House v. American Family Mutual Insurance

837 P.2d 391, 251 Kan. 419, 1992 Kan. LEXIS 140

• Court: Supreme Court of Kansas
• Decided: July 10, 1992
• Docket: 66,481
• Status: Published

Opinions

The opinion of the court was delivered by

Six, J.:

This is a first-impression statutory interpretation case. The statute in question is K.S.A. 40-3110(a) (personal injury protection [PIP] benefits under no-fault auto insurance credited by workers compensation benefits paid). The crafting of a resolution requires the blending of statutory and insurance policy references to PIP payments and workers compensation benefits. Our resolution is linked to legislative intent and the language of the insurance policy.

The district court entered summary judgment for American Family Mutual Insurance Company (American Family), James House’s auto insurance carrier. The Court of Appeals affirmed in an unpublished opinion filed December 13, 1991.

We granted House’s petition for review.

The issue is whether, under K.S.A. 40-3110(a), House is entitled to PIP benefits from his carrier, American Family. Is the statutory credit for workers compensation benefits to be applied to the total wage loss, i.e., House’s pre-accident monthly income, or to the maximum PIP benefits payable under the policy? We endorse the latter, affirming the district court and the Court of Appeals.

Facts

House was injured in a vehicle accident in the course of his employment as a bus driver. He received workers compensation benefits, including $983.67 per month for lost wages.

His average monthly income before the accident was $1,475.50. There was a difference of $491.83 per month between his wages and his workers compensation benefits.

House’s personal automobile policy with American Family included PIP coverage of 85% of lost wages not to exceed $650 per month. The PIP endorsement to the policy provided that the PIP coverage would be reduced by the amount payable for bodily injury under any workers compensation law.

The Parties’ Contentions

American Family contends that it has no liability to House for PIP benefits because the amount of his workers compensation benefits exceeds the policy limits, i.e., $983.67 is greater than $650.

House contends that his monthly PIP benefits should be $418.06. $418.06 is 85% of $491.83, which is the difference between his preaccident monthly income ($1,475.50) and his monthly workers compensation benefits ($983.67).

House also filed suit against the bus company’s insurer and Kansas Insurance Guaranty Association; both were eventually dismissed from the action.

Lower Court Rulings

The material facts are not in dispute and the issue before the trial court was a question of law; the case was ripe for summary adjudication. See Patterson v. Brouhard, 246 Kan. 700, 702-03, 792 P.2d 983 (1990).

The district court and the Court of Appeals agreed with American Family’s contention, concluding that House was not entitled to PIP benefits because PIP benefits were to be reduced by any workers compensation benefits. The maximum PIP benefits payable under the American Family policy ($650) minus his monthly payment under workers compensation ($983.67) is zero.

As a threshold observation we note that K.S.A. 40-3110(a) provides: “No claim for personal injury protection benefits may be made after two (2) years from the date of the injury.” House was injured in 1984; the petition was filed in 1989. American Family raised the statute of limitations as a defense to House’s claim. Neither the district court nor the Court of Appeals reached the limitation claim. Because we find that House is not entitled to receive PIP benefits under the policy, there is no need for us to address the issue.

K.S.A. 40-3110(a)

PIP benefits are defined in the Kansas Automobile Injury Reparations Act (no-fault act), K.S.A. 40-3101 et seq., as “disability benefits, funeral benefits, medical benefits, rehabilitation benefits, substitution benefits and survivors’ benefits required to be provided in motor vehicle liability insurance policies pursuant to this act.” K.S.A. 1991 Supp. 40-3103(q). “Disability benefits” are defined to include lost wages. K.S.A. 1991 Supp. 40-3103(b). K.S.A. 40-3107© provides, in part, that every policy of vehicle liability insurance issued to an owner residing in Kansas shall “include personal injury protection benefits to the named insured . . . not exceeding the limits prescribed for each of such benefits, for loss sustained by any such person as a result of injury.”

K.S.A. 40-3110(a) provides in part:

“Except for benefits payable under any workmen’s compensation law, which shall he credited against the personal injury protection benefits provided by subsection (f) of K.S.A. 40-3107, personal injury protection benefits due from an insurer or self-insurer under this act shall be primary and shall be due and payable as loss accrues, upon receipt of reasonable proof of such loss and the amount of expenses and loss incurred which are covered by the policy issued in compliance with this act.” (Emphasis added.)

House’s motor vehicle liability insurance policy with American Family contained a PIP endorsement with the following provisions:

“2. Limits of Liability

“c. For work loss the maximum amount payable:

(1) Shall not exceed $650 per month for a period of no more than 1 year . . .; and

(2) Shall be limited to 85% of any such work loss ....

“g. Any amount payable by us under this coverage shall be reduced by the amount payable for bodily injury under the workmens’ compensation law or disability benefits law or any similar law.”

House argues that the purpose of the no-fault act and Kansas case law favoring insureds require us to afford him the greatest possible protection. He cites K.S.A. 40-3102: “The purpose of this act is to provide a means of compensating persons promptly for accidental bodily injury arising out of the ownership, operation, maintenance or use of motor vehicles in lieu of liability for damages to the extent provided herein.” As expressions of policy favoring the insured, House relies on Clayton v. Alliance Mutual Casualty Co., 212 Kan. 640, 646, 512 P.2d 507 (1973) (superseded by K.S.A. 40-3108[a], which permits an insurer to disallow “stacking” of certain PIP benefits), and on Van Hoozer v. Farmers Insurance Exchange, 219 Kan. 595, 549 P.2d 1354 (1976) (which set out the rationale for allowing the insured to stack two automobile policies).

In Van Hoozer, we quoted the following from Van Tassel v. Horace Mann Mutual Ins. Co., 296 Minn. 181, 187, 207 N.W.2d 348 (1973):

“ ‘But if the question must be resolved on the basis of who gets a windfall, it seems more just that the insured who has paid a premium should get all he paid for rather than that the insurer should escape liability for that for which it collected a premium.’ ” 219 Kan. at 610.

Having advanced the quote from Van Tassel as an expression of policy favoring the insured, House denies that he would receive a windfall if the policy and statute were to be interpreted in his favor. Under the American Family policy, in the case at bar, he would not receive more than 85% of the shortfall between his pre-accident income and his workers compensation lost wages benefits.

“The fundamental rule of statutory construction is that the intent of the legislature governs. [Citation omitted.] When construing a statute, a court should give words in common usage their natural and ordinary meaning. [Citation omitted.]” Hill v. Hill, 13 Kan. App. 2d 107, 108, 763 P.2d 640 (1988).

K.S.A. 40-3110(a) clearly states that PIP benefits are primary; however, benefits payable under the Workers Compensation Act “shall be credited against” PIP benefits.

The question for resolution is whether the workers compensation credit shall be applied against the total wage loss (preaccident monthly income) or against the maximum PIP amount payable under the policy.

Both parties cite Egy v. United States Fidelity & Guaranty Co., 8 Kan. App. 2d 144, 651 P.2d 954 (1982), aff'd 233 Kan. 234, 661 P.2d 1239 (1983). Egy was injured in an automobile accident. He claimed both workers compensation benefits from his employer s insurance carrier and PIP benefits from his personal automobile insurance carrier. Both insurers refused to pay because it was unclear whether Egy was in the course of employment at the time of the accident. 8 Kan. App. 2d at 145. The Court of Appeals held that Egy had no right to recover PIP benefits until his employment status had been adjudicated. 8 Kan. App. 2d at 152-53.

Egy does not directly address the issue before us in the instant case. The parties in Egy settled as to the obligation of the automobile insurer for PIP wage loss benefits attributable to that portion of Egy’s wage loss which was unsatisfied by the payment of temporary total disability compensation. 8 Kan. App. 2d at 147. The Egy court reasoned that the Workers Compensation Act and the automobile liability policy afforded Egy “concurrent entitlement to benefits subject only to applicable exclusions and coordination, or primacy.” 8 Kan. App. 2d at 150. The phrase, “applicable exclusions and coordination,” however, was not defined.

The language of the policy limitation on the automobile insurer’s obligation to pay PIP benefits in Egy is virtually the same as that in House’s policy. “[A]ny amount payable by the Company under the terms of this coverage shall be reduced by the amount payable on account of such bodily injury under [the Workmen’s Compensation Act of Kansas].” The Egy court approved this language as in accord with K.S.A. 40-3110(a), 8 Kan. App. 2d at 145, observing:

“Under the facts of this case, the trial judge’s decision that plaintiff was entitled to payment of benefits under defendant’s PIP coverage was not correct if the policy provision limiting such benefits by reduction therefrom of ‘the amount payable on account of such bodily injury under [the Workmen’s Compensation Act of Kansas]’ was applicable.” 8 Kan. App. 2d at 149.

A number of other jurisdictions have discussed the “workers compensation benefit credit” issue. Annot., 10 A.L.R.4th 996, § 4. A review of the annotation indicates support for House’s argument. However, the relevant statutes in certain jurisdictions require subtraction of workers compensation benefits from a plaintiff’s actual loss to determine the net loss which would remain compensable under no-fault coverage. See, e.g., United States Fidelity & Guaranty Co. v. Smith, 580 S.W.2d 216 (Ky. 1979); Motley v. State Farm Mut. Ins. Co., 502 Pa. 335, 466 A.2d 609 (1983).

Conversely, support is also found for American Family’s position. See, e.g., Hines v. Potomac Elec. Power Co., 305 Md. 369, 504 A.2d 632 (1986); Smelser v. Criterion Ins. Co., 293 Md. 384, 444 A.2d 1024 (1982); Featherly v. AAA Ins. Co., 119 Mich. App. 132, 326 N.W.2d 390 (1982). The statutes in Maryland and Michigan specifically provide, as does K.S.A. 40-3110(a), that workers compensation benefits shall be credited against PIP benefits payable.

The trial court, in the case at bar, cited Scudella v. Illinois Farmers Insurance Co., 174 Ill. App. 3d 245, 528 N.E.2d 218 (1988), appeal denied 124 Ill. 2d 562 (1989), which held that an auto insurer was entitled to offset workers compensation payments against PIP payments.

House relies on Comeau v. Safeco Ins. Co. of America, 356 So. 2d 790 (Fla. 1978). The statute in Comeau is substantially the same as K.S.A. 40-3110(a). “(4) Benefits; When Due. Benefits due from an insurer under ss. 627.730-627.7405 shall be primary, except that benefits received under any workers’ compensation law shall be credited against the benefits provided by subsection (1) and be due and payable as loss accrues . . .” Fla. Stat. § 627.736 (1990 Supp.). The Comeau court held that “an insurer is required to supplement workmen’s compensation benefits until the insurer has itself paid the limits of liability under its policy for required personal injury protection benefits.” 356 So. 2d at 794. The Florida Supreme Court reasoned that PIP coverage is primary and therefore PIP benefits should be paid in full whether or not any other coverage exists. The statutory provision granting credit for workers compensation benefits merely prevents recovery greater than the plaintiff’s actual loss. 356 So. 2d at 794.

The trial court, in the case at bar, rejected the reasoning in Comeau. Instead, the trial court noted that neither the Workers Compensation Act nor the no-fault act provide full wage replacement. Additionally, K.S.A. 40-284(e) allows uninsured motorist coverage to be excluded or limited to the extent that workers compensation benefits apply. Thus, the trial court concluded that the statutory schemes are designed to “assure basic relief and allocate risk, not effect reparations.” The credit of workers compensation benefits against PIP benefits assures that employers, not automobile liability insurers and their policy holders, bear the cost of employee on-the-job injuries, an allocation clearly within the legislature’s prerogative. There is no windfall to the automobile insurer because surely the carrier considered this factor in calculating its risk, and hence the cost of coverage. The “no windfall” rationale of the trial court has been endorsed in Smelser. 293 Md. at 394.

There are credible arguments in support of both House’s and American Family’s interpretations of K.S.A. 40-31lO(a).

House’s rationale suggests that the coordination of workers compensation benefits and PIP benefits is accomplished by reducing PIP benefits by workers compensation benefits only to the extent necessary to prevent the worker’s total benefits from exceeding his total lost wages. Where the wage loss resulting from a vehicle accident in the course of employment is partially paid by workers compensation, that portion remaining unpaid is a loss which PIP benefits were intended to compensate. The insurer is required to pay the balance up to the maximum amount recoverable under the PIP endorsement.

We do not find support for House’s rationale in K.S.A. 40-3110(a). The expression of such a rationale is, in our view, a matter of legislative policy.

House argues that the reasoning of the cases he cites from other jurisdictions coincides with the reasoning recently employed in Rich v. Farm Bur. Mut. Ins. Co., 250 Kan. 209, 824 P.2d 955 (1992). In Rich, we reversed the trial court’s ruling that the insurance carrier “was bhtitled to set off the urid'erinSured inbtorist benefits it owed against the nonduplicativte PIP benefits it previously paid.” 250 Kan. at 210.

The trial court’s ruling in Rich was based on K.S.A. 1991 Supp. 40-284(e)(6), which provides: “(e) Any insurer may provide for the exclusion or limitation of coverage: . . . (6) to the extent that personal injury protection benefits apply.” The insurer argued that 40-284 allows exclusion of both duplicative and nondriplicative PIP benefits. We rejected the arguinent arid held that “the legislature intended K.S.A. [1991 Supp.] 40-284(e)(6) to peitnit an insured to recover underinsured riiotorist benefits which are not duplicative Of PIP benefits.” 250 Kan. at 216.

The parties in Rich stipulated that none of the damages Rich as plaintiff claimed under the uninsured motorist coverage were dámages to which PIP benefits “apply.” 250 Kan. at 211. Cbftseqúéntlys urider the facts in Rich, the undeifinsured motorist benefits claiined were for damages to which PlP benefits did not apply.

K.S.A. 40-3llO(a) states that workers coinpenSation benefits shall be credited agáinst PIP benefits. The trial court, iri the cáse at bar, followed the statute, crediting the workers compensation benefits against PIP benefits.

American Family’s Policy

Insurance policies are to be enforced as written so long as the terms do not conflict with pertinent statutes or public policy. Where terms are ambiguous, the policy shall be construed to mean what a reasonable person in the position of the insured would have understood them to mean. A policy is not ambiguous, however, unless there is genuine uncertainty as to which of two or more possible meanings is proper. See Penalosa Co-op Exchange v. Farmland Mut. Ins. Co., 14 Kan. App. 2d 321, 322-23, 789 P.2d 1196, rev. denied 246 Kan. 768 (1990), and cases cited therein.

The American Family policy unambiguously states that “any amount payable” under PIP coverage shall be reduced by the amount payable under workers compensation. The maximum amount payable under plaintiffs PIP coverage was $650 per month. Since House received a greater monthly payment under workers compensation, the trial court and the Court of Appeals correctly ruled in American Family’s favor.

We emphasize the plain meaning of K.S.A. 40-3110(a) and the reduction of PIP benefits language in the American Family policy.

If the intent of the Kansas Legislature was to make workers compensation benefits primary, but to require the payment of any remaining uncompensated wage losses by auto insurers as excess coverage, that intent would be apparent somewhere in the language of the pertinent statutes. We find no suggestion that any such result is expected or intended.

The dissent references Todd v. Kelly, 251 Kan. 512, 837 P.2d 381 (1992). Kelly is also a statutory interpretation case. The dissent suggests that the statutory construction analysis we applied to the question in Kelly should be advanced as the analysis to the statutory construction question in the instant case. The questions are not the same. Differing questions frequently call for a differing analysis. Such is the situation in the case at bar and Kelly.

In Kelly, the Court of Appeals for the Tenth Circuit certified a statutory construction case to us. Two statutes, K.S.A. 40-3403(e) and K.S.A. 40-3422, relating to the Health Care Provider Insurance Availability Act, K.S.A 40-3401 et seq., conflicted.

The case at bar neither involved directly conflicting statutes, as did Kelly, nor requires the Kelly statutory construction analysis.

Affirmed.