Opinion ID: 2331458
Heading Depth: 1
Heading Rank: 3

Heading: Workers' Compensation, Self Insurance and UIM

Text: ¶ 18. Bonanno's case has a second issue, however. Bonanno's injury occurred during the course of his employment with Bell Atlantic. When Bonanno sought UIM payments from Bell Atlantic as a self insurer, the company denied any liability for UIM benefits, first claiming that its UIM coverage extended only to the statutory amounts in effect at the time of the accident ($20,000 for one person and $40,000 for two or more people injured or killed) and therefore Bonanno was not underinsured. The company later claimed that its self-insurance plan in Vermont did not include UIM benefits because as a self insurer it was not required to offer such benefits under the law. In any event, Bell Atlantic claimed the exclusivity provision of Vermont's Workers' Compensation Act, 21 V.S.A. § 622, barred any further recovery for Bonanno from the company. ¶ 19. Three factors ground our decision that Bonanno's claim against Bell Atlantic is not precluded by the exclusivity of the Workers' Compensation Act. First, the Legislature intended self insurance to operate on an equal footing with traditional liability insurance. Second, requiring Bell Atlantic to provide UIM benefits to injured workers is not inconsistent with the purpose of the Workers' Compensation Act and our precedents interpreting it, Third, the Legislature's intent to create universal UIM coverage should not be defeated by an employer's choice to self insure. Accordingly, we hold that self-insured employers have the same obligation as commercially insured employers to furnish UIM benefits to workers injured on the job by underinsured motorists.
¶ 20. We begin by addressing whether § 941(f)'s mandate for UIM coverage extends to self insurers. Because § 941(f)(UIM) and 23 V.S.A. § 801(c) (self insurance) are parts of Vermont's motor vehicle financial responsibility system, they must be considered together to discern the Legislature's intent regarding mandatory UIM coverage. Bd. of Trustees of Kellogg-Hubbard Library, Inc. v. Labor Relations Bd., 162 Vt. 571, 574, 649 A.2d 784, 786 (1994) (statutes that are closely related because they deal with the same subject matter or have a similar purpose must be construed with reference to each other). ¶ 21. Vermont's financial responsibility law requires all drivers and owners of automobiles in the state to maintain some form of insurance for liability claims arising from motor vehicle accidents. 23 V.S.A. § 800(a); see also id. § 809 (waiver of proof of financial responsibility shall not be construed to relieve an operator of his or her responsibility to comply with the mandatory insurance requirement set forth in 23 V.S.A. § 800). The statute prescribes either an insurance policy, surety bond, or in lieu thereof, evidence of self insurance. 23 V.S.A. § 800(a). Section 801 authorizes three methods to prove compliance with § 800(a)'s mandatory insurance requirement: (1) a policy of insurance, (2) a surety bond, or (3) a certificate of self insurance. Id. § 801(a), (c). Self insurance, authorized by § 801(c), did not exist at the time of the original provision's adoption in 1927. See 1927, No. 81, § 2. The Legislature authorized self insurance in a 1955 amendment to the statute. See 1955, No. 124, § 1. Except as to amount, the language of § 801(c) remains identical to the 1955 amendment, which allows self insurance in lieu of an insurance policy or bond. 23 V.S.A. § 801(c). In lieu of means instead. See Webster's New International Dictionary 1427 (2d unabr. ed.1961). Instead means equivalent or as a substitute. See id. at 1287. Thus, the Legislature's amendment in 1955 was intended to equate self insurance with a policy of insurance or surety bond. See also 23 V.S.A. § 800(a) (allowing self insurance in lieu of mandatory liability policy or surety bond). ¶ 22. Bell Atlantic argues that the language of § 801(c) limits a self insurer to liability coverage only and does not contemplate UIM coverage. It is true that a self insurer's responsibility under the plain language of § 801(c) is to obtain a certificate of self insurance protecting the driver of the self-insured vehicle against claims where the driver is the tortfeasor. See Champlain Cas. Co. v. Agency Rent-A-Car, Inc., 168 Vt. 91, 97, 716 A.2d 810, 814 (1998) (§ 801(c) provides a relationship between the self-insurer and the tortfeasor and describes it as insurance against the tortfeasor's loss). The pertinent question is not what § 801(c) says alone, however, but whether the Legislature intended § 941(f) to require those who choose to self insure to provide UIM coverage. The answer, we conclude, is unequivocally yes. ¶ 23. Thirteen years after the Legislature adopted self insurance as the third method of proving financial responsibility, it addressed the problem of uninsured motorists by enacting what is now § 941(f) 1967, No. 374 (Adj.Sess.), § 1. Like the present version, Act No. 374 provided that [n]o policy insuring against liability arising out of the use, ownership, or maintenance of an automobile may be issued or delivered in Vermont without an uninsured motorist provision. Id. As explained above, the Legislature added the underinsurance provision in 1980. Bell Atlantic asks this Court to construe the statute to exclude self insurers because § 941(f) refers to a policy of insurance and self insurers do not issue policies. To conclude Bell Atlantic's interpretation of § 941(f) is the correct one, we would have to agree that the Legislature intended § 941(f) to exclude from its protection all motorists insured through self-insurance plans or surety bonds. That construction of § 941(f) is incompatible with the Legislature's intent to equate self insurance with a commercial insurance policy. Cf. Wright v. Smallwood, 308 S.C. 471, 419 S.E.2d 219, 220-21 (1992) (legislative mandate that all automobile insurance policies provide uninsurance coverage requires self insurers to provide uninsurance coverage because self insurance is a substitute for an insurance policy). Moreover, it frustrates the broad remedial purpose underlying the UM/UIM requirement. See Monteith, 159 Vt. at 382, 618 A.2d at 490. Self insurance should not be a way to avoid claims of those persons the Legislature intended to protect through the motor vehicle financial responsibility laws. Nat'l Farmers Union Prop. & Cas. Co. v. Bang, 516 N.W.2d 313, 317 (S.D. 1994). Bell Atlantic has not offered any rationale for making the distinction between commercial insurers and self insurers that it suggests here, and we cannot discern one from the statutory language. Consequently, we conclude that § 941(f) directs mandatory UM/UIM coverage in all forms of motor vehicle insurance, including self insurance, so that all motorists have minimum protection from financially irresponsible drivers. ¶ 24. Interpreting § 941(f) to require UIM coverage for all insured motor vehicles regardless of the form of insurance is consistent with decisions in other states. [1] Construing a statute equating self insurance with a commercial insurance policy, the South Dakota Supreme Court held that self insurers must provide UIM coverage, which the South Dakota legislature required in all motor vehicle insurance policies. Id. In a decision relating to UM coverage, the New Jersey Supreme Court determined that the legislative requirement to carry uninsured motorist coverage applied to self insurers. Christy v. City of Newark, 102 N.J. 598, 510 A.2d 22, 27 (1986). It explained: So strong is the public policy favoring UM coverage that in the absence of an unmistakable legislative declaration to the contrary, we are certain that the foregoing principle applies to any legislatively-authorized self-insurance fund.... Id. at 27-28. In Hartford Insurance Co. v. Hertz Corp., 410 Mass. 279, 572 N.E.2d 1 (1991), the Massachusetts Supreme Judicial Court held self insurers must provide UIM coverage. It reasoned that the broad remedial purpose of UIM would not be served if an automobile owner could avoid maintaining underinsured motorist coverage by becoming self-insured under a motor vehicle liability bond. [2] 572 N.E.2d at 5; see also Heavens v. Laclede Gas Co., 755 S.W.2d 331, 332-33 (Mo.Ct.App.1988) (self insurers must provide UM; holding otherwise would allow self insurers to circumvent statutory mandate for UM coverage). We therefore hold that self insurers must provide UIM coverage like other insurers.
¶ 25. We now address Bell Atlantic's argument that the exclusivity provision of Vermont's Workers' Compensation Act, 21 V.S.A. § 622, bars any recovery for UIM benefits from a self-insured employer. The issue central to this question is whether Bell Atlantic can be considered a third party subject to UIM liability to Bonanno under § 624(a) of the Act. Bell Atlantic asserts that it is not a third party because it is Bonanno's employer. In making this argument, Bell Atlantic ignores this Court's precedent looking favorably on the so-called dual persona or dual capacity doctrine. Under that doctrine, an employer immune from suit by § 622 may be subject to a third-party claim in accordance with § 624(a) if the employer's liability to the victim arises from actions taken in a nonemployer capacity. ¶ 26. In Derosia v. Duro Metal Products Co., 147 Vt. 410, 413, 519 A.2d 601, 604 (1986), we held that a workers' compensation insurer, which is considered the employer under the Workers' Compensation Act, 21 V.S.A. § 601(3), is a third party subject to suit if the insurer undertakes to provide, rather than pay for, benefits and services. 147 Vt. at 413, 519 A.2d at 604. Similarly, we have found no bar to suits against corporate officers who otherwise enjoy employer immunity under § 622 where the officer's negligence arose from a breach of a personal duty rather than a duty owed to the worker by the employer. See, e.g., Gerrish v. Savard, 169 Vt. 468, 471-72, 739 A.2d 1195, 1198 (1999) (third-party exception to exclusivity may in certain circumstances apply to an employer if employer acts in capacity of co-employee in negligently causing accident); Garrity v. Manning, 164 Vt. 507, 511, 671 A.2d 808, 811 (1996) (adopting the Wisconsin rule on dual capacity, which requires examination of the duty breached when assessing whether worker's suit for damages is permissible); see also Dunham v. Chase, 165 Vt. 543, 543, 674 A.2d 1279, 1280 (1996) (mem.) (corporate officer may be subject to co-employee liability for those negligent acts that breach personal duty only rather than nondelegable corporate duty). ¶ 27. Our decision in Libercent v. Aldrich, 149 Vt. 76, 539 A.2d 981 (1987), further supports Bonanno's claim against Bell Atlantic. In deciding that § 624(a) allowed a third-party claim by a state employee against a coworker where the state would defend and indemnify the coworker, we looked at the source of the state's obligation to defend its employees in the workplace negligence suit and determined that it arose independently of its obligations under the Workers' Compensation Act. 149 Vt. at 82-83, 539 A.2d at 985. We explained that the state does not assume direct liability for the acts of an employee; rather its status is analogous to that of an insurer. Id. at 82, 539 A.2d at 985. The same analogy applies in this case, even if the employer is a named defendant. Bell Atlantic's liability for UIM is not direct; rather, Bell Atlantic's liability arises from the negligence of the third-party underinsured driver who caused Bonanno's injuries and the statutory mandate to provide UIM coverage. Bell Atlantic's role in this case, like that of the state in Libercent, is one of an insurer. Like the co-employee tortfeasor in Libercent, the tortfeasor who injured Bonanno remains primarily liable, although the damages Bonanno seeks to recover will come in whole or in part from the employer as UIM insurer. Cf. William v. City of Newport News, 240 Va. 425, 397 S.E.2d 813, 816 (1990) (employer's liability for UIM payments to injured worker flows from judgment obtained against third-party tortfeasor and statute requiring self insurers to provide UIM coverage; the workers' compensation exclusivity provision therefore does not apply); see also Nat'l Farmers Union, 516 N.W.2d at 318 (if employee seeks UIM from employer for injury employer caused, claim is barred by workers' compensation exclusivity, but claim is not barred where third party causes injury). ¶ 28. Thus, under our precedents, we examine the capacity in which the party protected by § 622 was engaged to determine the injured worker's right to pursue additional compensation under § 624(a). Section 622 immunity offers no protection to an insurer or corporate officer who becomes liable to an injured employee for actions taken outside of the employer/employee relationship. The same rule should apply here to Bell Atlantic. Bell Atlantic has chosen a dual role for itself. It is an employer. The company is also an insurer bound to provide UIM coverage on its motor vehicles in accordance with § 941(f). Invoking the dual capacity doctrine here recognizes Bell Atlantic's different and distinct duties toward Bonanno: its duty as an employer to provide workers' compensation, and its duty as an insurer and automobile owner to maintain UIM coverage on its vehicles. ¶ 29. Applying the dual capacity doctrine in this case also makes sense because it furthers the Legislature's intent regarding UIM and self insurance and does no violence to the concepts underlying workers' compensation. The purpose of the Workers' Compensation Act is to eliminate the delays and costs involved in employee/employer litigation over workplace injuries under the common law. See Sienkiewycz v. Dressell, 151 Vt. 421, 423, 561 A.2d 415, 416 (1989) (workers' compensation law was passed for benefit of employees who were victims of industrial injury to avoid cost, delays, and complications of recovery under old common law, with its rules relating to such doctrines as contributory negligence and fellow servant negligence). The Act provides swift compensation to the injured worker in exchange for employer immunity from suit for the worker's injury. Id. Underlying § 941(f) is the legislative desire to protect the insured public from financially irresponsible drivers, Monteith, 159 Vt. at 381, 618 A.2d at 489-90, by requiring all owners or operators of motor vehicles to obtain UIM coverage regardless of the form of insurance. Employer responsibility for an employee's workplace injury is not at issue when the employee seeks UIM benefits from any UIM provider. When the employee seeks UIM payments from the employer, the employee is enforcing the employer's statutory obligation to provide UIM coverage irrespective of the method of insurance. The facial conflict between mandatory UIM coverage, the exclusiveness of the workers' compensation remedy, and the third-party exception to exclusivity can be resolved by harmonizing the statutes to give effect to the legislative intent underlying each. See Vt. Agency of Natural Res. v. Holland, 159 Vt. 21, 23, 613 A.2d 712, 713 (1992) (Where two statutory provisions conflict, interpretations that harmonize and give effect to both are favored.). Bell Atlantic's position, on the other hand, frustrates the Legislature's intent to make UIM coverage universal, even for workers injured by underinsured motorists, solely because Bell Atlantic made a business decision to self insure. See Heavens, 755 S.W.2d at 333 ([I]t would be ... unconscionable to allow an employer to totally avoid providing employees with uninsured motorist coverage by choosing to be self-insured.). It is inconceivable that this result was intended by the Legislature when it enacted § 941(f), which was intended to apply to drivers generally. Therefore, the trial court's decision in Bell Atlantic's favor must be reversed.
¶ 30. The remaining issue is the extent of Bell Atlantic's UIM coverage. Under today's decision if Bell Atlantic's UIM coverage is equal to or less than the tortfeasor's liability coverage of $500,000, Bonanno has recovered all he can from the company for the accident. As one might expect, the parties disagree about the extent of Bell Atlantic's UIM obligation; Bell Atlantic at one time claimed it provided UIM coverage only at the statutory amount, and Bonanno claims the company has no UIM limits because its self insurance coverage is unlimited and the company cannot prove it rejected the higher limits. ¶ 31. Resolution of this dispute requires a factual inquiry into the limits of Bell Atlantic's self-insurance plan because self insurance is a term with no specific legal meaning. 1 L. Russ & T. Segalla, Couch on Insurance 3d § 10-1, at 10-2 (1997). Most often, the term encompasses situations where a large corporation, governmental entity, or charitable organization chooses to forego purchase of a commercial insurance policy in favor of managing its potential risks through the establishment of a reserve fund or purchase of a bond. Id.; see also 1 E. Holmes & M. Rhodes, Holmes's Appleman on Insurance 2d § 2.18, at 326 (1996). In some cases, the self-insured entity purchases a commercial insurance policy with a high deductible so that it meets losses up to that deductible through the entity's own assets. 1 L. Russ & T. Segalla, supra, at 10-3; 1 E. Holmes & M. Rhodes, supra, at 326; M. Flory & A. Walsh, Know Thy Self-Insurance (And Thy Primary and Excess Insurance), 36 Tort & Ins. L.J. 1005, 1007 (2001); see, e.g., McClain v. Begley, 465 N.W.2d 680, 681 (Minn.1991) (company's self-insurance plan entailed a self-insurance reserve of $500,000 before excess insurance policy provided by commercial insurer for an additional $2,500,000 was triggered). ¶ 32. In this case, the record shows that Bell Atlantic purchased an excess liability policy with coverage for its automobiles. In 1999, the policy had a self-insurance retention of $2,000,000, which meant that the company was self insured up to $2,000,000 before the commercial policy was triggered. It is unclear from the record whether the self-insurance retention amount at the time of Bonanno's accident was also $2,000,000, or some other amount. With respect to coverage for UIM, the record also contains conflicting evidence. Deposition testimony from company officials indicated that under Bell Atlantic's self-insurance plan, the company would pay UIM benefits, but only up to the amounts required by statute. Later supplemental interrogatory responses indicated that the company's self-insurance plan in Vermont did not include benefits for UIM because company attorneys advised that Vermont did not require self insurers to provide UIM coverage. Bonanno claims that Bell Atlantic cannot prove that it selected the statutory limits for UIM, rather than providing coverage equal to its general liability limits. See Lecours v. Nationwide Mut. Ins. Co., 163 Vt. 157, 159, 657 A.2d 177, 179 (1995) (although insurer has burden to prove the insured rejected higher UM limits, the rejection need not be in writing). ¶ 33. The trial court did not determine the extent of Bell Atlantic's liability, if any, because it granted the company summary judgment on the applicability of the workers' compensation exclusivity bar. Like the trial court, we review the record to determine if a genuine dispute over material facts exists and any party is entitled to judgment as a matter of law. See V.R.C.P. 56(c)(3) (summary judgment proper when no genuine material facts are in dispute and any party is entitled to judgment as a matter of law); Mellin v. Flood Brook Union Sch. Dist., 173 Vt. 202, 211, 790 A.2d 408, 417 (2001) (Court uses same summary judgment standard on appeal as trial court used below). It is apparent from the conflicting factual record before us now that summary judgment on Bell Atlantic's self-insurance limits is not appropriate. We therefore remand the matter back to the trial court for final determination In Supreme Court Docket No. 2000-053. we answer the certified question in the negative. In Supreme Court Docket No. 2000-410, we affirm the court's judgment for appellee American Protection Insurance, and we reverse the judgment in favor of appellee Bell Atlantic Communications, Inc. and remand for further proceedings consistent with this opinion.