Hiltner v. Owners Insurance Co.

KAPSNER, Justice,

dissenting.

[1Í31] I respectfully dissent. The answer to the certified question should be ‘Yes.” There are five reasons on which I base this answer:

1. This answer is mandated by the statutory requirement of “legally entitled to collect” provided in Chapter 26.1-40 and gives due regard to the *471“no-fault” provisions of Chapter 26.1-41.
2. This answer does not' violate, but rather accords with, the express legislative intent in the 1989 amendments to Chapter 26.1-40 because it results in no double recovery and comes closest to’making the insured whole.
3. This answer supports the intent of comparative fault and our prior caselaw on comparative fault.
4. This answer is consistent with our prior caselaw interpreting Chapter 26.1-40.
5. A separate premium is paid for the underinsured coverage.

1.

[¶ 32] Section 26.1-40-15.4(l)(b), N.D.C.C., prevents double recovery of no-fault benefits; “Any damages payable to or for any insured for uninsured or. under-insured motorist coverage must be reduced by ... [a]mounts paid or payable under any valid and collectible motor vehicle medical payments, personal injury protection insurance, or similar motor vehicle coverages.” Chapter 26.1-40 does not specifically identify how or when the reduction for medical payments is to be made. However, in paragraph 7, the majority quotes statutory language that is key to a determination of underinsured coverage;

The insurer shall also provide underin-sured motorist coverage at limits equal to the limits of uninsured motorist coverage. Underinsured motorist coverage must pay compensatory damages which an insured is legally entitled to collect for bodily injury, sickness, disease, including death resulting therefrom, of such insured, from, the owner or operator of an underinsured motor vehicle arising out of the ownership, maintenance, or use of such underinsured motor vehicle.

N.D.C.C. § 26.1-40-15.3(1)’ (emphasis added).

[¶ 33] The majority improperly interprets this language in paragraphs 25 and 26 where it rejects N.D.C.C. § 26.1-41-08(l)(b) as an inter-related provision that gives content to the phrase “legally entitled to collect.” Under section 26.1-41-08(l)(b), a secured person is “exempt from liability to pay damages for: .., .[economic loss to the extent of all basic no-fault benefits paid or . to become payable” for accidental bodily injury arising from the operation of a secured motor vehicle. This does not render the phrase “legally entitled to collect” superfluous but, rather, gives content to the phrase. Because the insured cannot collect the no-fault benefits from the owner or operator of the underin-sured motor vehicle, this amount must be deducted from the compensatory damages before allocation of fault because it cannot be considered, in the damages which are collectible under underinsured motorist coverage. The majority is simply wrong in stating, as it does in paragraph 24, that to construe the statute to allow the reduction before the allocation of damages based upon comparative fault would be to reduce the ’ amount of offset provided for in N.D.C.C. § 26.1-40-15.4(l)(b). Hiltner does not contest that she has been paid $30,000 in medical benefits and that her total damages must be reduced by this amount. Because the medical benefits are not based on fault, they are not among the damages that should be allocated by the comparative fault assigned to the individuals involved in this accident.

2.

' [¶ 34] The majority opinion quotes extensively from the legislative history arising from the amendments to the insurance law in 1989. It is unnecessary to repeat *472much of this history except to note that it expresses two main purposes: 1) avoid duplication of .recovery, and 2) make the insured “whole” to the greatest extent possible. The answer propounded by the majority satisfies the first purpose, but violates the second. The answer ‘Tes” satisfies both purposes.

[¶35] The legislative history in paragraph 23 of the majority opinion emphasizes: “Subsection I [of N.D.C.C. § 26.1-40-16.4] does not in any way reduce the amount of coverage that is available for either uninsured or underinsured motorist coverages.” With either answer, Hiltner will have' collected $30,000 in no-fault medical benefits. However, under the- majority’s answer, the full $30,000-' will benefit the insurer and Hiltner will collect approximately $13,000 less of past economic damages from the underinsured motorist coverage. In violation of express legislative intent, her underinsured coverage' will have been reduced. ’ She will not be made “whole” in either case, but she "will be made less “whole” if the' answer is “No.” That result is not 'what the legislature specifically stated it intended when it amended the Chapter in 1989.

3.

[¶ 36] The answer offered by the majority confuses issues .of no-fault and comparative fault. It also gives the full benefit of no-fault medical benefits to one party determined to be at fault, a result at odds ■with our notions of comparative fault under N.D.C.C. ch. 32-03.2. The district court determined three -people were at fault — the .driver, a passenger, and Hilt-ner. Yet, the allocation of the no-fault benefits is entirely to the benefit of the driver’s insurer, resulting in a reduction of underinsured benefits to Hiltner.

[¶ 37] In Haff v. Hettich, 1999 ND 94, ¶35; 593 N.W.2d 383, this Court stated:

The modified (.comparative fault provisions of N.D.C.C. ch. 32-03.2 generally sketch a fault-based tort system for apportionment of fault and damages, while the no-fault provisions of N.D.C.C. ch. 26.1-41 specifically pertain to personal injuries sustained in motor vehicle accidents. Cf. N.D.C.C. § 32-03.2-02.1 (limiting application of comparative fault for property damage sustained in motor vehicle accident). The plain language of the no-fault statutes specifically requires payment of basic no-fault benefits “without regard to fault.” N.D.C.C. § 26.1-41-06, We believe the purpose of the no-fault system to transfer victim compensation for personal injuries arising out of motor vehicle accidents from a fault-based tort recovery to a compulsory no-fault insurance would be seriously undermined if our no-fault statutes applied modified comparative fault principles' to medical malpractice in treating personal injuries sustained in a motor vehicle accident.'

The holding in Haff separates the liability of the respective tortfeasors and maintains the separation of the concept of fault from the concept of no-fault.' The majority’s answer in this case does not. However, deducting the no-faült medical benefits from the damages before allocation of fault would preserve the allocation of fault and the respective liabilities of the parties regarding Hiltner’s injuries. It would preserve the distinction of “no-fault” benefits and comparative fault determinations of liability inherent in our statutory scheme.

[¶ 38] A further problem results from the majority’s answer. Liability was assigned to three persons in this accident. Under N.D.O.C. § 26.1-41-01, an occupant of a secured' motor vehicle- is a secured person who is alsó exempt from'liability under section 26.1-41-08 for no-fault benefits paid. To the extent the court fails to deduct the no-fault benefits before the alio-*473cation of fault, there is a potential for each party at fault to claim a reduction of damages based upon the no-fault benefits paid. See Moser v. Wilhelm, 300 N.W.2d 840, 847 (N.D.1980), decided under the law pri- or to the 1989 amendment:

In this case, the evidence shows that both vehicles involved were “secured motor vehicles” pursuant to Section 26-41-03(16). Therefore, Long, Moser, and Wilhelm [two drivers and a passenger] were all “secured persons” pursuant to Section 26-41-03(17). In accordance with Section 26-41-12, N.D.C.C., all were exempt from liability for economic losses to the extent of all basic no-fault benefits paid or payable. Therefore, because Moser had not exhausted her basic no-fault benefits, she was properly prevented from introducing evidence of economic loss.

Under the answer given by the majority, if Hiltner were to sue the passenger also found to be at fault, the application of the secured person exemption would also reduce collectible damages, a further insult to the express legislative intent of 1989.

[¶ 39] In Norman v. Farrow, 880 So.2d 557 (Fla.2004),.the Supreme Court of Florida was faced with a similar decision about the calculation of damages when a plaintiff had received PIP (personal injury protection) benefits, but was also comparatively negligent. That court held that to harmonize the concepts of personal injury protection benefits, where the injured person “shall have no right to recover any damages for which personal injury protection benefits are paid or payable” with the concept of comparative negligence, the proper allocation was as follows:

Reading these statutes in conjunction, we find that pursuant to section 627.736(3), which bars all recovery of damages paid or payable by PIP benefits, the amount for which PIP benefits have been paid or-payable is to be deducted by the trier of fact from the amount awarded as economic damages in the verdict. Those amounts are not recoverable. Following that deduction, the noneconomic damages awarded should be added and then the percentage of comparative negligence found by the trier of fact is to be applied to reduce the amount of damages which are recoverable from the tortfeasor. The remainder is the amount of the judgment.

Id. at 559-61 (footnotes' omitted). Our statutory scheme of no-fault benefits is very similar to Florida’s personal injury protection benefits. The rationale in the Florida case is clear and accurately reflects the purpose of compensation under a comparative fault system. Following this same rationale, our North Dakota statutes also require reduction for receipt of no-fault benefits before allocation of damages.

4.

[¶ 40] Although the majority .tries to explain to the contrary, our prior caselaw indicates that the answer should be “Yes.”

■ • [¶ 41] Hiltner is correct that this Court has already affirmed a trial court’s refusal to allow an insurer’s request to offset under N.D.C.C. § 26.1-40-15.4(l)(b). See Hartman v. Estate of Miller, 2003 ND 24, 656 N.W.2d 676. In that case, it was not necessary to construe the section because there was no double recovery. ■ Evidence of medical benefits recovered under no-fault provisions had not been allowed at trial. Id. at ¶¶ 24-25. Because N.D.C.C. § 26.1-41-08(l)(b) makes a secured person exempt from liability for no-fault benefits, it is not unusual to prevent the plaintiff in an action based on fault from seeking no-fault benefits already recovered as damages in the action. See Moser, 300 N.W.2d at 847.

*474[¶42] In DeCoteau v. Nodak Mutual Ins. Co., 2000 ND 3, 603 N.W.2d 906, we did an extensive review of the legislative history of the amendments to Chapter 26.1-40 noting specifically “[t]he legislative history reflects the legislature deleted, difference-in-limits-language from the introduced version of what became N.D.C.C. § 26,1-40-15.3(2), see fn. 1, to make insureds “whole’ by allowing them.to recover underinsured benefits until their policy limits are reached or they are fully compensated for their injuries.” Id. at ¶ 12. We reiterated this understanding in Jund v. Johnnie B’s Bar & Grill, Inc., 2011 ND 230, ¶ 14, 814 N.W.2d 776. We noted the Report to House IBL Conference Committee on Engrossed H.B. 1155 states an “intent to amend (if necessary) the wording of engrossed bill H.B. 1155 so that when an insured qualified for underinsured motorists coverage, his policy would respond to the full limit of his coverage and not “be diminished by an offset’ which reduces the actual limit available to the insured.” Id. at ¶ 13. That language, along with the Report’s directive that the “only purpose is to avoid-potential duplication for recovery of the same loss,” guided our decision in Jund, and it should guide our decision in this certified question. In Jund, we construed the language of N.D.C.C. § 26,1-40-15.4(1) “to require the reduction for benefits paid or payable under any WSI law from the insured’s total compensable damages and not from the insured’s under-insured motorist coverage, limit.” Id. at ¶ 17 (emphasis added). . The reasoning of that decision should control our answer to the federal court. Our answer should be “Yes.”

5.

[¶ 43] Our legislature requires insurers to offer underinsui'ed coverage, see N.D.C.C. § 26.1-40-15.3(1), and insurers charge a separate premium for this coverage. It is a separate insurance benefit, which serves the purposes of Chapter 26.1-40. The insurer’s obligation to pay claims under this separate benefit is based on fault, because it is determined by those amounts which the insured is “legally entitled to collect.” It should not be confused with no-fault benefits. Yet, that is the result of the answer that the majority has given to the federal court in this case.

[¶ 44] For these reasons, I dissent. The answer should be “Yes.”

[¶ 45] CAROL RONNING KAPSNER