Opinion
No. FBT CV 04 0413002 S
December 19, 2008
MEMORANDUM OF DECISION
In this lawsuit, Enviro Express, Inc. ("Enviro") seeks a declaratory judgment that it is entitled to payment in the amount of $299,900 from Connecticut Insurance Guaranty Association ("CIGA"). The parties are in agreement that there are no genuine issues of material fact in this case and have submitted a joint stipulation of facts. Presently before the court are cross motions for summary judgment filed by the Enviro (#106.00) Express, Inc. and the CIGA (#107.00).
In their respective memoranda, both parties have cited two different amounts, $299,000 and $299,900, as the statutory maximum that CIGA is authorized to pay. General Statutes § 38a-841(1)(a)(ii) provides that CIGA's "obligation shall include only that amount of each such claim which is in excess of one hundred dollars and is less than three hundred thousand dollars for claims arising under policies of insurers determined to be insolvent prior to October 1, 2007 . . ." consequently, the correct amount is $299,900, and this figure will be used throughout this memorandum.
THE STIPULATED FACTS
Enviro is a corporation engaged in the business of hauling waste. On June 25, 1998, an Enviro employee, while operating a tractor-trailer truck owned by Enviro, was involved in a motor vehicle accident with Louis Mennillo in Bridgeport, Connecticut. Mennillo, who suffered physical injuries in the accident, initiated a lawsuit against Enviro. At the time of the accident, Enviro maintained insurance policies with Reliance and AIU Insurance Company (AIU). The Reliance policy provided for liability coverage up to a limit of $1,000,000 per accident or loss, and the AIU policy provided umbrella coverage for any amount over $1,000,000 to a maximum of $10,000,000 per accident or loss. Following the commencement of Mennillo's lawsuit, Enviro gave notice to both Reliance and AIU of the claim and demanded coverage.
On October 3, 2001, Reliance was declared insolvent by a Pennsylvania court and has failed to pay Enviro any money on the claim stemming from Mennillo's lawsuit. Following this declaration of insolvency, Enviro filed a claim with the New York Property/Casualty Insurance Security Fund, which denied coverage because the accident occurred in Connecticut. Enviro then filed a claim with CIGA. As a further result of Reliance's insolvency, Mennillo also filed an uninsured motorist claim with Safeco Insurance Company (Safeco), which was the insurance carrier on the vehicle that he was driving during the accident. Safeco provided Mennillo with $600,000 in uninsured motorist benefits. By letter dated October 23, 2003, CIGA refused to pay any money to Enviro, stating that Safeco's payment acted as a complete offset of the amount that CIGA owed Enviro.
On June 3, 2005, Enviro and AIU reached a settlement agreement with Mennillo, where the two insurance companies agreed to pay Mennillo $2,000,000 in addition to the $600,000 that he had already received from Safeco. Following a certified question answered on July 25, 2006, the Connecticut Supreme Court determined that the $600,000 uninsured motorist payment should be credited to the $1,000,000 retained limit of the AIU policy, and therefore Enviro should only pay $400,000 towards the settlement with Menillo and AIU should pay the remaining $1,600,000. See Enviro Express, Inc. v. AIU Ins. Co., 279 Conn. 194 (2006).
DISCUSSION
In the present lawsuit, Enviro contends that it is owed the statutory maximum of $299,900 from CIGA in order to reimburse it for the money that it would have obtained from Reliance but for Reliance's insolvency. CIGA, however, has refused to pay and contends that, pursuant to General Statutes § 38a-845(1), the uninsured motorist benefits paid to Mennillo by Safeco operate as a complete setoff of any obligation to pay under the CIGA Act.
On November 12, 2008, both parties filed cross motions for summary judgment and memoranda of law in support. Enviro and CIGA also provided the court with reply memoranda. As the only matter before the court is an interpretation of the provisions of the General Statues governing CIGA (§ 38a-836 et seq.), and both sides agree that the facts are undisputed, the only attachments provided by the parties were copies of relevant statutes and court cases. This matter was argued at a hearing before the court on November 20, 2008.
"Summary judgment is method of resolving litigation when pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law . . . The motion for summary judgment is designed to eliminate the delay and expense of litigating an issue when there is no real issue to be tried." (Citations omitted.) Wilson v. New Haven, 213 Conn. 277, 279 (1989). "In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party . . . The party moving for summary judgment has the burden of showing . . . that the party is . . . entitled to judgment as a matter of law." (Internal quotation marks omitted.) Dark-Eyes v. Commissioner of Revenue Services, 276 Conn. 559, CT Page 20092 570 (2005). "In this case, the trial court's determinations [are] based on a record that [consists] solely of a stipulation of facts, written briefs, and oral arguments by counsel . . . In these circumstances, the legal inferences properly to be drawn from the parties' definitive stipulation of facts raise questions of law rather than of fact." (Internal quotation marks omitted.) Old Farms Associates v. Commissioner of Revenue Services, 279 Conn. 465, 480 (2006). "[W]here . . . the question is a matter of statutory construction rather than of factual sufficiency, this determination constitutes a question of law . . ." (Internal quotation marks omitted.) State v. Smith, 289 Conn. 598, (2008).
The resolution of this case turns on an interpretation of the provision of the General Statutes governing the creation and operation of CIGA. In its memorandum of law, CIGA argues that General Statutes § 38a-845(1) provides that CIGA's obligation to pay is automatically reduced by any amount recoverable under the claimant's insurance policy. Since Mennillo has already received uninsured motorist benefits that are in excess of CIGA's statutory maximum payout, CIGA argues that these uninsured motorist payments act as a complete offset, and reduces its obligation to zero. CIGA claims that this statutory interpretation is supported by the plain language of the statute, Connecticut case law and cases from other jurisdictions that have enacted similar provisions.
CIGA also argues that the court should grant summary judgment in its favor because Enviro's arguments in support of this declaratory judgment action contravene arguments made before the Connecticut Supreme Court in Enviro Express, Inc. v. AIU Ins. Co., supra, 279 Conn. 194. Since this matter can be resolved solely on the first, and main, argument raised by CIGA, this memorandum will only address CIGA's first argument.
In response, Enviro contends that CIGA is obligated to pay because the uninsured motorist payment was made to Mennillo, not Enivro, and therefore a complete offset is not appropriate. Enviro argues that the legislative intent behind the offset provision was to prevent a double recovery, and since the uninsured motorist payment was only made to Mennillo, Enviro has not received any recovery from Reliance's insolvency and has therefore been denied any benefit whatsoever from the Reliance policy.
In 1971, CIGA "was established for the purpose of providing a limited form of protection for policyholders and claimants in the event of insurer insolvency." (Internal quotation marks omitted.) Giglio v. American Economy Ins. Co., 278 Conn. 794, 812 (2006). "The association's statutory mandate, and sole reason for existence, is to provide compensation for those whose remedy would otherwise be thwarted by insurer insolvency . . . Indeed, we have noted that, [i]n general, the legislative objective was to make the [association] liable to the same extent that the insolvent insurer would have been liable under its policy." (Citations omitted; internal quotation marks omitted.) Id., 815. `When an insurer is determined to be insolvent under [General Statutes] § 38a-838(7), the association becomes obligated pursuant to [General Statutes] 38a-841, to the extent of covered claims within certain limits." (Internal quotation marks omitted.) Id., 812. "[S]uch obligation shall include only that amount of each such claim which is in excess of one hundred dollars and is less than three hundred thousand dollars for claims arising under policies of insurers determined to be insolvent prior to October 1, 2007 . . ." General Statutes § 38a-841(1)(a)(ii). The CIGA Act defines "insolvent insurer" as an organization "licensed to transact insurance in this state either at the time the policy was issued or when the insured event occurred, and . . . determined to be insolvent by a court of competent jurisdiction." General Statutes § 38a-838(6). A "covered claim" is statutorily defined as "an unpaid claim, including, but not limited to, one for unearned premiums, which arises out of and is within the coverage and subject to the applicable limits of an insurance policy . . . if such insurer becomes insolvent after October 1, 1971, and (A) the claimant or insured is a resident of this state at the time of the insured event or (B) the claim is a first party claim for damage to property with a permanent location in this state . . . [subject to exceptions not relevant here]." General Statutes § 38a-838(5). "Pursuant to General Statutes § 38a-841, [CIGA] is authorized to pay only covered claims, and must deny all other claims." Hunnihan v. Mattatuck Mfg. Co., 243 Conn. 438, 449 (1997).
Recovery under the CIGA Act is specifically limited by the following provision: "Any person having a claim against an insurer under any provision in an insurance policy, other than a policy of an insolvent insurer, which is also a covered claim under [General Statutes] sections 38a-836 to 38a-853, inclusive, shall exhaust first his rights under such policy. Any amount payable on a covered claim under said sections shall be reduced by the amount recoverable under the claimant's insurance policy or chapter 568." General Statutes § 38a-845(1). There is no dispute that Reliance is indeed insolvent for the purposes of the CIGA Act and therefore CIGA would be obligated to pay Enviro for any applicable "covered claim." In its memorandum of law, CIGA assumes that Mennillo's claim is a "covered claim," therefore the issue is whether CIGA can appropriately invoke this offset provision.
Chapter 568 of the General Statutes involves workers' compensation and is not relevant in this matter.
When interpreting the meaning of a statute, the court is first guided by the mandates of General Statutes § 1-2z, which provides: "The meaning of a statute shall, in the first instance be ascertained from the text of the statute itself and its relationship to other statutes. If, after examining such text and considering such relationship, the meaning of such text is plain and unambiguous and does not yield absurd or unworkable results, extra textual evidence of the meaning of the statute shall not be considered." Nevertheless, "[w]hen the relevant statutory text and the relationship of that text to other statutes do not reveal a meaning that is plain and unambiguous, [the court's] analysis is not limited, and [the court can] look to other factors relevant to determining the meaning of [the statute], including its legislative history, the circumstances surrounding its enactment and its purpose." DaimlerChrysler Services North America, LLC v. Commissioner of Revenue Services, 274 Conn. 196, 202 (2005).
The plain language of § 38a-845(1) is very broad. It states that "any amount payable on a covered claim . . . shall be reduced by the amount recoverable under the claimant's insurance policy . . ." This all encompassing language certainly supports CIGA's argument that its obligation to pay is vitiated by Mennillo's recovery of uninsured motorist benefits. Consequently, according to the plain language of the statute, if Menillo is a claimant, his recovery of uninsured motorist benefits should reduce CIGA's obligation to pay.
At oral argument, Enivro's counsel stated that it interprets the word "claimant" to be a claimant to the CIGA fund, and not necessarily the claimant to an insurance policy. Under this interpretation, Enviro would be deemed as the claimant to the CIGA fund, and since Enviro has received no payment from a third party, then it would be entitled to full compensation from CIGA. Unfortunately, there is no statutory definition of claimant in the CIGA Act that would either support or contravene Enviro's position. There is also no support for this argument in the legislative history of the CIGA act. Moreover, in dicta, the Connecticut Supreme Court has stated that "claimant" can refer to either a claimant under an insurance policy or the tort victim. See Connecticut Ins. Guaranty Ass'n. v. Union Carbide Corp., 217 Conn. 371, 378-79 (1991). Since Menillo both received uninsured motorist benefits under an insurance policy and is a tort victim, he would qualify as a "claimant" under § 38a-845(1). Accordingly, CIGA should be entitled to invoke the offset provision provided in § 38a-845(1).
Although Connecticut courts have yet to decide a case that is directly on point with the present matter, the Connecticut Supreme Court has heard a case that dealt with CIGA's ability to offset payments from uninsured motorist benefits that were paid to a claimant. In Robinson v. Galino, 275 Conn. 290 (2005), the plaintiff brought an action against the defendant for negligence stemming from a motor vehicle accident. The defendant's automobile insurance company, which was also Reliance, became insolvent. As a result of this insolvency, the plaintiff filed a claim with her insurance company for uninsured motorist benefits, but she failed to exhaust the full amount of this policy before asking for payments from CIGA. In ruling that the plaintiff needed to fully exhaust her uninsured motorist benefits before requesting reimbursement payments from CIGA, the Supreme Court stated that "a settlement does constitute an exhaustion of rights, but . . . the guaranty fund's liability is reduced by the full amount of the uninsured-motorist policy limits, regardless of the amount that the claimant actually received in the settlement . . . [T]he rationale behind the non duplication provision . . . is to insure that the Fund is a recovery of last resort by requiring that the claimant first seek to cover his loss with funds available from other insurers." Robinson v. Galino, supra, 304. In a Superior Court decision, Judge Lagenbach held that because the plaintiff has recovered workers' compensation benefits in excess of CIGA's statutory maximum payout, CIGA was entitled to fully offset this payment. Stearns Wheler, LLC v. Connecticut Ins. Guaranty Ass'n., Superior Court, complex litigation docket at Hartford, Docket No. X03 CV 05402256 (July 13, 2007, Lagenbach, J.) [43 Conn. L. Rptr. 772]. Both of these cases are reflective of a general legislative intent for CIGA to be the payor of last resort, and that CIGA should be allowed to offset any amount that the claimant receives from a solvent insurance policy or other source.
In response, Enviro argues that the Robinson and Stearns Wheeler cases are not applicable to the present matter. Instead, it points to the Supreme Court decision in Connecticut Ins. Guaranty Ass'n. v. Union Carbide Corp., supra, 217 Conn. 371. In Union Carbide, CIGA brought an a declaratory judgment action to determine its responsibility to reimburse Union Carbide, the alleged tortfeasor, for claims arising out of the chemical plant disaster in Bhopal, India. Prior to the incident, Union Carbide had in place a primary insurance policy, an umbrella policy and forty-two "excess umbrella" policies. Due to the magnitude of the Bhopal disaster, the ensuing settlement exhausted Union Carbide's solvent insurers, which triggered CIGA's obligation to pay. CIGA argued that the amount that it had to reimburse Union Carbide should be reduced by the funds that the Bhopal victims had recovered from any source, including the government and other insurance. Disagreeing, the Supreme Court stated that "[t]he evident purpose of providing . . . for a reduction of a covered claim by the amount of any recovery from other available insurance was to prevent a person from twice receiving benefits for the same loss or otherwise obtaining a windfall, not to reduce the amount of a claim for a loss that remains partially unsatisfied." Connecticut Ins. Guaranty Ass'n. v. Union Carbide Corp., supra, 388. Enviro argues that this quoted passage is applicable to the present case because it would not receive a double recovery if CIGA were to compensate it for Reliance's insolvency. To further support this contention, Enviro cites cases from Arizona and Washington that adopt the same concept. See Arizona Property Casualty Ins. Guaranty Fund v. Herder, 156 Ariz. 203, 205, 751 P.2d 519 (1988); Washington Ins. Guaranty Ass'n. v. McKinstry Co., 56 Wash.App. 545, 553, 784 P.2d 190 (1990).
The Arizona case has since been superseded by statute. The Arizona legislature has now made clear that a claimant's recovery under the Arizona Property Casualty Insurance Guaranty Fund must be reduced by any amount recovered through the claimant's underinsured motorist insurance policy. Jangula v. Arizona Property Casualty Ins. Guaranty Fund, 207 Ariz. 468, 88 P.3d 182 (Ariz.Ct.App. 2004), cert. denied, (Ariz. September 21, 2004).
A close examination of Union Carbide reveals that it is distinguishable on its facts from the present matter. In Union Carbide, at issue was whether CIGA could benefit from payments made to the tortfeasor by other, solvent, insurance companies. This matter, however, involves payments of uninsured motorist benefits to the victim, not the culpable party. The Union Carbide court expressly refused to reach the issue of whether CIGA could offset any payments made to the Bhopal plaintiffs because there was no evidence in the record of such payments. The Supreme Court stated that "[t]he present record does not disclose that any of the victims received payments from any other source but UCC, which paid the agreed settlement amount to the government of India as the victims' representative. In this factual vacuum it would have been improper for the court to determine the issues presented for adjudication . . . Until there is evidence of payments to the Bhopal victims from sources other than the settlement funds, the rendition of a declaratory judgment on the effect on such payments in reducing CIGA's obligation [is improper]." (Citation omitted; internal quotation marks omitted.) Connecticut Ins. Guaranty Ass'n. v. Union Carbide Corp., supra, 217 Conn. 391-92.
Decisions of courts in other jurisdictions support the conclusion that CIGA is entitled to credit for the uninsured motorists benefits paid to Mennillo. As stated by our Supreme Court, "[i]nasmuch as the guaranty act is based on a model statute drafted by the National Association of Insurance Commissioners that has been adopted in substantial part by the legislatures of many of our sister states . . . [this court may] find guidance in on point court decisions from those states with respect to this issue of first impression in our state." Robinson v. Galino, supra, 275 Conn. 300.
As an example, the Oregon Supreme Court has ruled that under Oregon's insurance guaranty association law, "if an injured claimant can receive all damages to which he or she is legally entitled from existing other UM or UIM insurance, the claimant would have no claim against either the insured of the insolvent insurer or against [the Oregon Insurance Guaranty Association] for the amounts within the [Oregon Insurance Guaranty Association's] coverage. The reason: the claimant has been compensated for the injuries sustained pursuant to a statutory procedure for determining fair compensation, a procedure designed to award the same amount that claimant would be legally entitled to receive from the insured in a civil action for damages." Carrier v. Hicks, 316 Or. 341, 349, 851 P.2d 851 (1993).
The New Hampshire Supreme Court reached a similar result in New Hampshire Ins. Guaranty Ass'n. v. Pitco Frialator, 142 N.H. 573, 580, CT Page 20097 705 A.2d 1190 (1998). In Pitco, an employee was injured by a product manufactured by the defendant. During the litigation, Pitco's insurer became insolvent. This insolvency triggered the obligation of New Hampshire's guaranty association to reimburse Pitco. However, the injured employee had already received workers' compensation benefits in excess of the guaranty association's statutory maximum payout. The New Hampshire Supreme Court ruled that the state's guaranty association was entitled to offset these workers' compensation benefits. It held: "Although the title of [New Hampshire's version of § 38a-845] suggests that its purpose is merely to prevent a double recovery, we conclude that the language of the provision requires us to subtract the $300,000 of workers' compensation benefits from [New Hampshire guaranty association's] $300,000 statutory cap . . . Indeed, the amount payable on a covered claim under this chapter is $300,000 . . . and this $300,000 amount payable must be reduced by the $300,000 of workers' compensation payments . . ." (Citation omitted; internal quotation marks omitted.) New Hampshire Ins. Guaranty Ass'n. v. Pitco Frialator, supra, 580.
Results similar to Pitco have been reached in a number of other states. See, e.g., Ventulett v. Maine Ins. Guaranty Ass'n., 583 A.2d 1022, 1024 (Me. 1990); Moiser v. Oklahoma Property and Casualty Ins., 890 P.2d 878, 879 (Okla. 1994); Bird v. Norpac Foods, Inc., 325 Or. 55, 66, 934 P.2d 382 (1997). The collective authority of these out-of-state decisions suggests that the CIGA's position is the correct interpretation of the model insurance guaranty association statute as adopted by Connecticut. Consequently, the court finds that CIGA is entitled to offset the uninsured motorist benefits received by Mennillo.
For the reasons stated above, the court grants summary judgment in favor of the defendant, Connecticut Insurance Guaranty Association.