Opinion
Record No. 1100-22-1
12-19-2023
Michael BROWN v. Timothy L. KIRKPATRICK
Steven L. Lauer (S. Geoffrey Glick; The Joel Bieber Firm, on briefs), for appellant. John D. McGavin, Fairfax (Kara A. Schmidt; McGavin, Boyce, Bardot, Thorsen & Katz, PC, on brief), for appellee. Amicus Curiae: Virginia Association of Defense Attorneys (Robert F. Friedman, Richmond; Harmon, Claytor, Corrigan & Wellman, on brief), for appellee.
UPON A REHEARING EN BANC
FROM THE CIRCUIT COURT OF THE CITY OF NEWPORT NEWS, David F. Pugh, Judge Designate
Steven L. Lauer (S. Geoffrey Glick; The Joel Bieber Firm, on briefs), for appellant.
John D. McGavin, Fairfax (Kara A. Schmidt; McGavin, Boyce, Bardot, Thorsen & Katz, PC, on brief), for appellee.
The Virginia Association of Defense Attorneys moved for leave to file an amicus brief in this matter along with said brief in support of appellee. This Court grants the motion.
Amicus Curiae: Virginia Association of Defense Attorneys (Robert F. Friedman, Richmond; Harmon, Claytor, Corrigan & Wellman, on brief), for appellee.
Present: Chief Judge Decker, Judges Humphreys, Beales, Huff, O’Brien, AtLee, Malveaux, Athey, Fulton, Ortiz, Causey, Friedman, Chaney, Raphael, Lorish, Callins and White
OPINION BY JUDGE GLEN A. HUFF
In April 2022, a jury awarded Michael Brown (“appellant”) a judgment against Timothy Kirkpatrick (“appellee”) for damages arising from a motor vehicle accident. Appellant received the full amount of the judgment from a combination of payments made by his own automobile insurance carrier as well as the automobile insurance carrier for the tortfeasor motorist, appellee. Despite these payments, appellant refused to mark the judgment satisfied. Upon appellee’s motion, pursuant to Code § 8.01-455, the Circuit Court for the City of Newport News (the “trial court”) ordered the judgment to be marked satisfied. Appellant appealed, claiming the trial court erred in crediting appellee for the payments made by appellant’s own insurance carrier. Because his insurance carrier had waived its right to subrogation against the underinsured motorist, appellant argued he was free to collect the full judgment amount against appellee without any offset for the payments made under his own contract of insurance.
After considering the effect of the subrogation waiver, a divided panel of this Court agreed with appellant and reversed the trial court’s order. Appellee’s petition for rehearing en banc was granted, and the mandate of the panel was stayed. Upon reconsideration eri baric, this Court now affirms the trial court’s judgment.
The pertinent facts are not in dispute, In particular, both parties agree that USAA waived its subrogation right against appellee, but they
disagree on the effect of that waiver under Code § 38.2-2206.
In May 2018, appellant and appellee were involved in an automobile accident. At the time of the accident appellee was insured by State Farm Mutual Automobile Insurance Company (“State Farm”) with coverage limits of $50,000. Appellant’s contract of automobile insurance was with United Services Automobile Association (“USAA”) and included $300,000 in uninsured/underinsured motorist (“UIM”) coverage. Appellant filed a personal injury lawsuit against appellee, and USAA was served in accordance with the UIM statute: Code § 38.2-2206. Prior to trial, USAA reached an agreement with State Farm whereby USAA would waive its right of subrogation against appellee if State Farm continued defending the case through trial. Following a jury trial, during which State Farm satisfied its end of the bargain, judgment was entered against appellee in the amount of $286,000. State Farm paid its coverage amount ($50,000) toward satisfaction of the judgment. And in accordance with the insurance carriers’ pre-trial agreement, USAA paid the remaining balance of $236,000.
Code § 38.2-2206(F) first requires the insured to “serve a copy of the process” upon the UIM insurer in any action “instituted against the owner or operator of an uninsured or underinsured motor vehicle” when the insured intends “to rely on the uninsured or underinsured coverage provision or endorsement….” It further provides that the insurer shall “have the right to file pleadings and take other action allowable by law in the name of the owner or operator of the uninsured or underinsured motor vehicle or in its own name.” Code § 38.2-2206(F) (emphasis added).
Interest and costs were borne by State Farm.
Despite receiving payments totaling $286,000, the total amount of the judgment entered against appellee, appellant refused USAA’s request to mark the judgment satisfied. Because he carried UIM coverage and USAA had waived its subrogation rights, appellant argued that USAA’s payment should not be credited toward the judgment and that appellant was free to recover another $236,000 directly from appellee. Appellee moved the trial court to enter an order marking the judgment satisfied. Over appellant’s objection, the trial court granted the motion and entered the requested order.
Code § 8.01-455 allows a “defendant in any judgment” to move the court to mark the judgment satisfied “upon proof that the judgment has been paid off or discharged.”
This appeal followed.
STANDARD OF REVIEW
[1–5] Central to this appeal is the interpretation of Virginia’s UIM statute, Code 38.2-2206. “Questions of statutory interpretation … are subject to de novo review on appeal, and we owe no deference to the circuit court’s interpretation of the statutory scheme.” Esposito, v. Va. Stiate Police, 74 Va. App. 130, 133, 867 S.E.2d 59 (2022). Courts, are duty bound “to construe the law as it is written.” Hampton Roads Sanitation Disi. Comm’n v. City of Chesapeake, 218 Va. 696, 702, 240
or underinsured motor vehicle or in its own name.” Code § 38.2-2206(F) (emphasis added). S.E.2d 819 (1978). “When construing a statute, our primary objective ‘is to ascertain and give effect to legislative intent,’ as expressed by the language used in the statute.” Va. Elec. & Power Co. v. State Corp. Commn, 295 Va. 256, 262-63, 810 S.E.2d 880 (2018) (quoting Cuccinelli v. Rector & Visitors of the Univ. of Va., 283 Va. 420, 425, 722 S.E.2d 626 (2012)). “We must determine the legislative intent by what the statute says and not by what we think it should have said.” Miller & Rhoads Bldg., L.L.C. v. City of Richmond, 292 Va. 537, 541-42, 790 S.E.2d, 484 (2016) (quoting, Carter v. Nelms, 204 Va. 338, 346, 131 S.E.2d 401 (1963)). “When the language of a statute is unambiguous, we are bound by the plain meaning of that language.” Conyers v. Martial Arts World of Richmond, Inc., 273 Va. 96, 104, 639 S.E.2d 174 (2007) (citations omitted).
ANALYSIS
As required under Code § 38.2-2206(A), all automobile insurance policies issued in Virginia, or covering vehicles principally garaged or used in Virginia, must include UIM coverage. Recovery of such underinsurance benefits is “subject to the conditions set forth in [Code § 38.2-2206].” Code § 38.2-2206(B)(4). As relevant here, Code § 38.2-2206(G) provides that “[a]ny insurer paying a claim [for underinsurance benefits] … shall be subrogated to the rights of the insured to whom the claim was paid ….” (Emphasis added). In the insurance context, the principle of subrogation dictates that “an insurer that has paid a loss under an insurance policy is entitled to all the rights and remedies belonging to the insured against a third party with respect to any loss covered by the policy.” Subrogation, Black’s Law Dictionary (11th ed. 2019).
Uninsured coverage in the statute is treated as the generic category that includes underinsurance coverage. Code § 38.2-2206(A).
[6] In the case at hand, USAA paid underinsurance benefits to appellant in accordance with the UIM provision of their existing policy. As the insurer paying such claim, USAA became the owner of the subrogation rights by operation of law when it completed its payment of underinsurance benefits to appellant. See Code § 38.2-2206(G). As such, USAA alone owned the right to recoup the amount of its UIM insurance payment from appellee—the tortfeasor. See Code § 38.2-2206(G) (providing that the UIM carrier “shall be subrogated to the rights of the insured to whom the claim was paid … to the extent that payment was made” (emphasis added)). Furthermore, appellant’s receipt of USAA’s $236,000 payment, in accordance with Code § 38.2-2206(G), precluded him from seeking to obtain that amount from appellee. Simply put, under the plain meaning of the UIM statute, the subrogation right belonged exclusively to USAA and appellant no longer had a right to recover the amount paid by USAA directly against appellee. Id.
Moreover, as sole owner, USAA was free to use the subrogation rights as it saw fit. Here, USAA used its subrogation rights to negotiate with State Farm prior to trial. Importantly, the two insurance carriers agreed that, in exchange for State Farm defending the case through trial, USAA would not exercise its subrogation right. Agreeing to not exercise its subrogation right did not divest USAA of that right. Under the provisions of Code § 38.2-2206, USAA remained the lawful owner of the subrogation right, thereby retaining the exclusive authority to choose whether to exercise it. That power can be a powerful bargaining chip to UIM carriers involved in litigation initiated by their insureds. Indeed, USAA’s agreement to not exercise its right to collect from appellee provided valuable consideration to support its contract with State Farm.
USAA and State Farm agreed that USAA’s right to collect an excess judgment against State Farm’s insured would be waived in exchange for State Farm providing a defense through trial. If judgment had been within State Farms’ coverage, there would have been no UIM payment and no subrogation right. Code § 38.2-2206(G); But in this case, the judgment exceeded State Farm’s coverage, thus triggering USAA’s contractual obligation to make payment pursuant to the terms of appellant’s UIM coverage.
[7, 8] Notwithstanding the plain meaning of the statute, appellant argues that payments of UIM benefits should be treated like medical payments or disability payments that are sometimes sheltered by the collateral source doctrine. Once again, the plain meaning of the words chosen by the General Assembly resolves the issue at hand. At the outset, Code § 38.2-2206(B)(4) explicitly states that recovery of UIM benefits is “subject to the conditions set forth in [Code § 38.2-2206].” By that language, the General Assembly created a set of rules unique to the payment and recovery of UIM benefits by automobile insurance carriers.
The collateral source doctrine is encountered in two different contexts: (1) as an evidentiary issue during trial and (2) as a substantive matter outside of trial. Typically, the collateral source rule is invoked to exclude from trial any evidence of payment made by the insurance carrier, Va. R. Evid. 2:411. The issue presented here, however, is outside of trial and is governed by the motor vehicle statute instead. In the case at bar, appellant was made whole, and appellee remained liable to USAA only for UIM insurance payments paid by USAA, although State Farm successfully settled that liability with USAA in exchange for bearing the cost of defense through trial. Generally, the collateral source doctrine instructs that “compensation or indemnity received by a tort victim from a source collateral to the tortfeasor may not be applied as a credit against the quantum of damages the tortfeasor owes.” Acordia of Va Ins. Agency, Inc. v. Genito Glenn, L.P., 263 Va. 377, 387, 560 S.E.2d 246 (2002) (quoting Schickling v. Aspinall, 235 Va. 472, 474, 369 S.E.2d 172 (1988)). This doctrine, however, is “a narrow exception to both the default rule against double recoveries and the principle that compensatory damages cannot leave a plaintiff better off than before the injury.” Dominion Res. Inc. v. Alstom Power, Inc., 297 Va. 262, 270-71, 825 S.E.2d 752 (2019). Substantively, medical benefits are the only insurance payment that may not reduce the amount of damages. See Code § 38.2-2216.
And unlike the subrogation rights that belong to the insurance carrier once a UIM claim is paid pursuant to Code § 38.2-2206(G), medical payments are treated differently under, Virginia’s motor vehicle statutes. Code § 38.2-2216 specifically prohibits “reducing the amount of damages covered under the liability or [UIM] coverages of the policy by the amount of payments made by the insurer under the medical expense or other medical payments coverage of the policy.”
[9, 10] Comparing the words chosen by the General Assembly in these differing statutes demonstrates the limited circumstances under which the collateral source doctrine ap- plies. “The maxim expressio unius est exclusio alterius applies when mention of a specific item in a statute implies that omitted items were not intended to be included.” Virginia-Pilot Media Cos., LLC v. Dow Jones & Co., 280 Va. 464, 468-69, 698 S.E.2d 900 (2010). “[W]hen the General Assembly has used specific language in one instance[ ] but omits that language or uses different language when addressing a similar subject elsewhere in the Code, we must presume that the difference in the choice of language was intentional.” Zinone v. Lee’s Crossing Homeowner’s Ass ’ n, 282 Va. 330, 337, 714 S.E.2d 922 (2011). Based on the words chosen by the General Assembly, payment of medical expenses is subject to the collateral source doctrine while payment of UIM coverage is not.
Lastly, appellant relies on Llewellyn v. White, 297 Va. 588, 831 S.E.2d 494 (2019), to apply the collateral source doctrine and recover from appellee. Llewellyn dealt with the common law principle, modified by statute in Virginia, that settlement with one tortfeasor was a settlement as to all. Llewellyn, 297 Va. at 596, 831 S.E.2d 494. In that case, the Supreme Court clarified that Code § 8.01-35.1 did not bar recovery against a tortfeasor where the UIM insurance carrier settled with its insured, before suit, such that no UIM coverage existed at the time of trial. Id. at 603, 831 S.E.2d 494. The Court recognized that the UIM coverage sounded in contract and therefore was not subject to the laws regarding joint tortfeasors. Id. at 601-03, 831 S.E.2d 494. Llewellyn is distinguishable from this matter based on the position of the various parties. In Llewellyn, the insured tort victim settled with her own insurer prior to trial. Such agreement did not include the opposing party. Here, in contrast, the tort victim’s insurance carrier—USAA—obtained the subrogation right when it paid appellant’s claim but, then contracted away that right with the opposing party. The inclusion of appellee and appellee’s insurer here had no effect on USAA’s obligations to appellant under their contract. But, as discussed above, the contractual relationship in which USAA negotiated with its subrogation rights does not make the UIM payments to appellant a collateral source. Accordingly, appellant’s reliance on Llewellyn is misplaced.
After making its ruling, the Court provided further explanation suggesting that its “conclusion is reflected by and consistent with the structure of Virginia’s UIM statute, Code § 38.2-2206.” Llewellyn, 297 Va. at 598, 831 S.E.2d 494. It went on to say, “if there is an agreement between the UIM carrier and the defendant, the defendant may be entitled to credit against any judgment received by the plaintiff, up to the amount owed pursuant to [the UIM carrier’s] subrogation rights.” Id. at 600, 831 S.E.2d 494. The Supreme Court also pointed out that in its case there was no agreement involving the tortfeasor. Id. The UIM carrier was therefore no longer involved because it had settled its coverage with its insured before litigation was pursued. Id
CONCLUSION
For the foregoing reasons, the trial court’s judgment is affirmed.
Affirmed.
Humphreys, J., with whom Chaney and Lorish, JJ. join, dissenting.
Under Code § 8.01-455, judgment-debtors may only escape their tort liability if their debt has been “paid off or discharged.” Because nothing in the record before this Court indicates that Kirkpatrick’s debt was paid off or discharged, I respectfully dissent from the majority’s holding that Kirkpatrick was entitled to have his judgment-debt set aside.
Our Supreme Court has applied the collateral source rule to UIM benefits in Llewellyn v. White, 297 Va. 588, 831 S.E.2d 494 (2019), and the majority ignores this conclusion in finding that the collateral source rule does not apply to UIM benefits. Llewellyn makes clear that Kirkpatrick’s tort liability was not “paid off’ as a result of USAA fulfilling its UIM obligations. The Llewellyn Court’s holding on this point is plain: “[a] person who is negligent and injures another owes to the latter full compensation for the injury inflicted[,] … and payment for such injury from a collateral source in no way relieves the wrongdoer of [the] obligation.” Id. at 601, 831 S.E.2d 494 (second, third, and fourth alterations in original) (quoting Acuar v. Letourneau, 260 Va. 180, 189, 531 S.E.2d 316 (2000)). Specifically, the Court noted that “damages, recoverable of personal injuries inflicted through the negligence of another are not to be reduced by reason of the fact that the injured party had been partly compensated for his loss by insurance which he has procured and for which he has paid.” Id. Admittedly, this doctrine permits a tort plaintiff to receive a double recovery, but as the Court held in Llewellyn, “the better option is to allow plaintiff to retain the ‘windfall’ that results from his foresight in voluntarily electing to purchase [UIM] coverage rather than allowing defendant …. to be the ultimate beneficiary of plaintiff’s decision to procure additional insurance coverage.” Id. at 602, ‘831 S.E.2d 494 (quoting Hairston v. Harward, 371 N.C. 647, 821 S.E.2d 384, 394 (2018)).
The majority suggests Virginia courts narrowly apply the collateral source rule. To the contrary, Virginia has a long history of applying the rule to benefits “wholly independent of the defendant.” Johnson v. Kellam, 162 Va. 757, 764, 175 S.E. 634 (1934).
Because Kirkpatrick is not entitled to credit for the payments USAA made to Brown under Brown’s UIM coverage, Kirkpatrick’s debt has not been “paid off” by virtue of those payments. The remaining question, then, is whether Kirkpatrick’s debt has been “discharged.” The majority appears to hold that a subrogee has the authority to discharge a subrogation claim to the detriment of the subrogor. Even assuming that a subrogee has that authority, this holding presupposes that USAA did, in fact, discharge the debt Kirkpatrick owed to USAA pursuant to its subrogation rights. The record does not support this conclusion. The record shows only that USAA agreed with Kirkpatrick that it was “willing to waive subrogation against [Kirkpatrick] if State Farm continues the defense on behalf of Defendant, Timothy Kirkpatrick, through the trial of this matter.” To reach the conclusion that Kirkpatrick is entitled to relief from his tort liability, the majority necessarily equates the waiver of the subrogation right with the discharge of the underlying tort liability. This conflating of waiver and discharge misunderstands the nature of the subrogation right.
Virginia courts have not previously authoritatively decided whether a subrogee has the authority to settle a subrogation claim to the detriment of the subrogor and at least two of our sister state courts have reached different conclusions on the question. Compare Ferrellgas, Inc. v. Yeiser, 247 P.3d 1022, 1027-28 (Colo. 2011) (holding that an insurance company’s settlement of a nearly $200,000 subrogation claim for $175,000 with the tortfeasor reduced the insured subrogor’s tort judgment by the full $200,000), with Sunnyland Farms, Inc. v. Cent. N.M. Elec. Coop., Inc., 301 P.3d 387 (N.M. 2013) (holding that a defendant may not obtain a subrogation lien against the recovery a plaintiff would obtain from that same defendant).
The waiver of the right to pursue recovery, a right that is wholly derivative of the insured’s right, is conceptually distinct from a settlement, release, or discharge of the underlying debt. In addressing the fact that the subrogee waived their subrogation right with the subrogor the Llewellyn Court noted that “[the subrogee] agreed with [plaintiff] not to interfere with [her] right to collect from [defendant] any amounts [defendant] Was found to owe [plaintiff].” Llewellyn, 297 Va. at 600, 831 S.E.2d 494 (emphasis added). Simply put, the subrogation right is the right of the subrogee (USAA in this instance) to stand in the shoes of the insured (Brown) and pursue a third party (Kirkpatrick) for a loss caused by that third party. On the other hand, a “discharge” is “[a]ny method by which a legal duty is extinguished; esp., the payment of a debt or satisfaction of some other obligation.” Discharge, Black’s Law Dictionary (11th ed. 2019). In this case, the majority conflates the very different concepts of “waiver” and “discharge.”
Waiver is the “voluntary, relinquishment or abandonment” of “a legal right or advantage.” Waiver, Black’s Law Dictionary, supra. Had USAA exercised its right of subrogation instead of waiving it and then agreed to release Kirkpatrick from his tort liability in exchange for State Farm’s defense of the claim at trial, then perhaps Kirkpatrick’s tort liability would be “discharged.” But instead, USAA simply agreed with Kirkpatrick to abandon its right to stand in Brown’s shoes and seek to recover from Kirkpatrick any amounts he owed to Brown pursuant to its subrogation right. In other words, in this case, USAA and Kirkpatrick bargained for a waiver of USAA’s subrogation right—it did not bargain for the discharge of Kirkpatrick’s underlying tort liability. The majority seems to consider this a distinction without a difference, but precision in its application is the hallmark of the law and eliding the difference between a waiver of a subrogation right and the discharge of underlying tort liability undermines that precision.
I reiterate that this conclusion first requires a holding that the subrogee indeed had the authority to settle the underlying tort liability.
The distinction between waiver of a right to subrogation and the discharge of a tortfeasor’s underlying tort liability is only one reason the majority errs. A second is that the majority mistakes the UIM’s posture upon payment of a claim as “subrogated to the rights of the insured” for the injured party having assigned its rights to recover to the UIM. An assignment is a transfer of a property right, and an absolute assignment “leaves the assignor no interest in the assigned property or right.” Assignment, Black’s Law Dictionary, supra. When the majority holds that “USAA became the owner of the subrogation rights by operation of law when it completed its payment of underinsurance benefits to appellant,” that “USAA alone owned the right to recoup the amount of its UIM insurance payment from appellee,” and that “the subrogation right belonged exclusively to USAA,” it essentially holds that USAA’s fulfillment of its contractual obligation to pay underinsurance benefits to its insured operated to assign USAA the exclusive right to recover the amount of its UIM insurance payment.
But subrogation and assignment are not synonymous. Nationwide Mut. Ins. Co. v. Minnifield, 213 Va. 797, 799, 196 S.E.2d 75 (1973). Our Supreme Court, examining a contractual right of subrogation, characterized subrogation as a right of reimbursement “against the fund recovered” by the injured party who had also received insurance payments under a policy. Collins v. Blue Cross, 213 Va. 540, 544, 193 S.E.2d 782 (1973) (recognized as abrogated in part by statutein Reynolds Metals Co. v. Smith, 218 Va. 881, 883, 241 S.E.2d 794 (1978)); cf. State Farm Mut Auto. Ins. Co. v. Kern, 976 N.E.2d 716, 720 (Ind. Ct. App. 2012) (a subrogation clause “provides that once an insured receives payment from a third-party tortfeasor, the insurer is entitled to reimbursement for the amount of benefits it previously paid to the insured”). Unlike the operation of an absolute assignment, upon a waiver of subrogation, the insured retains the right to recover the full amount of damages against the tortfeasor. For this reason, we agree with the Indiana Court of Appeals that “when a judgment is entered against a third-party tortfeasor, said judgment is not satisfied when the plaintiff’s insurer compensated the plaintiff due to the third-party tortfeasor’s being underinsured.” Kern, 976 N.E.2d at 720. The tortfeasor “is not entitled to benefit from [the injured party]’s carefulness and assiduousness in obtaining underinsured motorist insurance coverage.” Id. Put differently, when a UIM carrier “explicitly waive[s] its rights to subrogation” it “never possessed the right to recover the UIM benefits” so “the claim to recover such damages remained at all times” with the insured plaintiff. Voge v. Anderson, 181 Wis.2d 726, 512 N.W.2d 749, 751 (1994).
Additionally, the North Carolina case on which the Llewellyn Court chiefly relied involved this exact situation where the subrogee “waived its subrogation rights against defendant.” Hairston, 821 S.E.2d at 387. The Hairston court saw “no reason why defendant should be entitled to different treatment simply because [the insurer] elected to waive its statutory subrogation rights rather than attempting to enforce them.” Id. at 395.
USAA bargained away its right to pursue recovery from Kirkpatrick in exchange for his appearance and participation at trial. Kirkpatrick received the benefit of that bargain because USAA no longer has the right to recover against him. That agreement has no impact on Brown’s right to recover against Kirkpatrick. Like the North Carolina Supreme Court, I see no reason why Kirkpatrick should be able to escape his tort liability because USAA declined to pursue its subrogation rights.
Accordingly, because I do not think that this record supports the conclusion that Kirkpatrick’s debt was “paid off” or “discharged” as the statute requires, I would hold that the judgment of the circuit court should be reversed. I, therefore, respectfully dissent.