Opinion ID: 2548987
Heading Depth: 2
Heading Rank: 2

Heading: is american's uninsured motorist coverage endorsement paragraph d2(a) (offset provision) void?

Text: This Court exercises free review in determining whether an insurance contract is ambiguous. Clark v. Prudential Property and Cas. Ins. Co., 138 Idaho 538, 541, 66 P.3d 242, 245 (2003). When the policy language is unambiguous, coverage must be determined, as a matter of law, according to the plain meaning of the words used. Id. Although a contract may be unambiguous, if it violates public policy, it is illegal and unenforceable. Martinez v. Idaho Counties Reciprocal Mgmt. Program, 134 Idaho 247, 252, 999 P.2d 902, 907 (2000). Policies that are approved by the Director of the Department of Insurance are presumed to be in accordance with public policy. Hansen v. State Farm Mut. Auto. Ins. Co., 112 Idaho 663, 667-68, 735 P.2d 974, 978 (1987). Absent an assertion to the contrary, this Court assumes the policy was submitted to and approved by the Director. Id. at 667, 735 P.2d at 978. However, in our review of the policy if it is determined that the policy only provides an illusion of coverage for its premiums the policy will be considered void for violating public policy. Vincent v. Safeco Ins. Co. of America, 136 Idaho 107, 111-12, 29 P.3d 943, 947-48 (2001); Martinez, 134 Idaho at 252, 999 P.2d at 907. Public policy interests are served by preventing double recovery from worker's compensation benefits. See Barnett v. Eagle Helicopters, Inc., 123 Idaho 361, 364, 848 P.2d 419, 422 (1993); Schneider v. Farmers Merchant, Inc., 106 Idaho 241, 243-44, 678 P.2d 33, 35-6 (1983). The provision in dispute provides that Any amount payable under this coverage shall be reduced by all sums paid or payable under any workers' compensation, disability benefits or similar law[.] (This provision is hereinafter referred to as the offset provision). Reichert argues that the offset provision is void because American knew that all claimants would only receive minimal, if any, coverage because all claimants would also receive worker's compensation benefits. In support of his argument Reichert relies on Martinez v. Idaho Counties Reciprocal Mgmt. Program, 134 Idaho 247, 999 P.2d 902 (2000). In our review, we found nothing in the offset provision that is ambiguous and we assume the Director approved this policy and it comports with public policy. The Martinez case does not apply to these facts. In Martinez, this Court held that the uninsured motorist coverage issued to the city was illusory. Martinez, 134 Idaho at 252, 999 P.2d at 907. The city paid premiums for something they thought they were receiving, but due to the exclusion provisions the coverage did not exist. Id. at 251-52, 999 P.2d at 906-07. The policy was ambiguous as to uninsured motorist coverage. Id. at 250, 999 P.2d at 905. The insurance policy drafters could not agree on the policy interpretation. Id. at 251, 999 P.2d at 906. The insurance company alleged in their pleadings the city had purchased uninsured motorist coverage. Id. However, the clear language of the policy stated uninsured motorist coverage is extended automatically to those states that require it and when the state does not require it, coverage is not extended. Id. at 250, 999 P.2d at 905. Because Idaho does not require uninsured motorist coverage, the Court was unable to understand how the City of Rathdrum was covered at the time of the accident under the plain language of the policy. Id. at 251, 999 P.2d at 906. The Court then assumed uninsured motorist coverage existed, but determined that the policy provision only extended coverage to employees and then exempted coverage to any employee who could file a worker's compensation claim and therefore coverage was illusory. Id. at 252, 999 P.2d at 907. The Martinez case is distinguishable. In the instant case, the policy is unambiguous, unlike the policy in the Martinez case. The employees are not exempted from coverage if they could file a worker's compensation claim. Instead of an exemption, the policy drafters limited insurance to allow an offset for worker's compensation benefits. This prevents an injured victim from receiving a double recovery. Lastly, there is a difference in the definitions of who is an insured under the policies. Under this policy, not only does it include employees, but also anyone occupying a covered auto. We hold that the offset provision is consistent with the public policy against double recovery for worker's compensation benefits and is valid.