Present: All the Justices
CARL R. CATRON
OPINION BY JUSTICE A. CHRISTIAN COMPTON
v. Record No. 970582 January 9, 1998
STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY, ET AL.
FROM THE CIRCUIT COURT OF THE CITY OF ROANOKE
Richard C. Pattisall, Judge
In this insurance case, we must determine the respective
underinsurance obligations of a self-insurer and a commercial
insurer under two statutes, one codified among the insurance laws
and the other codified among the motor vehicle laws.
The facts were stipulated. On June 15, 1989, appellant
Carl R. Catron, an employee of appellee Roanoke County acting
within the scope of his employment, was injured when a Roanoke
County vehicle that he was operating collided with a vehicle
operated by Brian D. Layman.
At the time of the accident, Layman was insured under a
policy issued by Rockingham Casualty Company that provided
liability coverage limits of $100,000 for each person injured.
At the same time, Catron was the named insured under a policy
issued by appellee State Farm Mutual Automobile Insurance Company
that provided uninsured motorist coverage limits of $100,000 for
each person.
At the time, Roanoke County was self-insured for automobile
liability and uninsured motorist coverage purposes, and also for
workers' compensation purposes. The County's limit of liability
for uninsured motorist coverage was $25,000 for each person.
The County has paid in excess of $222,325 in benefits to
Catron pursuant to its obligations under the Virginia Workers'
Compensation Act for injuries he sustained in the accident. The
County continues to be liable for benefits under the Act.
Rockingham tendered a check to Catron in the amount of
$100,000, its policy limits. The County claims entitlement to
those proceeds as a result of its payment of workers'
compensation benefits.
In July 1994, Catron filed the present motion for
declaratory judgment naming State Farm, Layman, the County, and
Rockingham as defendants. Asserting he has incurred medical
expenses and lost wages in excess of $125,000, plaintiff asked
the court to declare that State Farm has the obligation to pay
him $25,000 based on the applicable priority of underinsured
coverage in the case. State Farm denied that it owed the
plaintiff any insurance benefits under the circumstances.
The pleadings and stipulation presented a pure question of
law and, upon consideration of argument of counsel, the trial
court ruled against the plaintiff. The court held that State
Farm's uninsured/underinsured motorist coverage was primary
coverage and that it owed no payment to the plaintiff. The court
also held that the self-insured uninsured/underinsured motorist
benefit provided by the County was secondary coverage.
The plaintiff appeals. The County, although nominally an
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appellee, supports the plaintiff's position on appeal.
We shall summarize the statutes pertinent to this
controversy. The uninsured motorist statute requires a motor
vehicle liability policy to provide at least $25,000 for each
person in uninsured motorist coverage through provisions that
"also obligate the insurer to make payment for bodily injury
. . . caused by the operation or use of an underinsured motor
vehicle to the extent the vehicle is underinsured, as defined in
subsection B of this section." Code § 38.2-2206(A).
Subsection B states that a motor vehicle is "underinsured"
if "the total amount of bodily injury . . . coverage applicable
to the operation or use of the motor vehicle and available for
payment for such bodily injury . . . is less than the total
amount of uninsured motorist coverage afforded any person injured
as a result of the operation or use of the vehicle." Code
§ 38.2-2206(B).
The same subsection provides that "available for payment"
means "the amount of liability insurance coverage applicable to
the claim of the injured person for bodily injury . . . reduced
by the payment of any other claims arising out of the same
occurrence." Id.
A focus of this appeal is upon the following provisions of
subsection (B).
"If an injured person is entitled to underinsured
motorist coverage under more than one policy, the
following order of priority of policies applies and
any amount available for payment shall be credited
against such policies in the following order of
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priority:
1. The policy covering a motor vehicle occupied by
the injured person at the time of the accident;
2. The policy covering a motor vehicle not
involved in the accident under which the injured
person is a named insured;
3. The policy covering a motor vehicle not
involved in the accident under which the injured
person is an insured other than a named insured;
Where there is more than one insurer providing
coverage under one of the payment priorities set
forth, their liability shall be proportioned as to
their respective underinsured motorist coverages."
The appeal also focuses on Code § 46.2-368 (formerly
§ 46.1-395), codified among the motor vehicle laws. This statute
deals with the discretionary power of the Commissioner of the
Department of Motor Vehicles to issue certificates of self-
insurance.
It specifies the certificate must provide protection
against an uninsured or underinsured motorist "to the extent
required by § 38.2-2206." It also provides that "protection
against the uninsured or underinsured motorist required under
this section . . . shall be secondary coverage to any other valid
and collectible insurance providing the same protection which is
available to any person otherwise entitled to assert a claim to
such protection by virtue of this section." § 46.2-368(B).
On appeal, the plaintiff contends the trial court erred in
ruling that the credit priorities of § 38.2-2206(B) were reversed
by the "secondary" language of § 46.2-368(B).
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The plaintiff argues he met the definition of
"underinsured" in 2206(B). He says the amount of coverage
"available for payment" is $100,000, the full amount of the
bodily injury liability coverage of Layman's Rockingham policy.
This sum is less than the total amount of uninsured motorist
coverage afforded him, which is $125,000 (the County's $25,000
uninsured coverage plus the plaintiff's $100,000 State Farm
policy in which he was the named insured). Consequently, he
argues, he was underinsured in the amount of $25,000.
Continuing, the plaintiff argues that the "order of
priorities for crediting an amount available for payment against
the underinsured coverage is controlled by § 38.2-2206(B)(1)."
He contends that the statutory language establishes the following
order of credits: (1) $25,000 uninsured coverage from the County
(the policy covering the vehicle occupied by the injured person
at the time of the accident); and (2) $100,000 uninsured coverage
from plaintiff's State Farm policy (the policy covering a vehicle
not involved in the accident but under which the injured person
is a named insured).
Therefore, the plaintiff contends, "[t]he entire $25,000 of
Roanoke County's coverage is covered by the $100,000 credit. The
remaining $75,000 of that $100,000 credit covers $75,000 of State
Farm's $100,000." Thus, plaintiff concludes, $25,000 remains and
State Farm will owe that amount if his personal injury claim is
tried or settled for an amount equal to or more than $125,000.
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State Farm, on the other hand, argues the trial court
correctly ruled that its coverage was primary and the County's
coverage was secondary. Because the municipal self-insurance is
secondary, State Farm argues, State Farm's coverage assumes the
"position of primary coverage in the UIM calculation," meaning
that "State Farm's policy is first in line for payment and also
for the credit generated by the available liability coverage."
Thus, it contends, "that credit covers all of State Farm's
potential coverage, and State Farm owes nothing in this case."
State Farm argues "the legislature meant what it said" in
Code § 46.2-368(B) "when it made a self-insurer `secondary' for
purposes of coverage analysis under the Virginia UM/UIM statute,
Code § 38.2-2206." Embarking on what it calls a "chronological
review of the relevant statutory and decisional history" of the
subject, State Farm urges there is "no doubt" that the County,
"as a UM/UIM self-insurer, is subject to the requirements of Code
§ 38.2-2206 in all respects except that its coverage is
`secondary' for all purposes."
State Farm argues that, since 1972, "former Code § 46.1-395
and current Code § 46.2-368 have required self-insurers to
provide UM coverage, but have placed self-insurers categorically
in the `secondary' position for purposes of UM coverage
priority." State Farm contends that, in 1988, "sixteen years
after self-insurers first became obligated to provide `secondary'
UM coverage, Code § 38.2-2206 was amended to create a single,
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statutory priority rule for multiple applicable UIM coverages --
a priority that governs the order in which the coverages line up
both for payment and for allocation of the `credit' for available
liability coverage."
Continuing, State Farm urges that, regarding "coverage on
the vehicle involved in the accident, self-insured coverage
ordinarily would be first priority UIM coverage for purposes of
payment and allocation of the credit under Code § 38.2-2206. The
categorical command of Code § 46.2-368, however, makes the self-
insured coverage `secondary' to all other coverages, meaning that
it comes last for purposes of payment and allocation of the
credit. This is the conclusion that the trial court correctly
reached in this case."
Finally, State Farm contends the plaintiff's argument rests
on a "misreading" of Code § 38.2-2206. It claims the General
Assembly did not intend "to make self-insurers secondary for some
purposes but primary for other purposes under Code § 38.2-2206."
It argues "Code § 38.2-2206(B) establishes a single order of
priority among applicable UIM coverages and endows that order of
priority with two consequences: it governs both the order in
which UIM coverage pay[s] and the order in which available
liability insurance is credited. Code § 46.2-368 make[s] self-
insured UM/UIM coverages `secondary' to all other coverages for
all purposes, without distinction." We do not agree with State
Farm.
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We have already determined "the language of Code § 38.2-
2206(B) to be clear and unambiguous." Dairyland Ins. Co. v.
Sylva, 242 Va. 191, 195, 409 S.E.2d 127, 129 (1991). And, when
statutory language is clear and unambiguous, "there is no need
for construction by the court; the plain meaning and intent of
the enactment will be given it." Brown v. Lukhard, 229 Va. 316,
321, 330 S.E.2d 84, 87 (1985). Unless a literal interpretation
of statutory language will amount to a manifest absurdity, courts
should not adopt a construction that, in effect, holds the
legislature did not mean what it actually has expressed. Sylva,
242 Va. at 194, 409 S.E.2d at 129.
We shall read § 38.2-2206(B) literally, for the moment
without regard to § 46.2-368. The applicable "order of priority
of policies" dictates that the sum available for "payment" shall
be "credited" against the several policies in "the following
order of priority:" first, the County's $25,000, from the policy
covering the County motor vehicle occupied by the plaintiff at
the time of the accident (there is no dispute that a self-
insurer's certificate of insurance is equivalent to an insurance
"policy" for purposes of this controversy); second, State Farm's
$100,000, from the policy covering a motor vehicle not involved
in the accident under which the plaintiff was the named insured.
Code § 46.2-368(B), however, provides that the "protection
against the uninsured or underinsured motorist required under
this section . . . shall be secondary coverage to any other valid
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and collectible insurance providing the same protection which is
available to any person otherwise entitled to assert a claim to
such protection by virtue of this section." We hold that this
language does not alter or reverse the credit priorities, as
opposed to the payment priorities, set forth in § 38.2-2206(B).
The General Assembly, in what is now § 46.2-368, has
recognized "a distinction in the financial implications of
recovery from self-insurers and recovery from commercial
insurers." William v. City of Newport News, 240 Va. 425, 432,
397 S.E.2d 813, 817 (1990). The legislature has placed self-
insurers in a favored status. For example, the proviso in Code
§ 38.2-2206(I) requires a self-insurer's workers' compensation
payments to be set off against any judgment for damages awarded
pursuant to the statute for personal injuries resulting from the
industrial accident.
Consistent with the foregoing legislative policy, the
General Assembly has not specified that the "secondary" language
in 368 modifies the credit priority design of 2206. Nowhere in
368 are the words "credit" or "priority" used. Surely, if the
General Assembly had intended 368 to modify the credit priorities
of 2206, it would have included language to effect that purpose,
so that a self-insurer always would be prohibited from assuming a
first priority credit position. This has not been done.
As the plaintiff points out, State Farm seeks a reading of
the statutes "that will push its $100,000 credit ahead of Roanoke
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County's $25,000 credit, so that its underinsurance coverage will
be totally set off by the credit, and the County will therefore
bear the entire burden of the underinsurance coverage . . . .
[T]his would totally defeat the legislative intent behind § 46.2-
368(B)."
Finally, State Farm relies heavily on Hackett v. Arlington
County, 247 Va. 41, 439 S.E.2d 348 (1994), a case decided before
the 1995 amendment to § 46.2-368(B) that obligated self-insurers
to provide underinsured motorist coverage. See Acts 1995, ch.
85. There, we stated: "The sole question presented in this
appeal is whether Arlington County, a self-insured entity, is
required to provide underinsurance coverage to an employee." 247
Va. at 42, 439 S.E.2d at 348. Interpreting § 46.2-368(B) with
§ 38.2-2206, we answered the query in the affirmative. Hackett
is not controlling here. The issues in the two cases are
entirely different.
Consequently, we hold that the trial court erred in ruling
§ 46.2-368(B) modified the credit priorities of § 38.2-2206. We
will reverse the judgment below and enter final judgment here in
favor of the plaintiff. We will declare that Code § 38.2-2206(B)
controls the coverage credit priorities in this case and that
State Farm is liable to the plaintiff for $25,000 if there is a
settlement or judgment in the plaintiff's personal injury claim
equal to or in excess of $125,000.
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Reversed and final judgment.
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