Butcher v . American Economy Ins. Cv-11-306-PB 6/7/12 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Paul Butcher
v. Case N o . 11-cv-306-PB Opinion N o . 2012 DNH 103 American Economy Insurance Co.
MEMORANDUM AND ORDER
Paul Butcher was injured in an automobile accident while at
work. He received workers’ compensation benefits and later
sought uninsured motorist coverage under his employer’s
liability insurance policy. The carrier, American Economy
Insurance Company (“American”), refused to cover Butcher’s claim
to the extent that he had received compensation for the same
losses under his employer’s workers’ compensation policy.
American based its decision on two coordination of benefit
provisions. The first appears in a section entitled
“Exclusions.” It states that uninsured motorist coverage “does
not apply to . . . [t]he direct or indirect benefit of any
insurer or self-insurer under any workers’ compensation,
disability benefits or similar law.” Doc. N o . 19-3 at 2 . The
second, entitled “Limit of Insurance,” states that American
“will not pay for any element of ‘loss’ if a person is entitled
to receive payment for the same element of ‘loss’ under any
1 workers’ compensation, disability benefits or similar law.” Id.
at 3 .
Butcher has filed a declaratory judgment against American,
and American has filed a third-party complaint against Clarendon
National Insurance Company (“Clarendon”), the insurer that
provided Butcher with workers’ compensation coverage. Butcher’s
principal argument is that the coordination of benefit
provisions are unenforceable. The parties have joined the issue
in cross motions for summary judgment. None of the material
facts are in dispute.
I. ANALYSIS
Butcher argues that the coordination of benefits provisions
are unenforceable because they violate the state’s uninsured
motorist and worker’s compensation statutes. His arguments turn
on the New Hampshire Supreme Court’s decision in Merchants
Mutual Insurance Group v . Orthopedic Professional Association,
which held that New Hampshire’s uninsured motorist statute bars
the enforcement of a policy provision that reduces the amount
payable under an uninsured motorist policy by “[t]he amount paid
and . . . [the] amounts payable . . . under any workmen’s
compensation law . . . .” 124 N.H. 6 4 8 , 654 (1984). Because
the court’s holding in Merchants is controlling, I begin with an
2 analysis of the decision and then apply the decision to the
facts of the present case.
The version of the uninsured motorist statute that was at
issue in Merchants required automobile liability insurers to
provide a specified minimum level of uninsured motorist coverage
and gave insureds the right to obtain additional coverage up to
the amount of liability coverage purchased.1 Id. at 655.
Because the statute did not authorize insurers to reduce
automobile coverage by the amount of benefits received from
another source, the Supreme Court reasoned that the policy
provision under review in Merchants was “an invalid restriction
of the statutory scope of coverage.” Id.
The court bolstered its holding by finding “a compelling
analogy” between its holding and the collateral source rule,
which bars a tortfeasor from reducing a damages award by the
amount of any payments received for the same injuries from
another source. Id. at 656. Like the collateral source rule,
the court reasoned, its holding that an uninsured motorist
carrier could not adopt a policy provision reducing the
uninsured motorist coverage purchased by the insured by the
amount of benefits received from another source was necessary to
prevent “a windfall for uninsured motorist carriers.” Id.
1 In its current form, the statute provides that “the insured’s uninsured motorist coverage shall automatically be equal to the liability coverage elected.” N.H. Rev. Stat. Ann. § 264:15, I . 3 After construing the uninsured motorist statute, the
Merchants court went on to consider whether a workers’
compensation carrier who provides benefits to an insured has a
lien against amounts payable to the insured under an uninsured
motorist policy. As then-codified, the workers’ compensation
statute authorized a lien in favor of the workers’ compensation
carrier to recover amounts received by the insured from “some
person” who has “legal liability to pay damages.” Id. at 657
(quoting N.H. Rev. Stat. Ann. § 281:14)). The court interpreted
the phrase “legal liability to pay damages” as limiting liens to
recoveries based on tort liability. Id. at 657-58.
Accordingly, the court determined that the lien provision did
not apply to payments received by an insured under an uninsured
motorist policy. Id. at 658-59.
The New Hampshire legislature responded to the court’s
decision by amending the workers’ compensation statute to permit
a lien when “[t]he circumstances of the injury create in another
person a legal liability to pay damages in respect thereto, or a
contractual obligation to pay benefits under the uninsured
motorist provision of any motor vehicle insurance policy.” N.H.
Rev. Stat. Ann. § 281-A:13, I (emphasis added). In removing the
limitation that the Merchants court read into the statute, the
legislature made it clear that a workers’ compensation carrier
is entitled to a lien against the proceeds of an uninsured
4 motorist policy. Id.; see Rooney v . Fireman’s Fund Ins. Co.,
138 N.H. 6 3 7 , 640 (1994) (“[B]ecause the legislature has now
expressly provided for such a lien, Merchants [ ] cannot be
relied upon as authority for denying a workers’ compensation
carrier the statutory right to assert a lien against an
employee’s uninsured motorist benefits.” (internal citation
omitted)).
Application
The coordination of benefit provisions at issue in this
case differ from the provision under review in Merchants in that
they merely relieve American from its obligation to cover losses
payable under the workers’ compensation statute, whereas the
provision at issue in Merchants also reduced the amount of
uninsured motorist coverage available to the insured by amounts
payable as workers’ compensation. As I explain below, however,
this distinction cannot justify a different result in the
present case.
The statutory construction argument that the court found
persuasive in invalidating the policy provision at issue in
Merchants applies with equal force here. The argument relied on
the fact that the uninsured motorist statute did not expressly
authorize an insurer to reduce coverage for benefits provided by
another sources. 124 N.H. at 655. Although the coordination of
benefits provisions in American’s policy do not work in
5 precisely the same way, they too purport to allow an uninsured
motorist carrier to limit its coverage obligations in a way not
authorized under the uninsured motorist statute. Accordingly,
it follows that the coordination of benefit provisions also
violate the uninsured motorist statute.
The analogy that the Merchants court drew between the
collateral source rule and its holding also supports Butcher’s
argument. As I have noted, the collateral source rule is
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Butcher v . American Economy Ins. Cv-11-306-PB 6/7/12 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Paul Butcher
v. Case N o . 11-cv-306-PB Opinion N o . 2012 DNH 103 American Economy Insurance Co.
MEMORANDUM AND ORDER
Paul Butcher was injured in an automobile accident while at
work. He received workers’ compensation benefits and later
sought uninsured motorist coverage under his employer’s
liability insurance policy. The carrier, American Economy
Insurance Company (“American”), refused to cover Butcher’s claim
to the extent that he had received compensation for the same
losses under his employer’s workers’ compensation policy.
American based its decision on two coordination of benefit
provisions. The first appears in a section entitled
“Exclusions.” It states that uninsured motorist coverage “does
not apply to . . . [t]he direct or indirect benefit of any
insurer or self-insurer under any workers’ compensation,
disability benefits or similar law.” Doc. N o . 19-3 at 2 . The
second, entitled “Limit of Insurance,” states that American
“will not pay for any element of ‘loss’ if a person is entitled
to receive payment for the same element of ‘loss’ under any
1 workers’ compensation, disability benefits or similar law.” Id.
at 3 .
Butcher has filed a declaratory judgment against American,
and American has filed a third-party complaint against Clarendon
National Insurance Company (“Clarendon”), the insurer that
provided Butcher with workers’ compensation coverage. Butcher’s
principal argument is that the coordination of benefit
provisions are unenforceable. The parties have joined the issue
in cross motions for summary judgment. None of the material
facts are in dispute.
I. ANALYSIS
Butcher argues that the coordination of benefits provisions
are unenforceable because they violate the state’s uninsured
motorist and worker’s compensation statutes. His arguments turn
on the New Hampshire Supreme Court’s decision in Merchants
Mutual Insurance Group v . Orthopedic Professional Association,
which held that New Hampshire’s uninsured motorist statute bars
the enforcement of a policy provision that reduces the amount
payable under an uninsured motorist policy by “[t]he amount paid
and . . . [the] amounts payable . . . under any workmen’s
compensation law . . . .” 124 N.H. 6 4 8 , 654 (1984). Because
the court’s holding in Merchants is controlling, I begin with an
2 analysis of the decision and then apply the decision to the
facts of the present case.
The version of the uninsured motorist statute that was at
issue in Merchants required automobile liability insurers to
provide a specified minimum level of uninsured motorist coverage
and gave insureds the right to obtain additional coverage up to
the amount of liability coverage purchased.1 Id. at 655.
Because the statute did not authorize insurers to reduce
automobile coverage by the amount of benefits received from
another source, the Supreme Court reasoned that the policy
provision under review in Merchants was “an invalid restriction
of the statutory scope of coverage.” Id.
The court bolstered its holding by finding “a compelling
analogy” between its holding and the collateral source rule,
which bars a tortfeasor from reducing a damages award by the
amount of any payments received for the same injuries from
another source. Id. at 656. Like the collateral source rule,
the court reasoned, its holding that an uninsured motorist
carrier could not adopt a policy provision reducing the
uninsured motorist coverage purchased by the insured by the
amount of benefits received from another source was necessary to
prevent “a windfall for uninsured motorist carriers.” Id.
1 In its current form, the statute provides that “the insured’s uninsured motorist coverage shall automatically be equal to the liability coverage elected.” N.H. Rev. Stat. Ann. § 264:15, I . 3 After construing the uninsured motorist statute, the
Merchants court went on to consider whether a workers’
compensation carrier who provides benefits to an insured has a
lien against amounts payable to the insured under an uninsured
motorist policy. As then-codified, the workers’ compensation
statute authorized a lien in favor of the workers’ compensation
carrier to recover amounts received by the insured from “some
person” who has “legal liability to pay damages.” Id. at 657
(quoting N.H. Rev. Stat. Ann. § 281:14)). The court interpreted
the phrase “legal liability to pay damages” as limiting liens to
recoveries based on tort liability. Id. at 657-58.
Accordingly, the court determined that the lien provision did
not apply to payments received by an insured under an uninsured
motorist policy. Id. at 658-59.
The New Hampshire legislature responded to the court’s
decision by amending the workers’ compensation statute to permit
a lien when “[t]he circumstances of the injury create in another
person a legal liability to pay damages in respect thereto, or a
contractual obligation to pay benefits under the uninsured
motorist provision of any motor vehicle insurance policy.” N.H.
Rev. Stat. Ann. § 281-A:13, I (emphasis added). In removing the
limitation that the Merchants court read into the statute, the
legislature made it clear that a workers’ compensation carrier
is entitled to a lien against the proceeds of an uninsured
4 motorist policy. Id.; see Rooney v . Fireman’s Fund Ins. Co.,
138 N.H. 6 3 7 , 640 (1994) (“[B]ecause the legislature has now
expressly provided for such a lien, Merchants [ ] cannot be
relied upon as authority for denying a workers’ compensation
carrier the statutory right to assert a lien against an
employee’s uninsured motorist benefits.” (internal citation
omitted)).
Application
The coordination of benefit provisions at issue in this
case differ from the provision under review in Merchants in that
they merely relieve American from its obligation to cover losses
payable under the workers’ compensation statute, whereas the
provision at issue in Merchants also reduced the amount of
uninsured motorist coverage available to the insured by amounts
payable as workers’ compensation. As I explain below, however,
this distinction cannot justify a different result in the
present case.
The statutory construction argument that the court found
persuasive in invalidating the policy provision at issue in
Merchants applies with equal force here. The argument relied on
the fact that the uninsured motorist statute did not expressly
authorize an insurer to reduce coverage for benefits provided by
another sources. 124 N.H. at 655. Although the coordination of
benefits provisions in American’s policy do not work in
5 precisely the same way, they too purport to allow an uninsured
motorist carrier to limit its coverage obligations in a way not
authorized under the uninsured motorist statute. Accordingly,
it follows that the coordination of benefit provisions also
violate the uninsured motorist statute.
The analogy that the Merchants court drew between the
collateral source rule and its holding also supports Butcher’s
argument. As I have noted, the collateral source rule is
designed to prevent a tortfeasor from reaping a windfall when
the insured is entitled to coverage for the same benefits from
another source. To the extent that the collateral source rule
can be applied by analogy to uninsured motorist carriers, it
requires the same result here that the court reached in
Merchants.2
2 In its effort to distinguish the reduction in the uninsured motorist coverage at issue in Merchants and the coordination of benefits provisions in its policy, American also cites the Louisiana Supreme Court’s decision in Travelers Insurance Company v . Joseph, 656 So.2d 1000 (La. 1995). In that case, the court upheld an exclusion in an uninsured motorist policy that prevented a workers’ compensation carrier from recovering benefits paid to an insured injured by an uninsured driver. Id. at 1004. The court noted, however, that uninsured motorist carriers could not reduce the mandated amount of coverage by the amount of workers’ compensation benefits. Id. The Travelers decision lacks the power to persuade because the court failed to explain why the distinction between a reduction in the coverage amount and an exclusion from coverage warrants different results, other than to state in a summary way that public policy is contrary to the former but not the latter. See id. At any rate, the Louisiana court’s decision is inapposite to the facts of this case because the New Hampshire Supreme Court and 6 The legislative response to the Merchants decision further
demonstrates the invalidity of the coordination of benefits
provisions. In amending the workers’ compensation statute so as
to reverse the court’s holding in Merchants that the statute
does not give a workers’ compensation carrier a lien against the
proceeds of an uninsured motorist policy, the legislature
specified the way in which benefits must be coordinated between
workers’ compensation and uninsured motorist carriers. The
statute now expressly grants the workers’ compensation carriers
a statutory lien against amounts payable under an uninsured
motorist policy. The legislature thus made clear that a
workers’ compensation carrier’s lien rights take precedence over
the rights of an uninsured motorist carrier when an insured is
entitled to a recovery under both policies. American’s
coordination of benefits provisions purport to limit the
uninsured motorist carrier’s liability at the expense of the
workers’ compensation carrier. If the exclusion is given
effect, it would subvert a legislative scheme that decidedly
favors the workers’ compensation carrier.
American responds by arguing that the legislature intended
to grant the workers’ compensation carriers a lien against
uninsured motorist benefits only when the uninsured motorist
legislature have in fact provided sufficient guideposts that the policy exclusion is invalid under New Hampshire law. 7 policy does not exclude coverage for losses recoverable under
the workers’ compensation statute. To support its position,
American points out that the statute authorizes a lien only when
the uninsured motorist carrier has “a contractual obligation to
pay benefits.” N.H. Rev. Stat. Ann. § 281-A:13. American
argues that it has no contractual obligation to pay benefits
here because the policy expressly relieves it from an obligation
to pay for any losses covered by a workers’ compensation
carrier.
American’s reading of the workers’ compensation statute
would render the lien provision toothless. Any uninsured
motorist carrier with minimal business acumen would follow
American’s lead and exclude coverage of losses covered by the
workers’ compensation statute. Contrary to American’s argument,
the legislature did not intend to permit uninsured motorist
carriers to limit their liability in a manner that effectively
deprives workers’ compensation carriers of their entitlement to
a lien. Instead, the legislature’s use of the phrase
“contractual obligation to pay benefits” appears to be a direct
response to the Merchants court’s interpretation of the previous
statutory lien provision. The court held that the provision
limits liens to recoveries based on tort liability, and that the
uninsured motorist carrier’s obligation to pay benefits arises
out of contract, not tort. Merchants, 124 N.H. at 657-58. By
8 amending the statute to expressly authorize liens against
benefits payable under an uninsured motorist policy, the
legislature expanded the scope of the lien provision to cover a
specific context where recovery is not based on tort liability.
Accordingly, a workers’ compensation carrier can assert a lien
against uninsured motorist benefits for the same elements of
damages. Coordination of benefits provisions that seek to
prevent it from doing so are unenforceable.3
II. CONCLUSION
For the aforementioned reasons, I grant Butcher and
Clarendon’s joint motion for summary judgment (Doc. N o . 20) and
deny American’s motion for summary judgment (Doc. N o . 1 9 ) . The
clerk shall enter judgment accordingly and close the case.
SO ORDERED.
/s/Paul Barbadoro Paul Barbadoro United States District Judge June , 2012 c c : Peter M . Solomon, Esq. Andrew D. Dunn, Esq. Merrick Charles Weinstein, Esq.
3 American also argues that the Insurance Commissioner’s approval of its policy in accordance with N.H. Rev. Stat. Ann. § 412:15 further demonstrates the validity of the policy exclusion. It cites no authority, however, for the proposition that the Commissioner’s approval shields the policy from judicial scrutiny. Even if the Commissioner’s approval is entitled to some deference, it is insufficient to overcome the fact that the exclusion in American’s policy is in clear conflict with the New Hampshire Supreme Court’s reasoning in Merchants and the lien provision of the workers’ compensation statute. 9