Case Title: Christy v. Mercury Cas. Co.

Citation: 

Docket Number: 102138

State: virginia

Court: Virginia Supreme Court

Date: 2012-03-02T00:00:00Z

Document:
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. 
 
2 
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). 
 
 
3 
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 
 
4 
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. 
 
5 
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. 
 
6 
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 
 
7 
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. 
 
8 
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 
 
9 
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 
 
10 
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 
 
11 
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[] 
 
12 
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 
 
13 
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 
 
14 
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.