Christy v. Mercury Casualty Company

• Court: Supreme Court of Virginia
• Decided: March 2, 2012
• Docket: 102138
• Status: Published

Opinion

Present: Kinser, C.J., Lemons, Goodwyn, Millette, Mims, and Powell, JJ., and Koontz, S.J.

KEVIN CHRISTY OPINION BY v. Record No. 102138 SENIOR JUSTICE LAWRENCE L. KOONTZ, JR. March 2, 2012 MERCURY CASUALTY COMPANY

FROM THE CIRCUIT COURT OF WASHINGTON COUNTY C. Randall Lowe, Judge

In this appeal, we consider whether the circuit court

correctly determined that an exclusion in an automobile

insurance policy regarding coverage for medical expenses

barred the policyholder from receiving any payment for medical

expenses because a portion of those expenses had been paid by

workers' compensation benefits.

BACKGROUND

On November 23, 2005, Kevin Christy, a police officer in

the Town of Abingdon ("the Town"), was a passenger in a

Washington County Sheriff's vehicle being driven by a

sheriff's deputy. The sheriff's vehicle was involved in an

accident in which it was struck from behind while stopped.

Christy suffered injuries as a result of this accident. The

parties disagree as to the extent of those injuries. It is

not disputed, however, that this accident arose out of and

occurred during the course of Christy's employment by the

Town. Christy was initially treated for his injuries in the

emergency room of Johnston Memorial Hospital in Abingdon on

November 24, 2005. Thereafter, Christy came under the care of

Dr. Timothy G. McGarry of Abingdon Orthopedic Associates for

joint pain in Christy's neck and left shoulder. Dr. McGarry

referred Christy to Dr. Richard Mullens of Abingdon

Radiological Services, who administered an MRI examination of

Christy's neck and spine on February 14, 2006 at Johnston

Memorial Hospital.

In a follow-up visit on March 1, 2006, Dr. McGarry

determined that Christy had a tear in the labrum of his left

shoulder, commonly called a "SLAP tear," that required

surgery. 1 Dr. McGarry was of opinion that Christy's SLAP tear

was caused by the November 23, 2005 accident and was not a

pre-existing condition.

At the time of Christy's accident, the Town obtained its

workers' compensation coverage through the Virginia Municipal

League Insurance Programs ("VMLI"). At the time of his

surgery, Christy received his primary health insurance through

1 In a medical context, "SLAP" refers to a lesion or tear to the "superior labral, anterior to posterior," an injury to the biceps tendon of the shoulder joint. 5 J.E. Schmidt, Attorneys' Dictionary of Medicine Illustrated S-181 (28th ed. 1995); see also Tae Kyun Kim, et al., Clinical Features of the Different Types of SLAP lesions, 85-A Journal of Bone & Joint Surgery 66, 66 (2003).

2 a physician-hospital organization ("PHO") administered by John

Deere Health Insurance, and subsequently by United Health Care

Plan of the River Valley, Inc. Christy was also insured under

an automobile liability insurance policy issued by Mercury

Casualty Company which provided coverage for his two private

vehicles. The Mercury Casualty policy included coverage for

"medical expense benefits as a result of bodily injury caused

by an accident and arising out of the . . . use of a motor

vehicle as a motor vehicle" with a limit of coverage of $5000

per person for each vehicle. This policy contained a

provision for the exclusion of coverage which, in relevant

part, provided that the insurance does not apply "to bodily

injury sustained by any person to the extent that benefits

therefor[] are in whole or in part payable under any

[workers'] compensation law."

For purposes of our resolution of this appeal, it will

suffice to briefly summarize the total medical expenses that

Christy incurred, including those for the treatment of his

shoulder, and the payments made by the various insurance

providers after contract adjustments accepted by the medical

service providers. The total medical expenses incurred by

Christy amounted to $16,564.00. VMLI paid $1,815.18 on claims

submitted by Johnston Memorial Hospital for Christy's

emergency room visit, the MRI examination performed at the

3 hospital, Dr. Mullens' claim for evaluating this MRI, and for

Dr. McGarry's claim for Christy's initial visit. However,

VMLI denied the claims for the March 24, 2006 surgery

submitted by Johnston Memorial Hospital and Dr. McGarry,

asserting that the SLAP tear was a pre-existing condition and

not compensable under the workers' compensation policy.

Christy concedes that he "did not pursue a [workers'

compensation] claim" against VMLI. The balance of $13,458.27,

after applying contract adjustments, for the claims of the

hospital and Dr. McGarry for the shoulder surgery was

ultimately paid or otherwise resolved by Christy and Christy's

PHO. 2

On April 20, 2009, Christy submitted a claim to Mercury

Casualty regarding his medical expenses incurred following the

November 23, 2005 automobile accident, asserting that he was

entitled to payment under the medical expenses coverage of his

policy. On June 12, 2009, Mercury Casualty denied the claim,

asserting the application of the exclusion to coverage

provision of the policy and maintaining that "[t]he bills in

2 Considerable litigation occurred between Christy, the hospital, and Christy's PHO, which in part involved the applicability of Code § 38.2-2201(A)(3)(b) to Christy's medical expenses, to determine the amounts to be paid by Christy and his PHO. These proceedings do not impact our view of this appeal.

4 this case were, at least in part, 'payable' under the workers'

compensation law."

On September 4, 2009, Christy filed a warrant in debt

against Mercury Casualty in the Washington County General

District Court seeking $10,000 in contract damages. He

obtained a judgment for $9,500 and attorney's fees. Mercury

Casualty appealed this judgment to the Circuit Court of

Washington County.

The case was submitted to the circuit court on a joint

stipulation of facts and supporting briefs. Following oral

argument of the parties, the court issued an opinion letter

dated April 29, 2010, in which it concluded that based on the

unambiguous language of the exclusion, "payment of [workers']

compensation, even in part, as a result of this accident

triggers the exclusion and precludes payment" by Mercury

Casualty of the portion of Christy's medical expenses not paid

by VMLI. By order dated May 25, 2010, the court entered

judgment consistent with this opinion, but retained

jurisdiction over the matter to consider a motion for

reconsideration filed by Christy prior to entry of the order.

By letter opinion thereafter, the court affirmed its prior

ruling, and entered final judgment granting summary judgment

for Mercury Casualty on August 12, 2010. We awarded Christy

this appeal.

5 DISCUSSION

The dispositive issue in this appeal is whether the

language of the exclusion in Mercury Casualty's policy bars

recovery when its insured suffers injury in a work-related

motor vehicle accident and any portion of the medical expenses

incurred as a result are paid by a workers' compensation

carrier. Because this issue was decided by the circuit court

based on stipulated facts and involves the interpretation of a

written contract, we apply a de novo standard of review.

Farmers Ins. Exch. v. Enter. Leasing Co., 281 Va. 612, 617,

708 S.E.2d 852, 855 (2011); Johnson v. Hart, 279 Va. 617, 623,

692 S.E.2d 239, 242 (2010).

Our analysis begins with the undisputed fact that the

November 23, 2005 accident arose out of and occurred during

the course of Christy's employment. As such, any injury

Christy sustained in the accident would be subject to coverage

under the Workers' Compensation Act. Code § 65.2-300.

However, if an employee suffers from a pre-existing condition

at the time of the covered accident, compensation will only be

payable for expenses incurred if the accident "accelerates or

aggravates [the] pre-existing condition." Ohio Valley

Construction Co. v. Jackson, 230 Va. 56, 58, 334 S.E.2d 554,

555 (1985); see also Combs v. Virginia Elec. & Power Co., 259

Va. 503, 511, 525 S.E.2d 278, 283 (2000); Olsten of Richmond

6 v. Leftwich, 230 Va. 317, 319-20, 336 S.E.2d 893, 895 (1985).

In the present case, VMLI, the workers' compensation carrier,

paid only a portion of Christy's claimed medical expenses

after concluding that Christy's SLAP tear was a pre-existing

condition. 3

Christy stresses that he does not challenge the validity

of the exclusion in Mercury Casualty's policy. Rather, he

maintains that the plain language of the exclusion means that

it applies only "to the extent" some portion of his medical

expenses were paid as a workers' compensation benefit, without

regard to whether he might have successfully pursued a claim

against VMLI for all the medical expenses. Thus, he contends

that the exclusion acts only to offset any amount actually

paid by VMLI for his medical expenses as a workers'

compensation benefit. Mercury Casualty responds that the

language of the exclusion is clear that no coverage is

available under its policy if any portion of the medical

expenses incurred is subject to workers' compensation, even if

those expenses are not actually paid by the employer's

workers' compensation carrier.

3 As previously noted Christy did not challenge VMLI's conclusion by seeking a hearing for a formal determination of that issue from the Workers' Compensation Commission. Moreover, in the circuit court, the parties agreed to have the issue whether the SLAP tear was caused by the accident deferred for resolution by a jury.

7 In Baker v. State Farm Mutual Automobile Insurance Co.,

242 Va. 74, 405 S.E.2d 624 (1991) and again in Scarbrow v.

State Farm Mutual Automobile Insurance Co., 256 Va. 357, 504

S.E.2d 860 (1998), we addressed nearly identical exclusions as

the one at issue in this case. In Baker, a bus driver who was

injured in an automobile accident while in the course of his

employment sought to recover related medical expenses under

the medical expenses coverage of his personal automobile

liability insurance. We said that the action was intended "to

recover a portion of the medical expenses" Baker incurred as a

result of his injury in a work-related accident. Baker, 242

Va. at 75, 405 S.E.2d at 625. In the present case, it was a

point of contention in the circuit court and on appeal as to

whether this statement meant that only a portion of these

expenses actually had been covered by workers' compensation.

We have reviewed the record in Baker and have determined

that all of the medical expenses for the injury arising from

the work-related accident in that case were paid by the

workers' compensation carrier. It was because these expenses

exceeded the maximum coverage under the medical expenses

coverage of Baker's personal automobile liability insurance

that we said he sought "to recover a portion of the medical

expenses." Thus, Christy is correct that Baker is

distinguishable from this case in that all of the medical

8 expenses for which Baker sought to recover were actually paid

by the workers' compensation carrier.

However, the issue in Baker was "whether an insurer may

enforce an exclusion from coverage absent specific

authorization for such an exclusion in a statute that required

the insurer to offer such coverage." Id. at 75, 405 S.E.2d at

624. Our decision in that case was limited to finding that

exclusions of the type at issue in that case, and here, are

valid and enforceable. Thus, Baker provides no direct

guidance on the issue presented in this appeal.

In Scarbrow, the insured was a driver for a parcel

delivery service who was injured in an automobile accident

while in the course of her employment. The facts of that case

differ somewhat from Baker in that Scarbrow's medical

expenses, although entirely covered by workers' compensation

benefits, were subsequently reimbursed to the carrier as the

result of a recovery in an action against the tortfeasor.

However, although it was alleged in the opening brief that as

a result of the reimbursement "Scarbrow received no benefit

from the [workers'] compensation payment," the issue in the

appeal was not whether this fact preempted the exclusion.

Rather, the issue was essentially the same as had been

addressed in Baker, and that is whether a provision in an

automobile insurance policy excluding coverage for medical

9 expenses that are payable under a workers' compensation

statute conflicts with Code § 38.2-2201 and is therefore

invalid and not enforceable. Scarbrow, 256 Va. at 358, 504

S.E.2d at 860. In accord with Baker, we rejected such a

contention and held the exclusion to be valid and enforceable.

Id. Thus, neither Baker nor Scarbrow required us to parse the

language of the exclusion, as the scope of the exclusion was

not at issue in either case.

Christy makes the facially appealing contention that the

language of the exclusion in Mercury Casualty's insurance

policy operates to prevent a "double recovery" in the sense

that the insured is not permitted to receive full payment for

medical expenses by a workers' compensation provider as well

as full payment for those expenses by his automobile insurance

provider. In doing so, Christy contends that the language of

the exclusion prevents a double recovery by limiting medical

coverage of the policy "to the extent that benefits therefor[]

are in whole or in part payable under any [workers']

compensation law." We agree that our decisions in both Baker

and Scarbrow avoided a double recovery by the insured in those

cases. However, because we are of opinion that the clear and

unambiguous language of the exclusion in Mercury Casualty's

policy creates a limitation to the scope of coverage of the

policy for medical expenses rather than a limitation on the

10 amount of coverage in the form of a set-off against workers'

compensation benefits, we reject Christy's contention that, as

he would not gain a double recovery, his case differs from

Baker and Scarbrow.

Christy's workers' compensation claim for medical

expenses incurred as a result of an automobile accident

arising out of and in the course of his employment included

the medical expenses related to joint pain in his neck and his

shoulder injury as well as services provided by the emergency

room personnel at Johnston Memorial Hospital. VMLI paid a

portion of his claim in the form of workers' compensation

benefits. That Christy did not challenge VMLI's determination

that his shoulder injury was a pre-existing condition and not

compensable under its workers' compensation coverage does not

alter the fact that workers' compensation benefits for

Christy's bodily injuries were "in part payable" by workers'

compensation.

In short, the language of the exclusion is clear that it

applies to the circumstances under which the insured's

injuries occurred, not whether payment under the applicable

workers' compensation law was actually forthcoming.

Accordingly, as it is not disputed here that the accident

arose out of and in the course of Christy's employment, we

hold that the phrase "to the extent that benefits therefor[]

11 are in whole or in part payable under any [workers']

compensation law" in the exclusion permits Mercury Casualty to

deny coverage for any expenses which would have been subject

to workers' compensation coverage by VMLI without regard to

whether all of those expenses were actually paid by VMLI,

because the exclusion is not merely a set-off for workers'

compensation benefits actually paid but, rather, operates to

limit the scope of the coverage of Mercury Casualty's

automobile insurance policy.

CONCLUSION

For these reasons, we will affirm the judgment of the

circuit court granting summary judgment to Mercury Casualty.

Affirmed.

JUSTICE POWELL, with whom JUSTICE MILLETTE and JUSTICE MIMS join, concurring in part and dissenting in part.

I concur with the majority on the well-reasoned part of

its opinion that effectively distinguishes Baker and Scarbrow.

However, I believe that the majority fails to recognize our

previous construction of the limiting phrase “to the extent,”

and the common meaning of the phrase in reaching its

conclusion. Accordingly, I must respectfully dissent.

In Landmark HHH, LLC v. Gi Hwa Park, 277 Va. 50, 57, 671

S.E.2d 143, 146 (2009), the dispute involved the

12 interpretation of contract language that absolved the parties

“from any losses . . . sustained ‘to the extent of the

insurance proceeds payable’ on such losses.” This Court held

that the plain meaning of this language “only prohibits [the

insured] from obtaining a double recovery on a loss

sustained.” Id. at 57, 671 S.E.2d at 146.

I find further support in the common definition of the

term “extent.” Extent is defined as “the range (as of

inclusiveness or application) over which something extends.”

Webster’s Third New International Dictionary 805 (1993).

Under this definition, the exclusion is limited to the “range”

of compensation payable under workers’ compensation law; any

compensation falling outside of that range would not be

excluded from the insurance policy.

The harsh result of the majority’s analysis is

highlighted by the facts of this case. There is ample

evidence that the benefits sought by Christy were not, in

fact, payable under workers’ compensation law. The record

demonstrates that Christy was only compensated for the post-

accident medical evaluation; once it was determined by VMLI

that the injury he sustained was not payable under workers’

compensation law, he did not receive any benefits. In other

words, it was specifically determined that the injury he

sustained was not “in whole or in part payable under any

13 work[ers’] compensation law.” However, the majority, in

effect, holds that the evaluation to determine whether

Christy’s injury was payable is considered payment “in part”

under workers’ compensation law. Thus, under the majority’s

opinion, because Christy sought and was ultimately denied

workers’ compensation benefits, he is now precluded from

filing an insurance claim.

For all the foregoing reasons, I would find that the

language of this policy only prohibits a double recovery.

Accordingly, I would reverse the judgment of the trial court

and remand the case for further proceedings.