Park v. American Casualty Insurance

Corrigan, J.

(concurring in part and dissenting in part). I concur that the trial court did not abuse its discretion in refusing to set aside the default judgment. Defense counsel provided no reasonable excuse for failing to appear on the scheduled trial date; counsel should have ascertained the trial date from the transferred file. Contrary to Judge Schmucker’s dissent, the default was not an unwarranted sanction because defense counsel also missed the earlier scheduling conference, although he had an order with that pertinent date.

Nonetheless, this Court should set aside the arbitration award. The issue regarding arbitration, one not addressed so far by a Michigan court, is whether worker’s compensation and social security disability benefits are economic losses that an insurer is enti *73 tied to set off from uninsured motorist coverage as a matter of public policy. I conclude that the insurer is entitled to do so.

i. underlying facts

Plaintiff Benjamin Park sustained injuries when another vehicle allegedly struck the truck he was driving. Plaintiff filed the instant suit to compel arbitration of his claim for uninsured motorist coverage under the insurance policy issued by defendant American Casualty Insurance Company. Although the parties later stipulated to arbitrate the claim, the court subsequently withdrew the order because the parties could not agree whether plaintiffs truck had made contact with another vehicle.

At the scheduled trial date, defense counsel did not appear. The court entered a default against defendant at that time. The court also determined that contact had occurred between plaintiffs truck and another vehicle, and granted plaintiffs request that the case be submitted to arbitration. Defendant later moved to set aside the court’s order, asking to submit the issue of contact to the arbitration panel. The court denied defendant’s motion to set aside the order.

An arbitration panel then heard the case. Plaintiff was seeking benefits under defendant’s policy for his excess wage loss and pain and suffering. During the hearing, the neutral arbitrator commented about plaintiff’s claim for excess wage loss; plaintiff then withdrew that claim, leaving only his claim for noneconomic damages. Defendant’s policy, however, contained a clause that offset any amount payable under the policy by all sums paid under worker’s compensation, disability benefits, or a similar law. *74 Despite this clause, the neutral arbitrator and the plaintiffs arbitrator decided that the worker’s compensation and social security disability payments received by plaintiff were not a permissible setoff because they were not of like kind to the noneconomic damages he sought.

The parties stipulated that plaintiff’s noneconomic damages totaled $500,000. The arbitration panel reduced that amount by five percent because of plaintiff’s comparative negligence in failing to wear a seatbelt. The court’s order of judgment on the arbitration award reflects that Park was to receive $482,226.51, including taxable costs and interest. Defendant appeals.

II. SETOFF CLAUSE

Defendant asserts that it is entitled to set off the monies that plaintiff received as worker’s compensation and social security disability benefits because of the policy language in the uninsured motorist clause. Uninsured motorist coverage provides an insured security for losses for which an uninsured tortfeasor would be liable. Bradley v Mid-Century Ins Co, 409 Mich 1, 62 ; 294 NW2d 141 (1980). Uninsured motorist coverage involves two types of losses: non-economic losses or excess economic losses. Id. When insurers have included setoff clauses in their policies, as defendant did here, their insureds may not collect twice for the same economic loss. Id. Amounts paid by the insurer for economic loss, however, do not reduce amounts due for noneconomic loss or excess economic loss. Id. at 63 .

The setoff clause in the policy in this case reads as follows:

*75 2. Any amount payable under this coverage shall be reduced by:

a. All sums paid or payable under any workers’ compensation, disability benefits or similar law.

If the language within an insurance contract is clear and unequivocal, the court will enforce the contract’s terms and not rewrite the contract. The court will construe reasonable doubts and ambiguities most favorably to the insured, particularly against the insurer who drafted the contract. Erickson v Citizens Ins Co, 217 Mich App 52, 54 ; 550 NW2d 606 (1996). Under the plain contract language included above, the payments received by plaintiff Park should be set off.

The contract between the parties was in plain language and was without ambiguity. Under the clear language of the policy, plaintiff could have had no expectation that he would receive double compensation for his loss. In short, the parties had agreed to restrict their damages in the contract. In my view, plaintiff improperly recast his economic damages, on the basis of the advice of the neutral arbitrator, as damages for pain and suffering to circumvent the application of Bradley to this case. Moreover, regardless of the label that plaintiff applies to his loss, the insurance contract states that “any amount payable” shall be reduced. Thus, despite plaintiff’s withdrawal of his claim for excess wage loss, the setoff still should occur under the policy language.

Under the personal injury protection portion of insurance policies, statutory law permits insurers to set off worker’s compensation and social security disability benefits. MCL 500.3109(1); MSA 24.13109(1) provides: “Benefits provided or required to be provided under the laws of any state or the federal gov *76 emment shall be subtracted from the personal protection insurance benefits otherwise payable for the injury.” The purpose of the above statute is to prevent recovery of benefits that duplicate benefits provided by the insurer, and thus prevent double recovery by the insured. Popma v Auto Club Ins Ass’n, 446 Mich 460, 477 ; 521 NW2d 831 (1994). Likewise, the uninsured motorist provision does not permit double recovery. Bradley, supra at 62 . Defendant is not attempting to violate Bradley by offsetting no-fault benefits against uninsured motorist coverage. Rather, defendant argues that plaintiffs worker’s compensation and social security disability benefits received after the three-year no-fault period should be set off.

Courts from other jurisdictions have permitted insurers to set off worker’s compensation and social security disability benefits from uninsured motorist coverage. In Dacosta v Allstate Ins Co, 199 Ga App 292, 293; 404 SE2d 627 (1991), the court awarded the insured damages for pain and suffering; nonetheless, it permitted the insurer to set off the worker’s compensation payments received by the insured. The insured ultimately collected nothing for his pain and suffering claim because the worker’s compensation payments had exceeded the uninsured motorist coverage limits. Id. at 293-294. In Schweighart v Standard Mutual Ins Co, 227 Ill App 3d 249, 253; 169 Ill Dec 241; 591 NE2d 121 (1992), the court determined that the insured’s worker’s compensation award offset all the coverage under the uninsured motorist provision, so it did not permit a claim for loss of consortium by the injured insured’s spouse.

Further, the Uniform Motor Vehicle Accident Reparations Act of 1972 holds that worker’s compensation *77 and social security payments are subtracted in calculating net loss. 14 ULA 11(a), p 73. Because the Michigan no-fault act was premised on the uniform act, Bak v Citizens Ins Co of America, 199 Mich App 730, 736 ; 503 NW2d 94 (1993), it follows that plaintiff should not be permitted twice to recover for his economic damages.

Finally, Judge Fitzgerald states that if we enforce the setoff of worker’s compensation and social security disability benefits, the coverage for noneconomic damages would be illusory and would defeat the reasonable expectations of the insured and the policy of the no-fault act to distinguish between economic and noneconomic loss. That conclusion overlooks the fact that plaintiff is receiving compensation from other sources. Further, to refuse to offset would ignore the plain contract language between the parties.

In light of Judge Schmucker’s concurrence in this view, we order reversal on this issue.

m. neutrality of arbitrator

Defendant also argues that the neutral arbitrator failed to behave impartially during the hearing. The parties did not provide this Court with a transcript of the arbitration hearing; it may be that the hearing was not transcribed. The dissent by defense arbitrator Linda M. Orlans, however, stated that at the hearing the neutral arbitrator “suggested that if [plaintiff] withdrew his claim for Wage Loss Benefits that [defendant] would not be able to reduce its policy limit.”

It appears to me that the neutral arbitrator’s suggestion to plaintiff regarding successful litigation strategy may well have pierced the veil of neutrality. *78 The arbitrator suggested a successful litigation tactic that had not occurred to plaintiffs counsel and resulted in a favorable award. When a judge cannot impartially hear a case, the judge may be disqualified. MCR 2.003(B). By analogy, when an arbitrator acting as a decision maker fails to act impartially, the arbitrator should be precluded from deciding the pending matter. Grounds for disqualification include when the judge “is personally biased or prejudiced for or against a party.” MCR 2.003(B)(1). The court rule requires a showing of “actual” bias. Cain v Dep’t of Corrections, 451 Mich 470, 495 ; 548 NW2d 210 (1996).

Despite my concern about the neutral arbitrator’s conduct, which amounted to giving legal advice to plaintiff regarding how to structure his claim of loss, I do not decide this issue in light of our disposition of the setoff issue.

I join Judge Fitzgerald in affirming the sanction but join Judge Schmucker in finding the policy language plainly requires a setoff for duplicative benefits.