Opinion ID: 874406
Heading Depth: 2
Heading Rank: 1

Heading: Coregis is entitled to an offset only for the net sum of worker's compensation benefits paid to Cherry.

Text: The amount of the $250,000 policy limit to which Cherry is entitled after Coregis applies the offset provisions depends upon the interpretation of the policy in light of the fact that the worker's compensation benefits received by Cherry were subject to the Fund's statutory subrogation interest. When analyzing Coregis' policy, the district court acknowledged that Farmers paid [Cherry] the limit of its policy with [its insured tortfeasor] in the amount of $100,000. Despite this statement, the district court granted summary judgment in favor of Cherry and ordered Coregis to pay her an additional $100,000 based upon its conclusion that the funds received by Cherry from Farmers were not paid according to the meaning of that word as contained in section D(2)(b). We do not think this is a reasonable interpretation. [2] The verb pay, of which the word paid is the past participle, is a word of common usage meaning to give to (a person) what is due. WEBSTER'S NEW WORLD DICTIONARY 1044 (2d College ed.1976). Farmers has given Cherry $100,000, which it has never recouped. From Farmers' perspective, it has manifestly paid $100,000. The district court's conclusion is only possible by an analysis that focuses on whether Cherry ultimately benefited from the payment, not on whether Farmers gave her the money to which she was entitled. In our view, this analysis results in a distortion of the word paid beyond recognition. For this reason, we vacate the district court's order entered on Cherry's motion to alter and amend. In our view, the more appropriate approach is to evaluate whether money has been paid or is payable by examining the financial impact upon the party responsible for payment. When considering this matter from the perspective of the Fund, one may reasonably assert that the Fund paid one of two different sums: the gross sum of $102,361.01 or the net sum of $36,079.63 after accounting for its recovery of $66,281.38 from Cherry under the statutory subrogation provision of I.C. § 72-223(3). [3] Thus, the question is presented whether the phrase [a]ll sums paid or payable in the D(2)(a) offset provision refers to gross or net sums paid or payable as worker's compensation benefits. This Court has not previously addressed this question. In examining an issue of first impression, it is helpful to look at how other jurisdictions have answered the question. The facts of Wildman v. Nat'l Fire and Marine Ins. Co., 703 N.E.2d 683 (Ind.App.1998), are analogous to the facts in this case. Wildman was injured in an automobile accident while at work, and his employer carried an uninsured/underinsured motorist liability policy with dual offset provisions similar to the provisions in the Coregis policy. Id. at 685. Wildman received funds from a worker's compensation carrier, subject to a statutory lien, which he later repaid with money recovered from the responsible party's insurance company. Id. at 684-85. Wildman argued that his employer's insurer, National, should be able to set-off only those worker's compensation benefits Wildman actually retained, not the amount of benefits he received and then repaid to the worker's compensation carrier pursuant to the statutory lien. Id. at 685. The setoff provision regarding worker's compensation in the National policy stated: Any amount payable under this coverage shall be reduced by all sums paid or payable under any worker's compensation disability benefits or similar law. Id. at 686. The court focused on the meaning of the phrase sums paid or payable in that provision and determined that: Reasonable people reading this language may conclude that this phrase means the amount of worker's compensation benefits originally received by the insured; equally reasonable people may determine that the reduction applies only to those benefits retained after subtraction of the compensation carrier's statutory lien. Because reasonable people may disagree as to whether it includes worker's compensation benefits received subject to a repayment obligation, we conclude that the reduction clause in National's policy is ambiguous. We resolve this ambiguity by construing the language in favor of the insured, Wildman, and against the insurer, National, and hold that National is entitled only to set-off the worker's compensation benefits received which are not subject to a repayment obligation. Id. at 687 (citing Meridian Mut. Ins. Co. v. Cox, 541 N.E.2d 959, 961 (Ind.App.1989) (ambiguous policy language strictly construed against insurer)). The offset provision regarding worker's compensation in the Coregis policy is ambiguous for the same reasons outlined by the Wildman court, and in Idaho, as in Indiana, all ambiguities in an insurance policy are to be resolved against the insurer. Foremost Ins., 102 Idaho at 142, 627 P.2d at 321. We find the reasoning in Wildman to be persuasive and conclude that while Coregis' obligation is reduced by the $100,000 paid by Farmers under section D(2)(b), Coregis' obligation to Cherry is reduced only by the net amount of worker's compensation benefits paid or payable to Cherry under section D(2)(a)$36,079.63. Thus, Cherry is entitled to recover from Coregis an amount equal to the amount she paid to the Fund in order to satisfy the Fund's statutory subrogation interest$66,281.38. We recognize that this conclusion is facially at odds with our previous holding in Am. Foreign Ins. Co. v. Reichert, 140 Idaho 394, 94 P.3d 699 (2004). In Reichert, we examined section D(2)(a) and stated that we found nothing in the offset provision that is ambiguous. 140 Idaho at 399, 94 P.3d at 704. However, we conclude that Reichert is distinguishable from the instant case both legally and factually. Reichert was injured by an uninsured motorist while on the job, and his employer carried liability insurance for uninsured motorists through American Foreign Insurance Company (American). Id. at 397, 94 P.3d at 702. Reichert initiated a worker's compensation claim. Id. The industrial commission, while processing Reichert's claim, decided that funds Reichert received for worker's compensation would not be subject to the subrogation interest set out in I.C. § 72-223. Reichert v. Magic Valley Foods, Inc., IC XX-XXXXXX, Industrial Commission Order at 2 (November 30, 1998). [4] Before the worker's compensation claim proceedings were completed, Reichert and American agreed to arbitrate Reichert's uninsured motorist claim, and the arbitrator granted Reichert a compensatory damage award. Id. Reichert appealed, raising several issues. 140 Idaho at 398, 94 P.3d at 703. The liability policy held by Reichert's employer contained an offset provision almost identical to section D(2)(a) in Coregis' policy. Id. Reichert argued that the offset provision was void in its entirety as against public policy because the insurer knew that all claimants would only receive minimal, if any, coverage because all claimants would also receive worker's compensation benefits. Id. at 399, 94 P.3d at 704. In other words, Reichert was not arguing the gross versus net distinction that Cherry has argued; rather, he was arguing, in the first instance, that no offset for worker's compensation should be allowed at all. This Court disagreed. Id. at 400, 94 P.3d at 705. The dissent urges that Reichert was in essence advancing the same argument that Cherry makes now, that the net money actually retained by the claimant does not reflect the gross compensation within the insurance plan. We believe that this misses the substance of Reichert's argument. Although Cherry's argument is similar to Reichert's to the extent that each claimant was attempting to maximize recovery under the UIM policy, Reichert argued a much broader proposition than does Cherry. He asserted that the worker's compensation offset provision in section D(2)(a) effectively negated the coverage afforded by the policy and thus, coverage was illusory. Accordingly, Reichert asked this Court to declare that the offset provision was void. Cherry does not argue that the offset provision is void or that coverage is illusory. Rather, her argument focuses upon the effect of the Funds assertion of its statutory subrogation interest in her recovery from the third-party tortfeasor. The Fund's assertion of its statutory rights has revealed a latent ambiguity in the language of the offset provision that this Court had no cause to consider under the facts of Reichert: Does the phrase sums paid or payable refer to the gross sum of worker's compensation or to the net sum of worker's compensation after the Fund's subrogation interest is satisfied? The dissent further argues that the Court's definition of payable in Reichert answers the question of whether sums paid or payable refers to gross or net sums. The dissent contends there is no other purpose to use the term `or payable' . . . except to cover funds to which a recipient is entitled, or funds which the recipient received but did not retain. The difficulty with reliance on our holding in Reichert is that this Court was addressing a different question than is presented in this case. Reichert argued that the term payable in the offset provision limited the offset to worker's compensation benefits already paid, as opposed to those that might be paid in the future. Id. at 402, 94 P.3d at 707. The Court held that applying the common understanding of the word `payable,' not only should the benefits that have already been paid to Reichert be deducted from the compensatory damages amount, but also any future benefits which the Industrial Commission awards. Id. Applying the definition of payable in Reichert, we are still confronted with the question whether the use of the phrase sums paid or payable in the offset provision refers to gross or net sums paid (in the past) or gross or net sums payable (presently or in the future). In short, this case presents a markedly different situation than was addressed in Reichert. We conclude that our decision in Reichert is not inconsistent with our resolution of the ambiguity in favor of the insured in the instant case. Accordingly, albeit for different reasons, we affirm the district court's initial decision on summary judgment in which Cherry was awarded $66,281.38.