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IN THE SUPREME COURT OF IOWA
No. 72 / 06-0032 Filed August 3, 2007 RANEE GREENFIELD and STUART GREENFIELD, Appellants, vs. THE CINCINNATI INSURANCE COMPANY, Appellee.

Appeal from the Iowa District Court for Polk County, Michael J. Huppert, Judge.

Plaintiffs appeal the district court's ruling to offset a prior workers' compensation settlement against a jury award for past and future loss of bodily function. Insurance company cross appeals, seeking to offset the settlement against the entire jury verdict. AFFIRMED IN PART AND

REVERSED IN PART; CASE REMANDED WITH INSTRUCTIONS.

R. Ronald Pogge, David S. Gorham, and Barrie J. Terrones of Hopkins & Heubner, P.C., Des Moines, for appellants.

Patrick J. McNulty and Lisa R. Perdue of Grefe & Sidney, P.L.C., Des Moines, for appellee.

2 APPEL, Justice. In this case, the proceedings take us to an intersection of insurance and workers' compensation law. Specifically, we must decide whether an injured employee's recovery under the underinsured motorist provision of her employer's automobile policy is reduced in whole or in part by workers' compensation benefits she received for injuries arising out of the same accident. The district court offset the workers' compensation recovery

against jury awards for medical expenses, lost wages, and past and future loss of function, but refused to allow an offset against jury verdicts for past and future pain and suffering and loss of spousal consortium. For the reasons set forth below, we affirm in part, reverse in part, and remand the matter to the district court for further proceedings. I. FACTUAL BACKGROUND AND PRIOR PROCEEDINGS.

Ranee Greenfield and other passengers traveled by van to Des Moines in order to testify at a hearing regarding the operations of East Lane Care Center (East Lane), Ranee's employer. A motor vehicle driven by Zachary Hedgecock ran a red light and struck the van, causing it to roll at least once. Although Ranee was wearing her seat belt, another unbelted

passenger was thrown into her upon impact. Ranee was transported to Iowa Methodist Medical Center, where she complained of head, neck, and chest pain. She was treated with ibuprofen and released. While the majority of her symptoms dissipated or Ranee

disappeared during her recovery, her chest pain continued.

eventually was diagnosed as suffering from fractures in the costochondral cartilage in her chest. In order to combat her pain, she was twice treated at the Mayo Clinic Pain Center in Rochester, Minnesota.

3 Ranee filed a workers' compensation claim against her employer and its workers' compensation carrier, Cincinnati Insurance Company (Cincinnati). The parties settled the claim in a "Compromise Special Case Settlement Agreement" pursuant to Iowa Code section 85.35 (2005). The total amount of the settlement was $154,404.28, which consisted of a $17,109.61 payment for medical expenses, $37,294.67 in indemnity payments, and a $100,000 lump sum payment. Ranee and her husband, Stuart Greenfield, also settled their personal injury claims against the tortfeasor for his liability insurance coverage limit of $30,000. This settlement, however, was subrogated to the interest of Cincinnati, as Ranee's workers' compensation insurer, pursuant to Iowa Code section 85.22(1). As a result, Cincinnati received $19,728.00. The Greenfields further pursued a claim against East Lane's underinsured motorist carrier (UIM), which also happened to be Cincinnati. This claim was not resolved, and the matter proceeded to trial. The jury returned a verdict in favor of the Greenfields, awarding Ranee $123,000 and Stuart $50,000 in damages. The special jury verdict in favor of Ranee allocated $10,000 for medical expenses, $25,000 for past pain and suffering, $30,000 for future pain and suffering, $20,000 for past loss of function, $30,000 for future loss of function, $8,000 for lost wages, and $0 for future loss of earning capacity. The special jury verdict in favor of Stuart allocated $20,000 for past loss of consortium and $30,000 for future loss of consortium. After trial, the district court filed a judgment entry and order in the case. The order applied a provision in Cincinnati's UIM policy with East Lane which allowed a credit/offset for benefits received by Ranee from her workers' compensation settlement and tortfeasor recovery. In applying the

4 offset provision, the district court determined that the offset was limited by the policy language to duplicative "elements of loss." The district court determined that jury awards for medical expenses, lost wages, and past and future loss of function were "elements of loss" covered by the workers' compensation settlement. The district court also determined that the

verdict must be further offset by the Greenfields' recovery from Hedgecock. The Greenfields' settlement with Hedgecock, however, did not allocate the proceeds between them or their injuries. Nevertheless, the district court decided to allocate the $30,000 offset equally between the Greenfields. After removing duplicative "elements of loss" from the jury verdict and applying the $30,000 offset, the district court reduced the award to Ranee to $40,000 and the award to Stuart to $35,000. Both parties filed motions to reconsider. The district court sustained its prior ruling except with respect to the allocation of the tortfeasor recovery, which was reallocated entirely against Ranee's recovery. Ranee's award was, therefore, reduced to $25,000, with Stuart's award increased to $50,000. Ranee and Stuart filed a timely notice of appeal. 1 On appeal, the Greenfields argue that the district court erred in allowing the workers' compensation benefits to be offset against the jury awards for past and future loss of function and in allowing Cincinnati to receive "a double credit" by not reducing the amount of the workers' compensation offset by the funds reimbursed to Cincinnati under Iowa Code section 85.22(1). Cincinnati filed a timely notice of cross appeal. In its cross appeal, Cincinnati asserted that the district court erred in not applying an offset of
Stuart as well as Ranee filed a notice of appeal, the district court left the special jury verdicts awarding Stuart damages for lost consortium intact. While a cross appeal was filed, the defendant does not challenge the jury's awards to the defendant. As a result, Stuart no longer has a stake in the outcome of this appeal.
1Although

5 the total workers' compensation recovery against the total jury award. Cincinnati also maintained that the district court erroneously refused to apply an offset against the jury's special verdicts for past and future pain and suffering. II. STANDARD OF REVIEW.

The interpretation of an insurance policy is a matter of law. A.Y. McDonald Indus., Inc. v. Ins. Co. of N. Am., 475 N.W.2d 607, 618 (Iowa 1991). This court's review, therefore, is for errors at law. Iowa R. App. P. 6.4. III. A. DISCUSSION. Offsets of Workers' Compensation Recoveries Under Reduction-of-Benefits Provisions of Underinsured Motorist Policies. 1. Statutory Authorization of Reduction-of-Benefits Provisions.

Iowa Code section 516A.1 requires all automobile insurance policies, absent a written rejection by the insured, to include coverage for uninsured and underinsured motorist claims. Iowa Code section 516A.2(1) further provides that ". . . forms of coverage may include terms, exclusions, limitations, conditions, and offsets which are designed to avoid duplication of insurance or other benefits." When such language is included in policies covering underinsured motorists, it is referred to generically as a reductionof-benefits provision. In Gentry v. Wise, 537 N.W.2d 732 (Iowa 1995), this court emphasized that reduction-of-benefits provisions were permissible under Iowa Code section 516A.2(1) so long as their design is to avoid duplication of coverage. Gentry, 537 N.W.2d at 735. Where an insurance contract does not contain a reduction-of-benefits provision authorized by statute, however, reduction of benefits may be denied. Detroit Auto Inter-Ins. Exch. v. Ayvazian, 233

6 N.W.2d 200 (Mich. Ct. App. 1975); Progressive Am. Ins. Co. v. Vasquez, 502 S.E.2d 10 (N.C. Ct. App.), aff'd in part, rev'd in part, 515 S.E.2d 8 (N.C. 1998). 2. Offsets of Recoveries from Workers' Compensation.

In McClure v. Employers Mutual Casualty Co., 238 N.W.2d 321 (Iowa 1976) [hereinafter McClure I], this court considered whether the Iowa legislature, in enacting Iowa Code section 516A.2(1), authorized offsets of workers' compensation benefits. The question was not free from doubt as Iowa Code section 516A.2(1) does not expressly authorize offsets of workers' compensation benefits, but only offsets to avoid duplication of "insurance or other benefits." The McClure I court concluded that notwithstanding the failure to specifically authorize reduction of coverage as a result of workers' compensation payments, the Iowa legislature intended to allow insurance companies to offset workers' compensation benefits against uninsured and underinsured motorist claims. While offsets are permissive under Iowa Code section 516A.2(1), they are not mandatory. The particular policy language at issue is controlling. Cincinnati, therefore, is entitled to an offset of workers' compensation benefits to avoid duplication only to the extent that its reduction-of-benefits provision authorizes such offsets. B. Meaning of Language in Cincinnati's Reduction-of-Benefits Provision in its Underinsured Motorist Policy. 1. Overview of Reduction-of-Benefits Provisions.

In light of McClure I, a central question in this case is the meaning of Cincinnati's policy language as it relates to underinsured motorist claims. The applicable language is as follows:

7 3. No one will be entitled to receive duplicate payments for the same elements of "loss" under this Coverage and any Liability Coverage Form. We will not make a duplicative payment under this Coverage for any element of "loss" for which payment has been made by or for anyone who is legally responsible. We will not pay for any element of "loss" if a person is entitled to receive payment for the same element of "loss" under any workers' compensation, disability benefits or similar law. (Emphasis added.) The Cincinnati policy further contains language defining "loss." According to the policy, "loss" means "direct or accidental loss or damage." The reduction-of-benefits language in Cincinnati's policy relating to underinsured motorist claims differs significantly from that relating to claims involving uninsured motorists (UM). The reduction-of-benefits

provision related to uninsured motorists is as follows: 2. With respect to damages resulting from an "accident" with an "uninsured motor vehicle" . . . the Limit of Insurance shall be reduced by: a. All sums paid or payable under any workers' compensation, disability benefits or similar law, and All sums paid by or for anyone who is legally responsible, including all sums paid under this Coverage Form's Liability Coverage.

b.

(Emphasis added). The difference between these reduction-of-benefits provisions is not happenstance. These provisions recognized the fundamental distinction in the policy goals of uninsured and underinsured motorist coverage. The purpose of uninsured motorist coverage is to make certain that an injured party receives minimum compensation for his or her injuries. Uninsured motorist protection thus provides a safety net of coverage. In contrast, the

8 purpose of underinsured motorist coverage is not to provide a minimum safety net, but to enhance the ability of a claimant in an automobile accident to be made whole for his or her losses. Veach v. Farmers Ins. Co., 460 N.W.2d 845, 848 (Iowa 1990); McClure v. Northland Ins. Co., 424 N.W.2d 448, 449-50 (Iowa 1988) [hereinafter McClure II]. Because of these differences, we have adopted a "broad coverage view" of underinsured motorist coverage, while recognizing a "narrow coverage view" of uninsured motorist coverage. Benefits that are duplicative in the context of uninsured motorist coverage, therefore, may not necessarily be so in the underinsured motorist context. Veach, 460 N.W.2d at 848. Cincinnati's two different reduction-of-benefits provisions are consistent with the approach taken in McClure II and Veach. Any recovery from a third party is "duplicative" in the context of uninsured motorist coverage, while only payments that cover the same type of injury are "duplicative" of underinsured motorist coverage. 2. Meaning of Reduction-of-Benefits Provision Related to Underinsured Motorist Coverage.

The basic rules for determining the meaning of provisions in an insurance policy are well established. Ultimately, the intent of the parties must control the outcome. Ordinarily, this is determined by the language of the policy. See A.Y. McDonald Indus., Inc., 475 N.W.2d at 618. The

insurance policy must be construed as a whole, with the words "given their ordinary, not technical, meaning [in order] to achieve a practical and fair interpretation." West Bend Mut. Ins. Co. v. State Farm Mut. Auto. Ins. Co., 624 N.W.2d 422, 424 (Iowa Ct. App. 2001). Where the meaning of the terms is susceptible to two interpretations, however, the one favoring the insured is adopted. Id.; see also Wildman v. Nat'l Fire & Marine Ins. Co., 703 N.E.2d

9 683, 687 (Ind. Ct. App. 1998) (contract provision related to reduction of benefits construed in favor of insured); Sisco v. Am. Family Mut. Ins. Co., 806 S.W.2d 409, 411 (Mo. 1991) (same). The plaintiffs claim that Cincinnati's reduction-of-benefits provision relating to underinsured motorist coverage limits any reduction to "those `elements of loss' which are compensable under the workers' compensation statute." Plaintiffs argue that the "elements of loss" language in the

underinsured reduction-of-benefits provision requires that each claim for recovery must be separately analyzed to determine whether it amounts to an identical claim for which payment has already been made. Under

plaintiffs' theory, the beginning point of analysis is not the total recovery of $123,000 obtained from the cumulation of special jury verdicts, but instead commences with an analysis of each separate jury award. Each separate award must then be evaluated to determine if they are the same "element of loss," or "duplicative," of recovery that plaintiff obtained pursuant to the workers' compensation settlement. Cincinnati asserts, however, that the underinsured policy language means that the entirety of the workers' compensation settlement must be offset against the cumulative jury verdict. According to Cincinnati, under its policy a plaintiff cannot recover more than the entire amount of the jury's verdict in an underinsured motorist case. In other words, Cincinnati claims that if a workers' compensation settlement exceeds the total amount awarded against the underinsured motorist insurer, nothing is owed to its insured as a result of its reduction-of-benefits provision. Cincinnati

advances a dollar-for-dollar theory, under which each dollar of recovery from workers' compensation must be offset against any dollar of recovery awarded by the jury.

10 We believe that the reduction-of-benefits language in Cincinnati's policy supports the plaintiffs' position. With respect to underinsured

motorist coverage, the Cincinnati policy expressly limits offsets to payments for "elements of loss" that are "duplicative." While "elements of loss" is not defined in the policy, ordinary usage of the term "element" or "elements" establishes that the word connotes a part of a larger whole and not the larger whole itself. See Webster's Third New International Dictionary 734 (2002) (definitions of element or elements include "one of the constituent parts" and "one of a number of distinct or disparate units, parts," etc.); The American Heritage Dictionary: College Edition 444-45 (2d ed. 1985) (definition of element or elements includes "a fundamental, essential, or irreducible constituent of a composite entity" and a "member of a set"). Cincinnati's policy language for underinsured motorist coverage clearly suggests the need to break down the total loss or recovery awarded by the jury into "elements of loss" and then analyze each "element of loss" separately to determine whether the recovery for that "element" is "duplicative" or amounts to "the same element of loss" recovered under a workers' compensation settlement. Our common sense interpretation of the reduction-of-benefits language for underinsured motorist claims is supported by Cincinnati's use of substantially different reduction-of-benefits language in the policy for uninsured motorists. For uninsured motorists, the Cincinnati policy

provides that insurance coverage is reduced by "[a]ll sums paid or payable under any workers' compensation, disability benefits or other similar law. . . ." Indeed, if the language applicable for uninsured motorist coverage applied to underinsured motorist claims, Cincinnati would be in a comparatively stronger position.

11 A cardinal rule of contract interpretation is that the use of substantially different language in provisions of a contract must have been intentional and must be recognized by a reviewing court. See Restatement (Second) of Contracts: Rules in Aid of Interpretation

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