tennessee legislature had mandated limited rather than broad coverage by enacting Tenn. Code Ann. § 56-1152, and that in the forty states where no comparable statute was enacted, broad coverage was the applicable rule.
However, we see nothing in the Terry case, or in Tenn. Code Ann. § 56-7-1205, the successor statute to Tenn. Code Ann. § 56-1152, that would warrant the conclusion that the appellant seeks to compel us to make. If we understand it correctly, we believe that the distinction between broad and limited coverage as defined in Terry only involves the question of whether the obligation of an insurer under an uninsured motorist policy is to be initially calculated by subtracting liability insurance payments and other valid offsets from the actual damages of the insured, or by subtracting those amounts from the coverage limits under the uninsured motorist policy.
III.
Tenn. Code Ann. § 56-7-1205 was cited by both parties in support of their respective positions, and both placed great emphasis on the final sentence of the statute. That statute reads in full:
56-7-1205. Minimum policy limits not Increased. — Nothing contained in this part shall be construed as requiring the forms of coverage provided pursuant to this part, whether alone or in combination with similar coverage afforded under other automobile liability policies, to afford limits in excess of those that would be afforded had the insured thereunder been involved in an accident with a motorist who was insured under a policy of liability insurance with the minimum limits described in § 55-12-107, or the uninsured motorist liability limits of the insured's policy if such limits are higher than the limits described in § 55-12-107. Such forms of coverage may include such terms, exclusions, limitations, conditions, and offsets, which are designed to avoid duplication of insurance and other benefits.
The appellant emphasizes the first part of that sentence, which appears to grant broad powers to the insurer to write limitations on its obligations. The appellee emphasizes the condition in the last clause of the sentence, that these limitations be designed to "avoid duplication of insurance and other benefits."
There is no possibility of a duplication of benefits under the facts presented to us in this case. In fact, if we adopted the position advanced by the appellant, the insured would suffer a double reduction in his benefits as the result of a single payment made by the tortfeasor's insurance company.
Though the language in Aetna's policy, standing by itself, might seem to support such a double reduction, we believe that Tenn. Code Ann, § 56-7-1205 requires us to place a restrictive interpretation upon the policy limitation that the appellant relies upon. Payments made "by or on behalf of persons or organizations who may be legally responsible" can reduce the uninsured motorist carrier's obligation, but only where such a reduction "avoid(s) duplication of insurance and other benefits." To adopt the appellant's interpretation of its insurance contract would be to ignore language included in the statute to protect the rights of insureds against the otherwise unrestricted power of insurance companies to impose on them limitations and offsets which could effectively eliminate the benefits to which their premium payment entitles them,
IV.
Another contested issue in this case arises from the appellee's assertion that the trial court erred in allowing Aetna to offset its obligation by undetermined future sums that the workers' compensation carrier might have to pay for Mr. Boyce's permanent partial disability. The appellee contends that such sums are speculative, and cannot form the proper basis for calculating an award.
We agree that such a sum is speculative until a judicial determination has been made of the obligation of the workers' compensation carrier. Once that determination has been made, the sum is no longer so speculative as to preclude a judgment that takes it into account. As we are remanding this case back to the trial court for further proceedings, the trial court may determine the proper amount of offset the appellant is entitled to as a result of adjudication of its insured's right under workers's compensation.
V.
We affirm the judgment of the trial court, and remand this case for further proceedings consistent with this opinion. Tax the costs on appeal to the appellant.
ORDER
Upon consideration of the application for permission to appeal and the entire record in this cause, the application for permission to appeal is denied with concurrence in the results only.