PUBLISHED OPINION
Case No.: 93-2622
Complete Title
of Case:IN THE MATTER OF THE ANCILLARY LIQUIDATION
OF MIDLAND INSURANCE COMPANY, A CORPORATION
ORGANIZED AND EXISTING UNDER THE LAWS OF
THE
STATE OF NEW YORK AND LICENSED TO DO
BUSINESS
IN THE STATE OF WISCONSIN:
KENNETH BELONGIA,
Appellant,
v.
WISCONSIN INSURANCE SECURITY FUND,
and NORTHBROOK PROPERTY & CASUALTY
COMPANY,
Respondents.
Submitted on Briefs: June 8,
1994
COURT COURT OF APPEALS OF WISCONSIN
Opinion Released: July
13, 1995
Opinion Filed: July 13, 1995
Source of APPEAL Appeal from an order
Full Name JUDGE COURT: Circuit
Lower Court. COUNTY: Dane
(If "Special" JUDGE: William
D. Johnston
so indicate)
JUDGES: Eich,
C.J., Gartzke, P.J., and Sundby, J.
Concurred:
Dissented: Sundby, J.
Appellant
ATTORNEYSFor the appellant, Kenneth Belongia, the cause was submitted on
the brief of Walter W. Stern of Union Grove.
Respondent
ATTORNEYSFor the respondent, Wisconsin Insurance Security Fund, the cause
was submitted on the brief of Jeffrey J. Kassel and Teresa M.
Elguezabal of La Follette & Sinykin of Madison.
COURT OF APPEALS DECISION DATED AND RELEASED July 13, 1995 |
NOTICE |
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62, Stats. |
This opinion is subject to
further editing. If published, the official
version will appear in the bound volume of the Official Reports. |
No.
93-2622
STATE
OF WISCONSIN IN COURT OF
APPEALS
IN THE MATTER OF THE ANCILLARY
LIQUIDATION
OF MIDLAND INSURANCE COMPANY, A
CORPORATION
ORGANIZED AND EXISTING UNDER THE LAWS OF
THE
STATE OF NEW YORK AND LICENSED TO DO
BUSINESS
IN THE STATE OF WISCONSIN:
KENNETH BELONGIA,
Appellant,
v.
WISCONSIN INSURANCE SECURITY FUND,
and NORTHBROOK PROPERTY & CASUALTY
COMPANY,
Respondents.
APPEAL from an order of
the circuit court for Dane County:
WILLIAM D. JOHNSTON, Judge. Affirmed.
Before Eich, C.J.,
Gartzke, P.J., and Sundby, J.
GARTZKE, P.J. Kenneth Belongia appeals from a circuit
court order affirming the decision of the Wisconsin Insurance Security Fund
dismissing his claim against the fund.
Belongia filed his claim against the fund because the liability insurer
for the party whose negligence injured him in a motor vehicle accident was
insolvent and undergoing liquidation.
The fund's hearing examiner dismissed Belongia's claim because his
damages are less than the amount available to him from other insurance
coverage. We affirm the circuit court's
order.
1. Background and Issues
Belongia, a truck
driver, was injured when a truck hit his parked truck. The liability insurer of the adverse driver
was insolvent. Belongia therefore filed
a claim against the Wisconsin Insurance Security Fund. The fund is created by and administered
under ch. 646, Stats. The purpose of ch. 646 "is to protect
insureds from losses occasioned by the insolvency of their insurance
company." Fireman's Fund
Ins. Co. v. Pitco Frialator Co., 145 Wis.2d 526, 532, 427 N.W.2d 417,
420 (Ct. App. 1988). More precisely,
one purpose of ch. 646 is to "maintain public confidence in the promises
of insurers by providing a mechanism for protecting insureds from excessive
delay and loss in the event of liquidation of insurers ...." Section 646.01(2)(a), Stats.
The fund consists of
payments by insurers through assessments made under § 646.51, Stats., earnings from investments, and
amounts the fund recovers upon liquidation of insurers. Section 646.11(1), Stats. The board of
directors of the fund stands in the position of the insurer in the payment of
claims filed by insureds against the fund.
Section 646.13(1)(b), Stats.
To be eligible for
payment from the fund, the claimant must show that he or she has an unpaid
claim for a loss insured under a policy and that the terms, conditions and
limitations of § 646.31, Stats.,
are met. One such limitation is set
forth in § 646.31(6), appropriately entitled "Collection from
Collateral Sources." Section
646.31(6)(a) provides in pertinent part:
"The portion of a loss claim for which indemnification is provided
by other benefits or advantages, which may not be included in the class of
claims defined by s. 645.68(3), may not be claimed from the fund under this
chapter."
Under
§ 646.31(6)(a), Stats., a
claimant cannot claim that "portion of a loss claim for which
indemnification is provided by other benefits or advantages ...." The fund's hearing examiner found that
Belongia's damages resulting from his injuries, exclusive of medical bills,
amounted to $11,641.06 in lost wages and $20,000 for pain, suffering and
disability, totalling $31,641.06.[1] The examiner also found that the portion of
Belongia's claim for which indemnification is provided by other insurance
totals $43,987.59, $30,000 in uninsured motorist coverage plus $13,987.59 in
worker's compensation benefits. Because
Belongia's damages minus a $200 deductible under § 646.31(3) are less than
the $43,987.59 available from the collateral sources, the examiner dismissed
Belongia's claim against the fund.
Belongia asserts: (1) the examiner lacked jurisdiction and the
circuit court lacked competence to review the examiner's determination because
a claims supervisor initially erred when denying the claim, (2) his damages for
his permanent injury and his pain, suffering and disability, past and future,
exceed the $20,000 set by the examiner, (3) the examiner erred by taking into
account the $30,000 coverage available under his employer's uninsured motorist
policy when, as a matter of fact, he and the insurer settled his uninsured
motorist claim in good faith for $17,500, and (4) the examiner erred by taking
into account a $5,940 lump-sum payment to him under a worker's compensation
compromise agreement.
We resolve the issues
Belongia raises against him.
2. Jurisdiction
The fund's claims
supervisor made an erroneous initial determination that § 646.31(6)(a), Stats., requires that a claimant
exhaust all collateral sources before seeking recovery from the fund. Because Belongia settled his
uninsured-motorist claim for $17,500, even though a $30,000 policy limit
existed, the claims supervisor denied Belongia's claim against the fund.
The fund concedes that
the initial determination was incorrect.
Section 646.31(6)(a), Stats.,
offsets from the fund's liability the amount of indemnification provided by
collateral sources, regardless whether the claimant has pursued those other
sources. The statute does not require
that a claimant exhaust collateral sources before claiming from the
fund.
We reject Belongia's
assertion that the initial determination somehow deprived the hearing examiner
of jurisdiction and the circuit court of competency. A statutory appeal procedure is in place to cure errors. Belongia, a claimant whose claim had been
declared ineligible, exercised his right under § 646.32(1), Stats., to appeal to the board of
directors of the fund within thirty days after notice of the initial
determination was mailed to him. An
evidentiary hearing was held before an examiner, and the erroneous basis for
the initial determination was cured, even though the examiner ultimately
dismissed Belongia's claim. Belongia
timely petitioned for review to the circuit court under § 227.52, Stats.
That court was competent to proceed under § 227.53, Stats.
3. Damages
Belongia disputes the
examiner's finding that his damages are $20,000 for his permanent injury and
his pain, suffering and disability, past and future. He asserts that the award is too low and not supported by
substantial evidence.
An award for past and
future pain, suffering and disability is a discretionary decision by the fact
finder.
We have said many times that an award of
damages for pain, suffering and disability must find its basis on the credible
evidence but that the amount of the award is a matter resting largely in the
discretion of the jury. This is because
damages of this kind cannot be calculated with any substantial degree of
mathematical certainty.
Davis
v. Allstate Ins. Co., 55 Wis.2d 56, 58, 197 N.W.2d 734,
735-36 (1972). The legislature has
prohibited us from substituting our judgment for that of the agency "on an
issue of discretion." Section
227.57(8), Stats. Our review of an agency's discretionary
decision is therefore deferential. We
look no further than to determine whether the agency examined the relevant
facts, applied a proper standard of law, and reached a reasonable
conclusion. Doersching v. Funeral
Directors, 138 Wis.2d 312, 328, 405 N.W.2d 781, 788 (Ct. App. 1987).
The hearing examiner
considered Belongia's injury and complaints.
He noted that Belongia claims:
(1) a permanent injury to his right hand, including numbness and
tingling, unabated by carpel tunnel release surgery, (2) the pain wakes him at
night, (3) he has difficulty using his hand and drops things, and (4) he has
other complaints. The examiner also
noted that he observed Belongia lean all of his weight on a cane which he held
in his right hand in the area that was the primary source of his
complaint. The examiner found that no
credible medical or other evidence exists that the injury caused a permanent
impairment to Belongia's ability to work as a trucker. The examiner found that while Belongia
receives social security for total disability, the primary reason is a prior
left-knee injury.
Belongia contends that
because the examiner offered no specific analysis as to the appropriateness of
the $20,000 award, we should reverse and direct him to do so. However, Belongia himself has not suggested
a specific award, much less a specific analysis for calculating it. The examiner considered the facts. Articulation of specific reasons for a specific
money award for pain and suffering is well-nigh impossible. The $20,000 award is reasonable, and we
affirm it.
4. Uninsured Motorist
Insurance Offset
Belongia's employer's
uninsured-motorist policy provides $30,000 coverage. Belongia settled his claim on that policy for $17,500.[2] The examiner concluded that Belongia's
damages must exceed $44,187.59 to proceed against the fund for additional
payments. The examiner arrived at this
amount by adding the policy limit ($30,000), Belongia's worker's-compensation
benefits exclusive of medical payments made on his behalf ($13,987.59),[3]
and the deductible under § 646.31(3), Stats.,
($200). Having found that Belongia's
total damages, exclusive of medical bills, amounted to $31,641.06, the examiner
dismissed Belongia's claim.
The propriety of the
examiner's ruling turns on that part of § 646.31(6)(a), Stats., which provides in effect that
the portion of a loss claim "for which indemnification is provided by
other benefits or advantages ...," may not be claimed from the fund. The question is whether the statute means,
as Belongia asserts, that recovery from the fund is prohibited only for that
portion of his loss claim for which indemnification was actually recovered from
other sources, or, as the fund asserts, the prohibition applies to the amount
of indemnification "provided" by other sources, regardless of the
amount actually collected from those sources.
The meaning of a statute
is a question of law. An agency's
interpretation does not bind the courts.
However, the courts frequently refrain from substituting their
interpretation of a statute for that of the agency charged with administering
the statute.
Courts
will give varying degrees of deference to an agency's interpretation of a
statute when they have concluded that the legislature charged the agency with
the duty of administering the statute; that the agency's interpretation is of
longstanding; that the agency's interpretation entails its expertise, technical
competence and specialized knowledge; and that through interpretation and
application of the statute, the agency can provide uniformity and consistency
in the field of its specialized knowledge.
Lisney
v. LIRC, 171 Wis.2d 499, 505, 493 N.W.2d 14, 16 (1992). A court will not defer when the agency's
interpretation contravenes the words of the statute, is contrary to the
legislative intent, or is otherwise unreasonable. Id. at 506, 493 N.W.2d at 16.
The fund does not assert
that it has prior experience with the issue before us, or that its
interpretation entails its expertise, or that its specialized knowledge will
provide uniformity and consistency in the application of the statute. We conclude that our review is de novo, and
we will not defer to the fund's interpretation of § 646.31(6)(a), Stats.
We are satisfied that
the fund correctly interprets the statute.
We note first that § 646.31(6)(a), Stats., prohibits claims against the fund for the amount of
indemnification "provided" by other sources. It makes no reference to the amounts
"collected" or "recovered" from other sources.
Second, by specifically
referring to § 645.68(3), Stats.,
§ 646.31(6)(a), Stats.,
incorporates the "class of claims defined by s. 645.68(3)" into the
description of the portion of the loss that may not be claimed from the
fund. We therefore look to
§ 645.68(3) to determine whether it contains anything contradictory to our
reading and the fund's reading of § 646.31(6)(a). We find no contradiction. Indeed, § 645.68(3) excludes from the
class of loss claims payable in a liquidation that "portion of any loss
for which indemnification is provided by other benefits or advantages recovered
or recoverable by the claimant ...."
(Emphasis added.) Thus, if other
benefits are recoverable by the claimant, regardless whether they are actually
recovered, the claim is reduced by that amount.
Finally,
§ 646.31(6)(c), Stats.,
provides:
Any person having an eligible claim which also
constitutes a claim or legal right of recovery under any governmental insurance
or guaranty program shall first exhaust all rights under that program, and any
amount payable on an eligible claim under this chapter shall be reduced by the
amount of recovery under that program.
(Emphasis
added.) Section 646.31(6)(c) shows that
when the legislature intends to reduce the amount payable on a claim against the
fund "by the amount of recovery," it has said so.
Belongia relies on a
Michigan decision, Watts v. Michigan Dept. of State M.V.A.C.F.,
231 N.W.2d 43 (Mich. 1975), under that state's Motor Vehicle Accident Claims
Fund. The Michigan Supreme Court dealt
with a provision in its statute that no payment be made out of the fund in
respect to a claim for damages of "any amount paid or payable by an
insurer by reason of the existence of a policy of insurance." Id. at 44. The court held that the fund was entitled to
credit only for the amount actually "paid" by an insurer rather than
the policy limit. Id. at
45. Section 646.31(6)(a), Stats., does not use the phrase
"paid or payable." Because of
the difference between the Michigan statute and § 646.31(6)(a), Watts
is inapplicable to the case before us.
Moreover, other
jurisdictions have explained why the Michigan rule can lead to undesirable
results. In Hetzel v. Clarkin,
772 P.2d 800, 805 (Kan. 1989), the Kansas Supreme Court rejected the Michigan
approach because it "may lead to collusive settlements between the injured
plaintiff and the plaintiff's uninsured motorist insurer. It may also lead to excessive litigation on
the issue of whether such settlements were made in good faith." The Colorado Supreme Court rejected the
Michigan approach for essentially the same reasons and added that it "may
result in the [fund's] subsidizing the uninsured motorist insurer" by
requiring that the fund pay the difference between the settlement amount and
the policy limit. Colorado Ins.
Guar. Ass'n v. Harris, 827 P.2d 1139, 1143 n.3 (Colo. 1992). See also Prutzman v. Armstrong,
579 P.2d 359, 362 (Wash. 1978) (offsetting actual recovery would furnish no
incentive for plaintiffs to seek adequate settlement from their own insurers,
because they could force the fund to pay the difference between the settlement
and the actual value of the claim).
We conclude that the
hearing examiner properly interpreted and applied § 646.31(6)(a), Stats., when offsetting against
Belongia's claim the $30,000 uninsured motorist coverage available to him for
the accident rather than the $17,500 he settled for under the policy.
5. Worker's Compensation
Settlement
Belongia entered a
worker's compensation compromise agreement for a lump-sum payment of $5,940,
with additional payments totaling $727 to be made to three health care
providers. The hearing examiner found
that the $5,940 was in consideration of temporary total disability and permanent
partial disability. The examiner determined
that § 646.31(6)(a), Stats.,
requires that the $5,940 lump-sum payment, but not the $727 paid to the health
care providers, must be offset against Belongia's claim against the fund. Belongia asserts that the $5,940 payment
should not be offset, because some of that amount was for medical expenses.
The record, however,
contains no evidence that any part of the lump-sum payment to Belongia went to
doctors or that he personally paid any of his medical expenses. The hearing examiner found that the worker's
compensation carrier paid all of Belongia's medical expenses, that the total
payment made by the carrier for indemnity and medical expenses is $19,766.20,
and that there is no evidence that any health care bills remain unpaid.
Belongia contends that
§ 102.16(1), Stats., which
authorizes submission of proposed worker's compensation compromises for
approval by DILHR, does not require division of the compromise into future
medical or past medical expenses or temporary total or partial permanent
disability. But it does not follow that
some or all of the $5,940 in fact went to pay medical bills. The entire lump-sum payment must be treated
as a collateral source, and therefore it may not be claimed from the fund under
ch. 646, Stats.
We conclude that we must
affirm the order of the circuit court affirming the decision of the hearing
examiner for the Wisconsin Insurance Security Fund dismissing Belongia's claim
against the fund.
By the Court.--Order
affirmed.
No. 93-2622(D)
SUNDBY, J. (dissenting). In
this case, we interpret provisions of the Wisconsin Insurance Security Fund
Law, ch. 646, Stats. The purpose of the law is to protect an
insured from excessive loss when its insurer is liquidated. Section 646.01(2)(a), Stats.
The law creates an "insurance security fund" consisting of
contributions from all insurers subject to ch. 646. Section 646.11(1), Stats. An insured whose insurer is in liquidation
may file a claim against the fund if it is an unpaid claim for a loss insured
under the insured's policy, and all of the statutory conditions are met. Section 646.31(1), Stats. The issue on
appeal is whether when the insured collects part of its loss from another
policy, its claim against the fund must be reduced by the amount the insured
recovers or by the amount of the policy limits.
Wisconsin was one of the
first states to enact an insurance security fund law. Laws of 1979, ch. 109, Preliminary Note. Wisconsin's Insurance Security Fund Law
preceded development of the model act under the auspices of the National
Association of Insurance Commissioners (NAIC).
Id. However, the
repeal and re-creation of Wisconsin's Security Fund Law in 1979 drew heavily on
NAIC's Post-Assessment Property and Liability Insurance Guaranty Association
Model Act. See Laws of 1979, ch.
109, § 14, Introductory Note.
NAIC's Model Act
suggests an "exhaustion" requirement intended to insure that an
insured will not recover twice--once from the collateral source and once from
the fund. Post-Assessment Property and Liability Insurance Guaranty
Association Model Act, NAIC Model Laws, Regulations and Guidelines
§ 12A (1995). Before a person
having a claim against an insurer may recover from the fund, he or she must
"exhaust" his or her right under any "collateral" policy.
The Model Act does not
describe how an insured "exhaust[s]" his or her rights under the
"collateral" policy. However,
the majority of the courts which have addressed the exhaustion requirement have
concluded that the insured is not required to litigate the insured's right to
recover the policy limits of a "collateral" policy; a settlement
negotiated in good faith satisfies the exhaustion requirement.
Chapter 646, Stats., does not impose an exhaustion
requirement on an insured who makes a claim against the fund, but insures
nonduplication of recovery by requiring that if the insured collects a portion
of a loss claim from collateral sources, the amount collected may not be
claimed from the fund. Section
646.31(6)(a), Stats.,
provides:
COLLECTION FROM COLLATERAL SOURCES. The portion of a loss claim for which
indemnification is provided by other benefits or advantages, which may not be
included in the class of claims defined by s. 645.68(3), may not be claimed
from the fund under this chapter.
The Wisconsin Insurance
Security Fund argues that there must be deducted from a claim against the fund
the policy limits of the "collateral" policy; not the amount
recovered. I disagree. I conclude that a claim against the fund
must be reduced only by the amount recovered from the collateral source,
provided that amount is determined in good faith.
In Fireman's Fund
Insurance Co. v. Pitco Frialator Co., 145 Wis.2d 526, 532, 427 N.W.2d
417, 420 (Ct. App. 1988), we said:
We
reiterate that the clear and unambiguous purpose of ch. 646 is to protect
insureds from losses occasioned by the insolvency of their insurance
company.... [T]he Wisconsin Insurance
Security Fund law is a remedial statute which must be construed to give effect
to its leading idea and must be brought into harmony with its purpose.
This purpose is undercut
if the insured whose insurer has become insolvent must have his or her claim
reduced by the policy limits of a collateral insurance policy source, even if,
realistically, such recovery is not possible except through litigation.
Section 646.31(6)(a), Stats., provides: "COLLECTION FROM COLLATERAL SOURCES.
The portion of a loss claim for which indemnification is provided by
other benefits or advantages, which may not be included in the class of claims
defined by s. 645.68(3), may not be claimed from the fund under this
chapter."
The majority considers
the title to § 646.31(6), Stats.,
"appropriate[]." Maj. op. at
3. "Collect" means "to
gather in or together, to collect taxes ...." The
New Lexicon Webster's Encyclopedic Dictionary 192 (1991). Belongia "collected" $17,500 from his
uninsured motorist coverage, not $30,000, the policy limits.
The majority relies on
the "recovered or recoverable" language of § 645.68(3), Stats.
It assumes that the policy limits of the collateral source are
"recoverable." However, we do
not know without a trial, how much of the policy limits of Belongia's uninsured
motorist coverage is "recoverable."
It is unreasonable to force Belongia to litigate this issue solely to
determine his claim against the fund.
The courts which have
construed their state's insurance security fund laws have uniformly required
that a claimant "exhaust" his or her rights to recover whatever is
available under his or her own insurance policies before making a claim against
the fund. However, they differ as to
the effect of that "exhaustion" upon the parties' claim against the
state's insurance security fund. The
Michigan Supreme Court holds that where the insured negotiates a settlement in
good faith, only the settlement is deducted from the insured's claim,
regardless of the policy limits. Watts
v. Michigan Dep't of St., Motor Vehicle Accident Claims Fund, 231
N.W.2d 43, 45 (Mich. 1975). The court
said that the fund's remedy for collusive settlements was to attack those
settlements by affirmatively showing collusion or some other species of
fraud. Id.[4]4
In Wisconsin, there is
no need to fear collusive settlements.
Section 646.13(2), Stats.,
which prescribes the special duties and powers of the board of directors of
Wisconsin's Insurance Security Fund provides:
"The board may:
(a) Review settlements, releases and judgments to which the insurer
or its insureds were parties to determine the extent to which they may be
properly contested." Thus, the board
may review and determine the bona fides of any settlement. This authority is meaningless unless it
applies to a collateral source settlement.
There would be no incentive for the insured to negotiate a settlement
with the collateral source insurer if his or her claim against the fund would
always be reduced by the policy limits.
I believe that limiting the deduction from the insured's claim against
the fund to the amount actually recovered from the collateral insurance policy
source is most faithful to the purposes of the Wisconsin Insurance Security
Fund. Accordingly, I dissent.
[1] The examiner incorrectly computed the total as $36,641.06. We use the correct total in our opinion.
[4] See Colorado Ins. Guar. Ass'n v. Harris, 827 P.2d 1139, 1142 (Colo. 1992) (the recovery the court allowed against the insurance fund was the difference between the policy limits of the uninsured motorist coverage and the fund's statutory limits); Hetzel v. Clarkin, 772 P.2d 800, 802 (Kan. 1989) ("Any amount payable on a covered claim under this act shall be reduced by the amount of any recovery under such insurance policy." (emphasis added)); Richard v. Johnson, 234 N.W.2d 22, 25 (N.D. 1975) (it is the general policy of the law to encourage good-faith settlements).