Opinion
No. CV 02-0818858
October 19, 2004
MEMORANDUM OF DECISION
At issue is whether the State of Connecticut may recover monies from the Connecticut Insurance Guaranty Association that it paid out in connection with a workers' compensation claim when the state was self-insured at the time of the underlying accident and at the time of payment but has since obtained insurance for its workers' compensation program.
In this action, the Connecticut Insurance Guaranty Association (association) seeks declaratory judgment regarding whether a claim made by the defendant, the State of Connecticut, falls within the definition of "covered claim" under General Statutes § 32a-838(6). The state's claim against the association results from an underlying automobile accident which occurred when it was acting as a self-insurer for workers' compensation claims.
"The association is a nonprofit legal entity established by General Statutes § 38a-839 and governed by the Connecticut Insurance Guaranty Association Act, which is codified at General Statutes § 38a-836 et seq. The association was established in order to reimburse, to a limited extent, covered claims against insolvent insurers." (Internal quotation marks omitted.) Doucette v. Pomes, 247 Conn. 442, 445 n. 2, 724 A.2d 481 (1999).
The parties have stipulated to the following facts: On April 10, 1997, Traci Carello and Karen Gagliardi, both residents of Connecticut, were involved in an automobile accident. Earlier that day, Carello had been discharged as a patient from Elmcrest Psychiatric Institute. The psychiatric institute was insured at the time of the accident; however, the policy was issued by a company which has been declared insolvent. Due to the insolvency, the association became obligated to pay "covered claims" under the psychiatric institute's policy, as defined by § 38a-838(6).
Gagliardi was employed by the state at the time of the accident. The state, as a self-insurer for workers' compensation, paid Gagliardi benefits amounting to $195,757.35 through November 16, 2001.
The state obtained an indemnity policy for self-insurers of workers' compensation from Illinois Union Insurance Company which became effective on November 16, 2001. This policy provides in section five, paragraph six, that "all claim reimbursements, including but not limited to subrogation recoveries, will be credited to [Illinois Union] on a pro-rata basis (whereby [the state] will get credit for claim reimbursements approved prior to the Effective Date, but not paid or received until after the Effective Date, and [Illinois Union] shall be entitled to all other subrogation recoveries)." The state's claim for reimbursement from the association for the $195,757.35 paid to Gagliardi was not approved prior to the November 16, 2001 effective date.
Monies paid to Gagliardi by the state and indemnified by Illinois Union after November 16, 2001, are not at issue in the present action.
In a September 30, 2002 document attached as an exhibit to the stipulated facts, Illinois Union "confirm[ed], effective [November 16, 2001], that notwithstanding anything in the Policy to the contrary, including without limitation Section 6 thereof, [Illinois Union] . . . hereby irrevocably waives any claim for subrogation recovery or reimbursement from the [state] from sums it may receive from the [association] in connection with the case known as Karen Gagliardi, et al. State of Connecticut v. Carello/Elmcrest. Per the agreement of the parties, [Illinois Union] and the [state], this waiver shall constitute an amendment to the Policy limited as above described."
The present action was filed by the association on August 16, 2002. Illinois Union was listed as a second defendant but in a stipulation of dismissal, filed April 14, 2003, the parties agreed to dismiss Illinois Union from this matter, with prejudice.
The Illinois Union waiver refers to a lawsuit initiated by Gagliardi against Carello and the psychiatric institute in the Superior Court, judicial district of New Britain, Docket No. CV 97 0483693. Pursuant to General Statutes § 31-293, the state has sought recovery from the psychiatric institute, and eventually through the institute from the association, of claim reimbursements for the $195,757.35 in benefits it paid to Gagliardi through November 16, 2001. The parties to this action have settled under an arrangement whereby the right to the $195,757.35 is to be determined in the present declaratory judgment action.
Section 31-293 allows for recovery from tortfeasors by an injured employee and the employer who has paid workers' compensation benefits to that employee as a result of the injury. In relevant part, the statute provides that when "any injury for which compensation is payable under the provisions of [chapter 568] has been sustained under circumstances creating in a person other than an employer who has complied with the requirements of subsection (b) of section 31-284, a legal liability to pay damages for the injury, the injured employee may claim compensation under the provisions of this chapter, but the payment or award of compensation shall not affect the claim or right of action of the injured employee against such person, but the injured employee may proceed at law against such person to recover damages for the injury; and any employer or the custodian of the Second Injury Fund, having paid, or having become obligated to pay, compensation under the provisions of this chapter may bring an action against such person to recover any amount that he has paid or has become obligated to pay as compensation to the injured employee."
At issue in the present case is whether the state's claim for reimbursement of the $195,757.35 it paid to Gagliardi as workers' compensation benefits is a "covered claim" pursuant to § 38a-838(6). The statute defines a covered claim and states the definition "shall not include any claim by or for the benefit of any . . . insurer . . . as subrogation recoveries or otherwise."
Subsection (6) of § 38a-838 provides: "`Covered claim' means 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 to which sections 38a-836 to 38a-853, inclusive, apply issued by an insurer, if such insurer becomes an insolvent insurer after October 1, 1971, and (a) the claimant is a resident of this state at the time of the insured event; or (b) the claimant is not a resident of this state, but only under all of the following conditions: (i) The insured is a resident of this state at the time of the insured event; (ii) the insolvent insurer is licensed to do business in this state at the time of the insured event; (iii) the state of the claimant's residence has an association similar to the association created by said sections; and (iv) such claimant is refused coverage by such association because the insolvent insurer is not licensed to do business in the state of the claimant's residence at the time of the insured event; or (c) the claim is a first party claim for damage to property with a permanent location in this state, provided the term `covered claim' shall not include any claim by or for the benefit of any reinsurer insurer insurance pool, or underwriting association, as subrogation recoveries or otherwise; provided that a claim for any such amount, asserted against a person insured under a policy issued by an insurer which has become an insolvent insurer, which, if it were not a claim by or for the benefit of a reinsurer, insurer, insurance pool or underwriting association, would be a `covered claim' may be filed directly with the receiver of the insolvent insurer but in no event shall any such claim be asserted against the insured of such insolvent insurer. A claim shall not be a `covered claim' if it is filed by or on behalf of an individual who is neither a citizen of the United States nor an alien legally resident in the United States at the time of the insured event, or an entity other than an individual whose principal place of business is not in the United States at the time of the insured event, and it arises out of an accident, occurrence, offense, act, error or omission that takes place outside of the United States, or a loss to property normally located outside of the United States or, if a workers' compensation claim, it arises out of employment outside of the United States." (Emphasis added.)
In Doucette v. Pomes, 247 Conn. 442, 457, 724 A.2d 481 (1999), our Supreme Court held that a self-insurer is not an insurer under the guaranty act. Thus, if the state had not obtained the Illinois Union policy before its claim against the association was approved, then the state, as a self-insurer, would be entitled to reimbursement from the association. Moreover, if the Illinois Union policy had an earlier effective date and the state had therefore been indemnified for the $195,757.35 in payments to Gagliardi under that policy, then the state and its insurer would not be entitled to recovery from the association. See Hunnihan v. Mattatuck Mfg. Co., 243 Conn. 438, 705 A.2d 1012 (1997). Our Supreme Court has explained that this is so because "[a]n interpretation of the covered claim definition that excludes claims by insurers is in accord with [the] legislative purpose to provide protection for policyholders and claimants from insurer insolvency. The exclusion of claims by insurers leaves the risk of insurer insolvency on the insurance industry. The result is that policyholders, who in effect fund the association, pay only for protection for fellow policyholders and claimants in the event that an insurer becomes insolvent." Id., 452.
The association argues that the state's claim does not fall within the definition of a covered claim because, under the Illinois Union policy, the state is obligated to turn over the reimbursement to Illinois Union after the state obtains it from the association and, thus, the claim is "for the benefit of an insurer." Citing the Webster's New Twentieth Century Dictionary of the English Language (2d ed. 1970), the association defines the word "benefit" as meaning "advantage, profit, or anything contributing to an improvement in condition" and defines the word "for" as meaning "meant to be received by or belong to a specified person or thing, or to be used in a specified way."
The state argues that the statutory exclusion of coverage does not apply to these facts because the claim is by the state and for the benefit of the state. Because Illinois Union was not an insurer for the state at the time of the accident and has no liability relating to the underlying claim, the state argues that a reimbursement of the claim is not "for the benefit" of Illinois Union. In other words, the state argues that the fact that the state chose to pay for future services from a business enterprise which just happens to be an insurer with the reimbursement it seeks from the association is a mere extraneous happenstance. The state also argues that the use of the word "insurer" in the statutory exclusion does not apply to Illinois Union under these facts because Illinois Union was not insuring the risk upon which the state's claim for reimbursement is made.
Our Supreme Court has explained that the process of statutory interpretation seeks "to determine, in a reasoned manner, the meaning of the statutory language as applied to the facts of this case, including the question of whether the language actually does apply." State v. Courchesne, 262 Conn. 537, 544, 816 A.2d 562 (2003). "When construing a statute, [the court] first [looks] to its text, as directed by Public Acts 2003, No. 03-154, § 1 ( P.A. 03-154). Public Act 03-154, § 1, 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, extratextual evidence of the meaning of the statute shall not be considered." (Internal quotation omitted.) Tele Tech of Connecticut Corp. v. Dept. of Public Utility Control, 270 Conn. 778, 796-97 (2004).
"It is no secret that P.A. 03-154 was enacted in order legislatively to overrule that part of State v. Courchesne, 262 Conn. 537, 570, 577, 816 A.2d 562 (2003), wherein [the] court abandoned the `plain meaning rule' as requiring that, in interpreting legislative language, [the court] must first surmount a threshold of ambiguity of the language before considering other sources of its meaning . . . Thus, in order for P.A. 03-154 to apply to a particular legislative text, [the court] must first determine that, considering that text along with other statutes, `the meaning of such text is plain and unambiguous and does not yield absurd or unworkable results . . .' Furthermore, in this context, [the court has] defined the term ambiguous to mean that the text is susceptible of more than one plausible meaning." (Citation omitted; internal quotation marks omitted.) Carmel Hollow Associates Ltd. Partnership v. Bethlehem, 269 Conn. 120, 150-51, 848 A.2d 451 (2004) (Borden, J., concurring).
The court must, thus, determine as a threshold matter whether the statutory text is plain and unambiguous and, if it is, whether it yields absurd or unworkable results. Here, the text of the statutory exclusion stating that the definition of a covered claim "shall not include any claim by or for the benefit of any . . . insurer . . . as subrogation recoveries or otherwise" is relatively simple and straight forward. The dictionary definitions applying to "for the benefit of" encompass the crediting of claim reimbursements as provided for under the Illinois Union policy.
Furthermore, the term "insurer" as used in this act has been examined by our Supreme Court which noted that General Statutes § 38a-1(11) "defines an insurer as including any corporation, association, partnership or combination of persons doing any kind or form of insurance business other than a fraternal benefit society, and shall include a receiver of any insurer when the context reasonably permits . . . Moreover, the subsection goes on to define alien insurer, domestic insurer, foreign insurer, mutual insurer and unauthorized insurer . . . [The court has] stated that [u]nless there is evidence to the contrary, statutory itemization indicates that the legislature intended [a] list to be exclusive." (Internal quotation marks omitted.) Doucette v. Pomes, supra, 247 Conn. 457. There is nothing in the statutory definitions of insurer which limits that definition to those insurers involved with an underlying claim or having liability for the same cause of action as the association. Moreover, applying the statutory exclusion to these facts would not yield results which rise to the level of absurd or unworkable. The remainder of the state's arguments against the application of the statutory exclusion to the present facts are contextual and therefore may not be considered unless the threshold set by P.A. 03-154 has been crossed — and it has not.
This, however, does not end the court's examination. The state also argues that, even if the statutory exclusion otherwise would apply, the September 30, 2002 Illinois Union document irrevocably waiving any claim for reimbursement relating to this matter cancels such application. The association counters that the purported waiver has no legal effect because Illinois Union has no right to impose upon the association any obligation that was statutorily excluded from the association's covered claim obligations. In other words, the association argues that because the state's claim against the association became barred when the November 16, 2001 policy went into effect, Illinois Union has no rights to waive.
In support of its argument, the association cites four cases from other jurisdictions: Besack v. Rouselle Corp., 706 F.Sup. 385 (E.D. Pa. 1989); Ferrari v. Toto, 383 Mass. 36, 417 N.E.2d 427 (1981); Kinney v. Leaman, 14 Mass.App.Ct. 926, 436 N.E.2d 996 (1982); Ventulett v. Maine Insurance Guaranty Assn., 583 A.2d 1022 (Me. 1990). It contends that these cases stand for the proposition that a waiver or assignment may not be used to alter the legislative judgment that a loss should be borne by an insurer rather than the association. It is true that "[t]he association was established for the purpose of providing a limited form of protection for policyholders and claimants in the event of insurer insolvency. The protection it provides is limited based upon its status as a nonprofit entity and the method by which it is funded . . . [I]t is in reality policyholders who pay for the protections afforded by the association. Limitations on the association's obligations, therefore, provide another form of protection against increased premiums for policyholders in addition to the primary protection afforded all claimants against losses resulting from insurer insolvency." Hunnihan v. Mattatuck Mfg. Co., supra, 243 Conn. 451. However, the legislative judgment which the association argues is underlying the statutory exclusion contained in § 38a-838(6) is not relevant to the process of statutory interpretation determining the meaning of the statutory language as applied to these facts. Under Public Act 03-154, § 1, the meaning of a statute is, in the first instance, ascertained from the text of the statute itself. Public Act 03-154 states that extratextual evidence is considered only when the text is ambiguous or yields absurd or unworkable results.
The plain and unambiguous language of the statutory exclusion contained in § 38a-838(6) does not apply to the matter presently before this court because the waiver signed by Illinois Union shows that any reimbursement paid by the association to the state for funds that the state has already paid out as a self-insurer will not be "for the benefit" of Illinois Union. Furthermore, the association has cited nothing in the text of the Connecticut Insurance Guaranty Act, General Statutes § 38a-386 et seq., nor in the relationship of this statute with other statutes, that would make the waiver signed by Illinois Union ineffective. Thus, under the statutory interpretation of § 38a-838(6), as required by Public Act 03-154, the state's claim for reimbursement from the association is not now excluded from the statutory definition of covered claim.
In the present matter, the insurer has waived its right to be paid by the state if and when the state is paid by the association; the insurer here has not waived, and has no claim for, payment directly from the association. This court therefore does not address whether an insurer's waiver or assignment of a claim for reimbursement or subrogation against the association would yield absurd or unworkable results if the insurer had entered into a contract to insure the underlying claim. This is the fact pattern presented in the four cases cited by the association but it is not the fact pattern presently before this court.
Accordingly, judgment shall issue in favor of the state declaring that the state shall recover from the association the amount of $195,757.35 which has been paid by the state to Gagliardi as a result of the April 10, 1997 automobile accident.
BY THE COURT
Hennessey, J.