Bolin v. Allstate Indemnity Company

Filing 29

ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT. 14 Defendant's Motion is Granted and 19 Plaintiff's Motion is Denied. THIS ORDER REPLACES 28 AS IT WAS ENTERED IN ERROR AND IS WITHDRAWN. Signed by Judge Richard F. Cebull on 10/19/2010. (EMA)

Bolin v. Allstate Indemnity Company

Doc. 29

IN THE UNITED STATES DISTRICT COURT FO R THE DISTRICT OF MONTANA B U T T E DIVISION

J E N N IFE R BOLIN, individually and on b e ha lf of all others similarly situated,

) ) ) P la intiffs , ) ) vs . ) ) A LLS T A T E INDEMNITY COMPANY, ) a nd all parent, affiliate and subsidiary ) c o mp a nie s thereof, ) ) D e fe nd a nt. ) ___________________________________ )

C a us e No. CV 09-83-RFC

O R D ER

T he Order on the Parties' cross-motions for summary judgment, dated O c to b e r 18, 2010, (Doc. 28) was entered in error. Accordingly, IT IS HEREBY O R D E R E D that it be WITHDRAWN and replaced by the following. I. I NTRODUCTION T his is a class action suit brought by named Plaintiff Jennifer Bolin, and o the rs similarly situated, against Defendant Allstate Indemnity Company. Presently b e fo re the Court are Cross-Motions for Partial Summary Judgment. The motions
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Dockets.Justia.com

are fully briefed and the Court is prepared to rule. A lls ta te ' s motion seeks partial summary judgment on Bolin's claims that A lls ta te is required to compensate Bolin, and all class members, for attorneys' fees a nd costs as alleged uncompensated damages under medical payments coverage, unins ure d motorist coverage, and underinsured motorist coverage.1 P la intiffs move for partial summary judgment on their claims that Allstate's " p ro gra mma tic claims adjustment" practice of taking credit for other personal, p o rta b le first party insurance benefits when adjusting its insured's claims constitutes d e facto subrogation. II. B ACKGROUND T his case was initiated in Montana's Eighteenth Judicial District Court, G a lla tin County, on October 13, 2009. Allstate removed to this Court on N o ve mb e r 13, 2009. In representing the putative class, Bolin alleges that on July 1, 2 0 0 7 , she was injured in an automobile accident. She suffered injuries with medical e xp e ns e s in excess of $15,000. Bolin was insured by Allstate with per person per accident coverage of $ 5 0 ,0 0 0 underinsured motorist ("UIM") coverage and $5,000 Medical Payments C o ve ra ge ("MPC"). Upon Bolin's request, Allstate paid the medical payment limits
1

AMENDED COMPLAINT ¶¶ 14-23. Page 2 of 17

arising from the accident, but refused payment at that time under the UIM coverage. The tortfeasor was insured by Farmers Insurance, with Bodily Injury ("BI") p o lic y limits of $30,000 per person per accident. Farmers paid Bolin the $30,000 B I limits without a release of claims against its insured. At the time of the accident, Bolin was also insured by Sentinel/Hartford Ins ura nc e Company ("Hartford") with stackable limits totaling $100,000 for UIM c o ve ra ge and $10,000 MPC. Upon Bolin's request, Hartford paid Bolin the $ 1 0 ,0 0 0 MPC limits for medical expenses, but Hartford paid nothing under the UIM c o ve ra ge policy. At the time of the accident, Bolin was paying premiums to H a rtfo rd for UIM and MPC coverage. In total, Bolin received $45,000 for injuries arising from the July 1, 2007 a uto mo b ile accident. In addition, Bolin alleges she incurred $14,499 attorney fees in recovering her losses arising from the accident.2 She further alleges that she c o ntinue s to suffer accident-related pain and limitations in her daily activities.3 O n March 29, 2010, this Court granted Allstate's Motion to Dismiss the O rigina l Complaint without prejudice. In granting the motion, this Court rejected

PLAINTIFFS' COMBINED STATEMENT OF GENUINE ISSUES AND STATEMENT S OF UNDISPUTED FACTS, ¶ 13.
3

2

Id., ¶ 13. Page 3 of 17

Bolin's argument that "because she has not been reimbursed for her attorney fees a nd costs from the tortfeasor, she has not been made whole."4 In that same Order, the Court allowed Plaintiffs to renew their claims if Bolin could allege recoverable d a ma ge s , other than attorney fees and cost, in excess of the payments she had a lre a d y received.5 Bolin has since filed an Amended Class Action Complaint a lle ging she continues to suffer accident-related pain and limitations in her activities o f daily living. III. A NALYSIS A. S TANDARD OF REVIEW

S umma ry judgment "should be rendered if the pleadings, the discovery and d is c lo s ure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c)(2). Here, the facts are undisputed and since the interpretation of a n insurance contract is a question of law, Modroo v. Nationwide Mut. Ins. Co., 191 P .3 d 389, 395 (Mont. 2008), the issues raised by these motions are appropriate for s umma ry judgment.

4

See Doc.# 11, pp 3-4. Id. Page 4 of 17

5

B.

D EFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT

A lls ta te seeks judgment as matter of law that it is not required to compensate B o lin, and all members of the class she purports to represent, for attorney's fees and c o s ts as alleged uncompensated damages under MPC, UIM and UM coverage. In support, Allstate cites the Order of March 29, 2010, wherein this Court he ld that attorney's fees are not an element of damages that are recoverable in tort.6 B o lin' s sole response to Allstate's Motion is that she has sufficiently alleged in her Amended Class Action Complaint that she has incurred damages in excess of the underlying BI limits of $30,000. As such, Bolin asks this Court to deny A lls ta te ' s partial summary judgment motion. A lls ta te concedes Bolin has alleged damages in excess of $30,000, but asks tha t the Court enforce its prior March 29, 2010 ruling that attorney's fees are not an e le me nt of damages recoverable in tort law. Having reviewed the Parties' arguments, this Court concludes there is no re a s o n for this Court to reconsider its March 29, 2010 ruling. Allstate's Motion for P a rtia l Summary Judgment on this issue must therefore be granted. C. P LAINTIFFS' MOTION FOR SUMMARY JUDGMENT

Plaintiffs allege Allstate's "programmatic claims adjustment" practice of
6

Doc. #11, pp. 3-4. Page 5 of 17

taking credit for other personal, portable first-party insurance benefits when a d jus ting its insured's claims violates Montana's "made whole" doctrine and c o ns titute s de facto subrogation. In response, Allstate contends it is not attempting to avoid paying any und e rins ure d motorist coverage benefits. Rather, under the "duplicate payments" p ro vis io n of its MPC and UIM coverages, it has the right to reduce the damages re c o ve ra b le by other payments Bolin has already received. A s the Court understands it, Bolin does not want Allstate to consider H a rtfo rd ' s $10,000 medical payment coverage in its calculations of damages re c o ve ra b le as underinsured motorist benefits. Rather, Bolin argues this Court s ho uld ignore Hartford's payment so that she may receive that same amount through he r underinsured motorist policy with Allstate. 1. C REDITS, DUPLICATE PAYMENTS AND OFFSETS

Bolin, on behalf of the Class, contends that Allstate's act of taking credit for o the r personal, portable first-party insurance benefits when adjusting constitutes de fa c to subrogation. However, this Court's review of Montana cases reflects support, w ithin the insurance context, for the use of credits, offsets and exclusions on d up lic a te payments.

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In Farmers Alliance Mut. Ins. Co. v. Miller, 869 F.2d 509, 513 (9 th Cir. 1 9 8 9 ), the court looked at Montana's underinsured motorist law and noted that und e rins ure d motorist coverage "presupposes some liability insurance but acts as a ga p -fille r, ensuring that the insured recovers at least the amount he is insured for, e ve n if the tortfeasor's insurance coverage is deficient." Id. Recovery in excess of the gap between the victim's underinsured motorist coverage and the tortfeasor's lia b ility coverage would not be underinsured motorist recovery at all; it would e ffe c tive ly be recovery under a judicially created collision policy. Id. A ltho ugh the Miller court limited its reasoning to offsets that resulted from lia b ility insurance held by a tortfeasor, it nevertheless acknowledged the possible a p p lic a b ility of offsets from other sources. Id. In Liedle v. State Farm, 283 Mont. 129 (1997), the Montana Supreme Court up he ld a reduction, under the collateral source reduction statute, of medical payment ins ura nc e benefits. In reaching that conclusion, the Montana Supreme Court noted tha t the statute did not "authorize collateral source payments to be deducted from the claimant's available underinsured motorist coverage, but authorized that such p a yme nts be entered into the calculation of the claimant's compensable injuries a n d losses." Id., 283 Mont. at 134. Further, the Liedle Court rejected plaintiff's a rgume nt that State Farm's offset was "the equivalent of allowing an insurance
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company to subrogate against its own insured . . ." Id., 283 Mont. at 133. In Olson v. Daughenbaugh, 307 Mont. 371 (2001), the Montana Supreme C o urt held that an employee injured while working for an uninsured employer could no t receive benefits from the Uninsured Employers Fund and pursue an independent c a us e of action against the employer. In finding for the employer, the Court noted tha t plaintiff was seeking full compensation for his work-related injury twice­once fro m the UEF and again from the employer. Id., 307 Mont. at 375. The Court c o nc lud e d Montana law does not allow for double recovery or duplicate payments o f workers' compensation benefits. C iting its ruling in Thayer v. Uninsured Employers' Fund, 297 Mont. 179 (1 9 9 9 ), the Olson Court noted that its present rationale was consistent with its p re vio us decisions. The Olson Court noted that, in Thayer, "[W]e held that the c la ima nt was not entitled to recover from both the UEF and the uninsured employer b e c a us e the Uninsured Employers' Fund is merely a safety net which stands in the p la c e of the uninsured employer, and the setoff provisions are uniquely necessary to a s s ure some payment to as many uninsured employees as possible." Olson, 307 M o nt. at 377. Consequently, a double recovery was not permitted. Id. A ltho ugh Thayer and Olson involved workers' compensation, on the issue of d o ub le recovery, this Court can rely on those holdings to conclude that double
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payments are not permitted. Here Plaintiff asks this Court to ignore the $10,000 tha t she has actually received from Hartford in order to recover that same amount fro m Defendant. Further, in Newbury v. State Farm Fire & Cas. Ins. Co. of Bloomington , Ill, 3 4 3 Mont. 279 (2008), the Montana Supreme Court also considered the issue of the " o the r payments." In Newbury, the plaintiff was struck by another vehicle in the c o urs e of his employment. He subsequently filed a claim for and received worker's c o mp e ns a tio n medical benefits. Because his resulting medical expenses were in e xc e s s of the benefits paid by the worker's compensation, Newbury turned to his tw o automobile insurance policies with State Farm, which allowed for $5,000 per p o lic y for medical expenses arising from bodily injury sustained "through being s truc k as a pedestrian by a motor vehicle." Id., 343 Mont. at ¶ 9. Newbury sought to obtain medical payment coverage from both policies in the amount of $10,000. State Farm paid the $1,175.80 in medical expenses not covered by worker's c o mp e ns a tio n and denied any further payment. In their denial, State Farm relied on a provision stating that there would be no coverage "to the extent workers' c o mp e ns a tio n benefits are required to be payable." Id. Newbury brought suit a tta c k ing the validity of the provision, among others, on public policy grounds. Id., 3 4 3 Mont. at ¶ 12.
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The Montana Supreme Court concluded that the clause at issue did not vio la te public policy. Specifically, they found that "in Montana, parties to an ins ura nc e contract may include provisions that exclude coverage without violating p ub lic policy if the exclusion applies to optional, rather than mandatory coverage." Id., 343 Mont. at 288.7 The Newbury Court went on to state that provisions re ga rd ing optional coverage in an insurance contract are "at the sole discretion of the parties to the contract" and not a violation of public policy. Id. Therefore,

w he re an insured is injured in a vehicle, it is permissible for a policy to limit or even e xc lud e coverage to the extent other primary insurance like that of the driver and/or to rtfe a s o r is available and required to be payable. Id., 343 Mont. at ¶ 38. The Newbury Court rejected the plaintiff's request that it ignore the worker's c o mp e ns a tio n benefits he received and give him the full medical payment limits of his auto policy. Essentially, the Newbury Court recognized State Farm's right to c re d it what was already paid by the workers' compensation fund in considering w ha t it was liable for under its insured's medical payment policies. Like the p la intiff in Newbury, Bolin asks this Court to ignore payments she has already re c e ive d in order to trigger her policy's coverage.

In Montana, medical payment and underinsured motorist coverage are optional coverage provisions. M.C.A. §§ 61-6-103(2), 301(1). However, uninsured motorist coverage is mandatory unless rejected by the insured. M.C.A. § 33-23-201. Page 10 of 17

7

Most recently, this Court, in Gettle v. Prop. & Cas. Ins. Co. of Hartford,8 fo llo w e d the line of reasoning stated in Newbury and recognized that a provision tha t prioritized an insurer's obligation to pay med pay, UM and UIM coverage until o the r primary insurance has been collected up to the policy limits, was not de facto s ub ro ga tio n and thus did not violate Montana's public policy.9 In Gettle, this Court c o nc lud e d that "excess coverage" provisions in a UIM policy which took into c o ns id e ra tio n other insurance payments in determining what an insurer owed its ins ure d was not a violation of public policy. Lo o k ing at Bolin's Allstate policy, both her medical payments coverage and und e rins ure d motorist coverage expressly state that no "duplicate payments for the s a me elements of loss" would be paid under those coverages.10 A ltho ugh Defendant has paid the policy limits of Plaintiff's med pay coverage of $ 5 0 0 0 , it contends that it is not obligated to pay any amounts under Plaintiff's und e rins ure d motorist policy. In support of this, Allstate notes that its adjuster has fo und Bolin's total loss to be $42,000.

8

Gettle involved the same attorneys as this case.

9

C V 09-43-RFC (U.S.D.C. Mont., February 9, 2010, Doc. #17)

DEFENDANT'S STATEMENT OF GENUINE ISSUES IN OPPOSITION TO PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT, Doc. #26, ¶5, Exhibits A & B. Page 11 of 17

10

The Court notes that Bolin has already received the $30,000 Bodily Injury limits from the tortfeasor, $10,000 Med Pay limits from Hartford Insurance and $ 5 ,0 0 0 Med Pay limits from Allstate. Based on this, Allstate contends that Bolin ha s been fully compensated for all recoverable damages. To the extent Bolin seeks to recover any attorneys' fees, Allstate argues, and this Court agrees, that under the A me ric a n rule and by prior Order this Court, attorneys' fees are not an element of d a ma ge s that are recoverable in tort. A s evidenced by the aforementioned Montana cases, there has been a long his to ry of recognition in the insurance and workers' compensation arena, of credits, o ffs e ts and the exclusion of double recoveries and payments. Our present case is no d iffe re nt. Moreover, the Montana Supreme Court has recognized that "parties to an ins ura nc e contract may include provisions that exclude coverage without violating p ub lic policy if the exclusion applies to optional, rather than mandatory coverage." Newbury, 343 Mont. at 288. The Newbury Court went on to state that provisions re ga rd ing optional coverage in an insurance contract are "at the sole discretion of the parties to the contract" and not a violation of public policy. Id. 2. D E FACTO SUBROGATION CLAUSES

B o lin contends that Allstate's practice of taking credit for other personal, p o rta b le , first party insurance benefits when adjusting its insured's claims
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constitutes de facto subrogation and is therefore contrary to Montana law. E xte ns ive discussion on the issue of subrogation and the "made whole" doctrine w a s made in this Court's opinion in the separate case of Gettle v. Prop. & Cas. Ins. Co. of Hartford. As such, a reiteration of the state of the law on subrogation will no t be made here. Plaintiffs allege that Allstate's present action of taking credit for other MPC, U M and/or UIM coverage constitutes de facto subrogation and denies coverage w he re Plaintiffs have paid valuable consideration. The consequence of Allstate ta k ing credit for another insurance company's policy, according to Plaintiffs, are tha t Allstate has effectively subrogated before Plaintiffs have been made whole. In researching cases that discuss the concept of de facto subrogation as a c a us e of action, this Court was only able to find two cases: Thayer v. Uninsured E m p lo y e r s ' Fund, 297 Mont. 179 (1999) and Blue Cross and Blue Shield of M o n ta n a , Inc. v. Montana State Auditor, 352 Mont. 423 (2009). Both cases come fro m the Montana Supreme Court. In Thayer, Uninsured Employers' Fund's (UEF) was paying death benefits to the widow of an employee whose employer carried no workers' compensation ins ura nc e . The widow brought suit against the employer and the employer settled fo r $100,000. Upon notice of the settlement with the employer, UEF informed
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Thayer that she was no longer entitled to further benefits. UEF claimed a statutory right of setoff to the remaining balance due ($74,301) against the $100,000 s e ttle me nt from the employer. UEF did not seek recovery of any benefits paid prior to Thayer's settlement with her husband's employer. Id, 297 Mont. at 181. T ha ye r contended that UEF was not applying a statutory right of setoff. Rather, UEF was claiming a subrogation interest in the settlement she received from the employer. Id. According to Thayer, this allowed UEF to have a de facto s ub ro ga tio n interest before she had been made whole. Id. Ultimately, the Montana Supreme Court concluded that its prior subrogation c a s e s did not apply to Thayer because the UEF was not an insurer and did not re c e ive premiums from the employer. Rather, it was a legislatively created source to minimize the hardships of an injured worker that is unable to get workers' c o mp e ns a tio n benefits and was not intended to provide full payment. Id. Further, b e c a us e the UEF was "merely a safety net" and stands in the place of the uninsured e mp lo ye r, it was reasonable to condition UEF's obligations "on the extent to which the employer fails to provide compensation." Id., 297 Mont. at 185. In Blue Cross Blue Shield ("BCBS"), the Montana Supreme Court affirmed the Montana State Commissioner of Insurance's decision to disapprove Blue C ro s s ' s insurance forms that contained policy language wherein BCBS would not
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pay health care benefits to its beneficiaries for: "services, supplies, and medications p ro vid e d to treat any injury to the extent the member receives, or would be entitled to receive where liability is reasonably clear, benefits under an automobile insurance p o lic y. . ." Id. 312 Mont at 425. In finding for the State Commissioner, the M o nta na Supreme Court concluded that, in the health insurance context, a p ro vis io n that allowed Blue Cross Blue Shield to "avoid any payment of benefits to its insured if the insured is `entitled to receive' benefits from any other auto or p re mis e s liability policy, whether or not the insured actually receives any of those b e ne fits , and whether or not the insured has been made whole," would violate Mont. C o d e Ann. §§ 33-30-1101 & 33-30-1102 and unlawfully allow BCBS to claim s ub ro ga tio n before its insured had been made whole. Id. 312 Mont. at 429. It is evident that the offending action and language that the Blue Cross Blue S h ie ld Court's conclusion was focused on was the avoidance of payments of b e ne fits when BCBS' insured was "entitled to receive" benefits from another s o urc e , not whether BCBS's insured actually received benefits from another source. Id. H e re , there is no evidence in the record that Allstate denied UIM coverage

b e c a us e Bolin was entitled to receive benefits from another auto or premises liability p o lic y. Consequently, Blue Cross Blue Shield is inapplicable to this case.

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More importantly, the discussions of de facto subrogation in both these cases w e re dicta. Neither cases' holding explicitly recognized nor created de facto s ub ro ga tio n as a new cause of action. This is in contrast to the cases cited by the C o urt that expressly recognize the application of credits, offsets and exclusion of d up lic a te payments in the insurance and workers' compensation arena. Fo r the foregoing reasons, this Court concludes that Allstate's "programmatic claims adjustment" practice of taking credit for other personal, p o rta b le first-party insurance benefits when adjusting its insured's claims is a re c o gniz e d legal practice. Further, as is the case here, parties to an insurance c o ntra c t may include provisions that exclude coverage without violating public p o lic y if the exclusion applies to optional, rather than mandatory, coverage. Following the reasoning of Gettle and Newbury, this Court concludes that A lls ta te merely used its freedom to contract in order to preclude the double p a yme nts . Plaintiffs neither argue, nor does the record reflect, that beyond taking the $10,000 credit from Hartford's med pay benefits, Allstate has refused to c o mp e ns a te any additional losses under Plaintiff's UIM policy. Plaintiff's Motion fo r Partial Summary Judgment must therefore be denied. For those reasons, IT IS HEREBY ORDERED that:

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1.

D e fe nd a nt' s Motion for Partial Summary Judgment (Doc. #14 ) is G R AN TED ; P la intiff' s Motion for Partial Summary Judgment (Doc. #19 ) is D E N IE D .

2.

D A T E D this 19th day of October, 2010. /s/ Richard F. Cebull RICHARD F. CEBULL U .S . DISTRICT JUDGE

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