Chambers v. Middlesex

USCA1 Opinion [NOT FOR PUBLICATION] United States Court of Appeals For the First Circuit No. 97-2327 DONALD L. AND MARILYN CHAMBERS, Plaintiffs, Appellants, v. MIDDLESEX MUTUAL ASSURANCE COMPANY, Defendant, Appellee. APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE [Hon. Eugene W. Beaulieu, U.S. Magistrate Judge] Before Lynch, Circuit Judge, Coffin and Bownes, Senior Circuit Judges. Joseph L. Ferris for appellants. Julie D. Farr with whom Carl F. Rella was on brief for appellee. March 24, 1998 Per Curiam. After full briefing, oral argument, and subsequent deliberation, we find ourselves in accord with the Magistrate Judge's statement of relevant facts, pertinent state caselaw, basic analysis, and legal conclusions as set forth in his Memorandum of Decision. We therefore affirm on the basis of that opinion. Our additional comments are directed, first, at appellants' misreading of Tibbetts v. Maine Bonding and Cas. Co., 618 A.2d 731 (Me. 1992), as revealed by their brief; we then elaborate the rationale for allowing appellee to reduce its underinsured motorist obligation by the amounts paid appellants by the two underinsured tortfeasors. In Tibbetts, where only one of two tortfeasors was underinsured, the Supreme Judicial Court made two major points: (1) a determination of underinsurance was governed by whether the liability insurance on a tortfeasor's vehicle was exceeded by the victims' underinsured motorist coverage a vehicle specific analysis; and (2) subrogation rights under 24-A M.R.S.A. 2902(4) and the offset permitted by the reduction clause in the underinsured motorist policy were inapplicable to amounts received from the insured tortfeasors. The court saw the statutory mandate as that of filling "the gap left by an underinsured tortfeasor" and the insurer's obligation to indemnify (and its right of subrogation) as "triggered" only by the damage and payment attributable to the underinsured vehicle. Id. at 734. The linchpin of appellants' argument rests on what they view as the "formula enunciated by the Court in Tibbetts." Citing Tibbetts, 618 A.2d at 734, they state: "To the amount of its policy limits, [the plaintiff's insurance company's] contractual obligation to the [plaintiff] is determined by the amount of the [plaintiff's] damages that are attributable to [the tortfeasors] reduced by any recovery received from [the tortfeasor's insurer]." Appellants' Brief p. 9. Again, later in their brief, while conceding that the amount of damages does not affect the determination whether a tortfeasor is underinsured, they assert, based on the above paraphrase: "However, once the determination is made that a particular tortfeasor is underinsured, Tibbetts holds that the amount of damages is used to calculate the amount of underinsured motorist benefits that are due the insured party." Appellants' Brief p. 14. This is unfortunate. At no point does the court make this statement. What appellants have seized upon is not a definition of the extent of a victim's underinsured motorist coverage (or any "contractual obligation"), but a passage dealing with the statutory right of subrogation in which the court made the observation we have noted above -- since "the insurer's obligation to indemnify . . . is limited to damages attributable to an underinsured vehicle," its right of subrogation also applies only to proceeds "received from" the triggering vehicle. The point that subrogation extends only to damages attributable to an underinsured vehicle and not to an insured one cannot be construed as a "formula" requiring that Maine courts calculate underinsured motorist benefits by deducting recoveries from a victim's total damages. Another misimpression arises from appellants' efforts to avoid the application of Middlesex's policy clause allowing a reduction for amounts paid on behalf of tortfeasors. Appellants state, "the Court in Tibbetts expressly voided a similar 'reduction clause.'" But the Tibbetts court was dealing with recovery of amounts from an insured joint tortfeasor which, if a reduction were given, "would nullify the statutorily authorized coverage for damages caused by an uninsured motorist." Id. at 734. Coming now to our basic rationale, we focus on the plain meaning of both the subrogation provision of the underinsured motorist statute and the corresponding language of appellants' Middlesex policy. The statutory provision reads: In the event of payment to any person under uninsured vehicle coverage, and subject to the terms of such coverage, to the extent of such payment the insurer shall be entitled to the proceeds of any settlement or recovery from any person legally responsible for the bodily injury as to which such payment was made, and to amounts recoverable from the assets of the insolvent insurer of the other motor vehicle. 24-A M.R.S.A. 2902(4). The relevant policy language reads: Any amounts otherwise payable for damages under the coverage shall be reduced by all sums: 1. Paid because of the "bodily injury" by or on behalf of persons or organizations who may be legally responsible . . . . As appellants point out, the statute "presumes a payment has been made" by the underinsured motorist insurer. This language expresses the generic subrogation concept of "substitution of one person in the place of another with reference to a lawful claim, demand, or right," Black's Law Dictionary 1595 (4th ed. 1957). In the classic subrogation situation, Middlesex would first make payment to appellants of its underinsured policy limit of $100,000. Then, stepping into appellants' shoes, it would recover, by suit or settlement, a total of $70,000 from the two tortfeasors' liability policies. The result would be a net outlay to the victims of $30,000 by Middlesex and $70,000 from the tortfeasors. The same end result is achieved if, as is contemplated by the policy reduction clause, the victim's underinsurance motorist insurer has not yet paid the victim, but the victim's recovery is reduced from an amount "otherwise payable." Appellants assert that "Section 2902(4) gives the underinsured motorist provider a right of action against the tortfeasors, not a mechanism to reduce the obligation to its insured." In our view, they are unpersuasive in demonstrating why a reduction of obligation does not follow from the existence of the right of action. While appellants assert that, despite giving "full subrogation rights," the statute "simply does not permit the stacking of those underlying insurance coverages," it nevertheless gives the underinsured motorist carrier entitlement to "the proceeds of any settlement or recovery from any person legally responsible." To our mind, "any" in this context includes "all." Were the entitlement to be calculated by deducting credit for one settlement from Middlesex's exposure, then by deducting the second credit from the original undiminished coverage, Middlesex would be a victim of having its exposure doubled. Had there been only one tortfeasor, with liability coverage of $70,000, there would be no basis for arguing that Middlesex should contribute more than $30,000. No reason is advanced why Middlesex's entitlement to settlement proceeds should be less in the case of, say, two tortfeasors, each carrying liability insurance on the amount of $35,000. The gap of underinsurance remains the same. A recent Massachusetts case dealing with an underinsurance coverage statute similar to Maine's is instructive. It declared that a policy's underinsurance coverage was not available "because the limits of that coverage did not exceed the sum of the two responsible tortfeasors." Hanover Insurance Co. v. Pascar, 421 Mass. 442, 443 (1995). The court also commented: We note as well that cases from other jurisdictions which have considered this issue (and which also have construed an insurance policy or a statute written in the singular) have concluded that the sum of the personal injury liability limits of separate policies insuring joint tortfeasors should be considered for the purpose of deciding whether underinsured coverage will be available to an injured insured. Id. at 446 (citations omitted). Affirmed.