Title: Windle v. Alabama Ins. Guar. Ass'n

State: alabama

Issuer: Alabama Supreme Court

Document:

591 So. 2d 78 (1991)
Clara M. WINDLE
v.
ALABAMA INSURANCE GUARANTY ASSOCIATION, et al.
1900910.

Supreme Court of Alabama.
December 6, 1991.
*79 McCoy Davidson of Roberts, Davidson, Wiggins & Crowder, Tuscaloosa, for appellant.
John A. Owens and K. Scott Stapp of Phelps, Owens, Jenkins, Gibson & Fowler, Tuscaloosa, for appellees.
INGRAM, Justice.
The issue in this case is whether, and, if so, to what extent, the payment of uninsured motorist benefits by Alfa Insurance Company offsets or reduces the amount the Alabama Insurance Guaranty Association ("AIGA") is obligated to pay for a "covered claim" under a policy of insurance issued by the now insolvent Champion Insurance Company.
In her complaint, Clara M. Windle alleged that on February 25, 1988, Rebecca L. Smith caused an automobile accident that resulted in severe personal injuries to Windle. Smith was insured by Champion at the time of the accident. On March 24, 1989, Windle sued Smith and Alfa, Windle's uninsured/underinsured motorist coverage carrier. On June 5 and 6, 1989, Champion was declared insolvent and liquidation was ordered. The AIGA assumed Smith's defense. Thereafter the parties agreed to allow the AIGA to intervene as a party pursuant to a stipulation that read as follows:
The trial court held that the AIGA was relieved of any obligation to the plaintiff by Alfa's payment of the uninsured motorist benefits in the amount of $20,000. Windle appealed.
Ala.Code 1975, § 27-42-2.
It is apparent from the Alabama Insurance Guaranty Association Act, §§ 27-42-1 to 27-42-20, Ala.Code 1975, that the legislature did not intend that the AIGA stand in the stead of the insolvent insurer. Indeed, when the statutory limitations regarding payment of claims are read along with this avowed purpose, one sees that the effect of the Act is not necessarily to provide the claimant or insured the same coverage or dollar recovery he would have realized had his carrier not become insolvent. K. Bowdre, Guaranty Association Law in Alabama, 20 Cumb.L.Rev. 321, 331 (1990) (citing Indiana Insurance Guaranty Association v. William Tell Woodcrafters, Inc., 525 N.E.2d 1281, 1285-86 (Ind. App.1988)). There are limits as to what type of claim will be paid. For example, the AIGA is obligated
Ala.Code 1975, § 27-42-8(a)(1) (emphasis supplied).
A "covered claim" is defined as
Ala.Code 1975, § 27-42-5(4).
Under the Act, for a claim to qualify as a "covered claim" the following requirements must be met:
Bowdre, supra, at 342 (emphasis supplied).
The "covered claim" the AIGA was obligated to pay as a result of Champion's insolvency was the amount of Windle's claimed damages (over $60,000), limited by the terms of Smith's Champion insurance *81 policy ($20,000); therefore, the amount of the "covered claim" is $20,000.
At issue in this appeal is whether, and, if so, to what extent, a "covered claim" is to be reduced by payment of uninsured motorist benefits under § 27-42-12(a), which states:
(Emphasis supplied.)
This Court has held that the AIGA is entitled to reduce "covered claims" by amounts recovered under uninsured motorist policies. See Alabama Insurance Guaranty Association v. Hollingsworth, [Ms. 1900334, June 7, 1991], 1991 WL 101543 (Ala.1991) (citing Alabama Insurance Guaranty Association v. Magic City Trucking Service, Inc., 547 So. 2d 849 (Ala. 1989); Alabama Insurance Guaranty Association v. Colonial Freight Systems, Inc., 537 So. 2d 475 (Ala.1988)). Therefore, the question raised on this appeal is to what extent those payments of uninsured motorist benefits affect Windle's possibility of recovery from the AIGA.
Windle argues that the amount of recovery from Alfa should reduce her actual claim for damages but not the policy limit or statutory limit of the "covered claim." As stipulated in this case, the parties agree that Windle's actual damages exceed $60,000; therefore, she argues that the AIGA's obligation to pay, i.e., its obligation to pay the $20,000 "covered claim," would not be extinguished by the $20,000 paid by Alfa on Windle's uninsured motorist policy. Under her theory, she would be entitled to $20,000 from Alfa and to $20,000 from the AIGA. The AIGA contends that the language of the statute clearly and unambiguously states that the amount of recovery on the uninsured motorist policy reduces the amount of the "covered claim."
The language of the statute clearly states that the amount of the recovery on the uninsured motorist policy reduces the amount payable by the AIGA on the "covered claim." Because a "covered claim" is, by definition, limited to the amount of the policy issued by the now insolvent insurer, see Ala.Code 1975, § 27-42-5(4), and because that amount in this case was $20,000, we hold that the amount recovered as uninsured motorist benefits ($20,000) reduces and extinguishes the "covered claim" the AIGA was obligated to pay, thereby relieving the AIGA of any obligation to pay.
AFFIRMED.
HORNSBY, C.J., and ALMON, ADAMS and STEAGALL, JJ., concur.