Case Title: Catron v. State Farm Mut. Auto. Ins. Co.

Citation: 

Docket Number: 970582

State: virginia

Court: Virginia Supreme Court

Date: 1998-01-09T00:00:00Z

Document:
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 
 
 
 
 
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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.