2006-879, LEAH BARBUTO v. PEERLESS INSURANCE CO.

Law Office of David C. Dunn, P.A.

No. 2006-879

Hillsborough-northern judicial district

Devine, Millimet & Branch, P.A.

appeals an order of the Superior Court (Mangones DUGGAN, J. The respondent, Peerless Insurance Company (Peerless),

with an underinsured tortfeasor. We reverse. underinsured motorist benefits by the amount she recovered in a settlement action to determine whether Peerless was entitled to reduce the petitioner’s judgment in favor of the petitioner, Leah Barbuto, in a declaratory judgment

THE SUPREME COURT OF NEW HAMPSHIRE Danielle L. Pacik on the brief, and Mr. Dunn orally), for the respondent.

brief and orally), for the petitioner.

page is: http://www.courts.state.nh.us/supreme. a.m. on the morning of their release. The direct address of the court's home reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00 to press. Errors may be reported by E-mail at the following address: editorial errors in order that corrections may be made before the opinion goes Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any Readers are requested to notify the Reporter, Supreme Court of New well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule 22 as p. 2 Peerless Ins. v. Vt. Mut. Ins. Co. Interpretation of the language in an insurance policy is a question of law.

potentially lead to a confusing conclusion.” concluded that the policy is ambiguous because Peerless’ interpretation “would sums paid by a tortfeasor. Finally, Peerless argues that the court improperly provision in Part C which requires the limit of liability to be reduced by all maintains that the trial court’s interpretation would render meaningless the distinguishable from the setoff rights governed by Part C. Peerless also deals exclusively with reimbursement and subrogation rights, which are the “Uninsured Motorists Coverage” section do not conflict because Part F Peerless contends that Part F of the “General Provisions” section and Part C of trial court erred in concluding that the policy is ambiguous. Specifically, against the actual damages sustained by the policy holder. It argues that the tortfeasor should be credited against the policy’s limit of coverage, rather than On appeal, Peerless asserts that the petitioner’s settlement with the

Co., 141 N.H. 317, 320 (1996). of proving lack of insurance coverage is on the insurer.” Maville v. Peerless Ins. Co., 148 N.H. 748, 751 (2002). Pursuant to RSA 491:22-a (1997), “the burden cannot reasonably disagree about its meaning. Trombley v. Liberty Mut. Ins. exclusionary language to be considered clear and unambiguous, two parties will be construed in favor of the insured and against the insurer. Id. For more than one interpretation and one interpretation favors coverage, the policy ambiguous and compelled a finding that Peerless was not entitled to the offset. and ordinary meaning. Id. However, if the policy is reasonably susceptible to provision. These conflicting provisions, the trial court held, rendered the policy of the policy are clear and unambiguous, we accord the language its natural language in Part F of the “General Provisions” section conflicted with this Wilson v. Progressive N. Ins. Co., 151 N.H. 782, 788 (2005). Where the terms allowed Peerless to offset the petitioner’s recovery from the settlement, but that the insured based upon a more than casual reading of the policy as a whole. of the “Uninsured Motorists Coverage” section of the policy unambiguously language of an insurance policy as would a reasonable person in the position of she was fully compensated for her damages. The trial court ruled that Part C, 151 N.H. 71, 72 (2004). We construe the Peerless was not entitled to offset her award by the tortfeasor’s settlement until The petitioner brought a declaratory judgment action alleging that

underinsured benefits by the $50,000 settlement. $50,000, claiming it was entitled to reduce the amount of recoverable Peerless denied the claim for $100,000, and instead paid the petitioner $100,000 from Peerless under the policy’s underinsured motorist coverage. fully compensate the petitioner for all of her injuries, she sought an additional $50,000 liability limit of the tortfeasor’s policy. Because this amount failed to permission from Peerless, the petitioner settled with the tortfeasor for the p. 3 We interpreted this exact policy language in Deyette v. Liberty Mutual

reimbursement, rather than setoff, the trial court found that Kelly v. Prudential Peerless argued that Part F of the “General Provisions” section dealt with unless the insured has been fully compensated for [her] damages.” Although from other parties will not be used to offset the limit of the insured’s policy the “General Provisions” section to mean that “payments the insured receives The trial court found that a reasonable insured could interpret Part F of

all sums paid under Part A of this policy.

organizations who may be legally responsible. This includes because of the “bodily injury” by or on behalf of persons or 1. The limit of liability shall be reduced by all sums paid

and 2. Reimburse us to the extent of our payment.” another, that person shall: 1. Hold in trust for us the proceeds of the recovery; and the person to or for whom payment is made recovers damages from to that right.” Paragraph B provides: “If we make a payment under this policy was made has a right to recover damages from another we shall be subrogated we make a payment under this policy and the person to or for whom payment fully compensated for damages.” Paragraph A provides, in pertinent part: “If be entitled to recovery under paragraph A. or B. only after the person has been 3 under: 1. Part C[.] of this policy [the underinsured motorist provision], we shall right to recover payment,” states, in relevant part: “If we make a payment policy’s “General Provisions” section, which, under a subsection entitled “Our “clearly and unambiguously permit[ted the insurer] to offset the plaintiffs’ The trial court, however, went on to consider the effect of Part F of the upon our interpretation of similar policy language in Kelly, which we stated that this provision could reasonably be construed as addressing setoff. Relying Property & Casualty Insurance Co., 147 N.H. 642 (2002), compelled a finding

motor vehicle”: With respect to damages caused by an accident with an “underinsured

the tortfeasor’s settlement. Motorists Coverage” would allow Peerless to reduce the petitioner’s award by under Deyette, that absent other considerations, Part C of the “Uninsured to that amount . . . .” Deyette, 142 N.H. at 563. Here, the trial court found, limit of $100,000 . . . the plaintiffs should reasonably expect to recover only up because “[t]he plaintiffs purchased uninsured motorist coverage . . . with a allowing the insurance company to limit its liability. We explained that Insurance Co. policy provides, in relevant part:, 142 N.H. 560, 561-62 (1997), as clearly and unambiguously Part C of the “Uninsured Motorists Coverage” section of the petitioner’s p. 4 . . . so that the total amount due does not exceed the amount of damage.” Id judgment you recover from the responsible party.” Kelly entitled to the amount we paid from the proceeds of any settlement or the policy, stated in relevant part: “Payments will be reduced by any amount provided, in pertinent part: “When we pay for a loss under this policy, we are 4 “Payments Reduced” provision, located in the Uninsured Motorists booklet of provisions in the policy. The “Trust Agreement” provision of the general policy the insurance company’s payment by a settlement with the tortfeasor. The uninsured motorists benefits by the $50,000 settlement, we interpreted two A second provision, however, also addressed the possibility of reducing provision . . . supersede[d] the general Trust Agreement provision.” Id. The conflicted, a reasonable insured “could conclude that the Payments Reduced Accordingly, because both offset provisions could not apply, and because they plaintiff’s recovery exceeds the amount of the plaintiff’s damages.” Id. insurance company “may reduce its payment to a plaintiff only when a We held that this provision could be reasonably read to mean that the

In Kelly In determining whether the insurance company could reduce the a tortfeasor.” Id. “always entitled to offset a plaintiff’s recovery by any amounts recoverable from tortfeasor.” Id. at 644. In essence, this provision meant that the insurer was unambiguously permits [the insurer] to offset the plaintiffs’ recovery from the (quotations omitted). We determined that this language “clearly and

insured’s settlement with the tortfeasor. Id. insurance company could not reduce uninsured motorists benefits by the available to the insured. Id. at 643. The insured sought a declaration that the insured’s coverage by the $50,000 settlement, making $50,000 in coverage to recover under the uninsured motorists policy. Id. The insurer offset the The insured settled with the tortfeasor for $50,000, and subsequently sought carried uninsured motorist insurance with a $100,000 limit. Id. at 642-43. damages of $225,000. Id. at 642. At the time of the accident, the insured

, the insured was injured in an automobile accident, sustaining

compensated for her damages. limit of the policy by the $ p. 5 50,000 settlement until the petitioner was fully exceeded $100,000, it determined that Peerless could not reduce the $100,000 be ambiguous. Because there was no dispute that the petitioner’s damages insured is fully compensated. Accordingly, the trial court found the policy to to reduce its limit of liability by any settlement regardless of whether the “Uninsured Motorists Coverage” section, the offset provision allowing Peerless compensated before Peerless is entitled to recovery, conflicts with Part C of the concluded that this offset provision, requiring the insured to be fully court found that Part F was also an offset clause. Therefore, the trial court recovery from the tortfeasor,” Kelly, 147 N.H. at 644 (emphasis added), the trial provisions in Kelly

exceeded damages would have no effect. Thus, regardless of the terminology By referring to the “Trust Agreement” and “Payments Reduced” insurance company to reduce its payment only when the plaintiff’s recovery tortfeasor, as provided under the “Trust Agreement,” the provision allowing the always entitled to recover payments by any amount recoverable from a the “Payments Reduced” provision meaningless. If the insurance company was provisions conflicted because applying both provisions would have rendered Reduced” and “Trust Agreement” provisions in that policy conflicted. These Our holding in Kelly was only that the specific language of the “Payments underinsured motorists claims and permitting subrogation or reimbursement. would effectively prohibit insurance policies from both limiting liability on is no distinction between setoff and reimbursement provisions. Such a holding

as “offset” provisions, we did not intend to imply that there

Peerless’ right of setoff and reimbursement can apply without conflict. long as the insured is fully compensated. Thus, under this policy, both Part F may entitle Peerless to be reimbursed to the extent of its payment so insured collects funds from other sources after Peerless has made a payment, reimbursement and applies after petitioner is fully compensated. Under facts not present here, where the Conversely, Part F of the “General Provisions” section clearly concerns entitled to any reimbursement for the $ p. 5 50,000 it already paid until the Insurance §§ 41.7, 44.4 (3d ed. rev. 2005). Under Part F, Peerless would not be 3 A. L. Widiss & J. E. Thomas, Uninsured and Underinsured Motorist rights against non-motorist tortfeasors until the insured is fully compensated); insured has not been fully compensated, but may not exercise subrogation reduce payments under uninsured motorists coverage even though the injured setoff. See, e.g., Deyette, 142 N.H. at 563 (acknowledging that an insurer may section. This right of reimbursement is conceptually distinct from the right of the $50,000 payment as calculated under Part C of the “Uninsured Motorists”

Unlike Kelly coverage limit of $100,000. Cf. Deyette, 142 N.H. at p. 5 563. the tortfeasor will be used as a setoff against the underinsured motorists section of the policy, the insured is put on notice that any payments made by specifically referencing “limit of liability” in the “Uninsured Motorists Coverage” Automobile Liability Insurance §§ 40:1, 40:2 (4th ed. 2004). Moreover, by insured in the first instance. See, e.g., 3 I. E. Schermer & W. J. Schermer, type typically used by an insurer to reduce or eliminate payments made to the $100,000 liability limit by the $50,000 settlement. This setoff provision is the Deyette, clearly and unambiguously allows Peerless to reduce the policy’s conflict. Part C of the “Uninsured Motorists Coverage” section, as we held in

, the two policy provisions at issue here can apply without

the amount paid by the tortfeasor. Id. insurer therefore could not offset the insured’s uninsured motorists benefits by p. 6 6

amount the tortfeasor paid in the settlement with the petitioner. entitled to reduce its $100,000 payment to the petitioner by $50,000, the reach Peerless’ remaining arguments. Accordingly, we hold that Peerless is Because we find that the policy language is unambiguous, we do not

BRODERICK, C.J.