No two ways about it
In February 2016, Samuel Doneson was injured in an automobile accident. He incurred approximately $22,000 in medical expenses, a portion of which was paid by workers compensation insurance. He recovered $15,000 from an at-fault third party and was required by law to reimburse the workers compensation insurer in the amount of $8,750.
At the time of the accident, Doneson was an insured under an automobile liability policy issued by Farmers Insurance Exchange. The policy contained a “medpay” component that provided coverage for injuries sustained in an automobile accident. The policy also contained an exclusion for “bodily injury” that “[o]ccurr[ed] during the course of employment if workers’ or workmen’s compensation benefits are required.”
Doneson submitted a claim to Farmers for $5,000 in medical expenses, which the insurer denied.
Doneson filed a complaint alleging breach of contract, declaratory relief, bad faith, and interference with contract. Farmers filed a motion to dismiss the complaint, asserting that the medpay claim was appropriately denied under the workers compensation exclusion. The court granted Farmers’ motion and dismissed the complaint with prejudice. Doneson appealed.
On appeal, Doneson claimed the trial court erred in finding that the workers compensation exclusion barred his claim. He argued that the court should have considered other factors, including the intent of the parties, public policy considerations, and extrinsic evidence, rather than enforcing the exclusion on the basis that it was unambiguous.
Farmers asserted that benefits are “required” when an injured employee is entitled to receive workers compensation benefits, regardless of whether the employee “sought, was ever paid, or was later required to reimburse workers compensation benefits.” Doneson claimed that when an insured party reimburses a workers compensation insurer for benefits received, the insured has taken nothing, and therefore benefits were essentially not “required.” Doneson asserted the trial court erred in failing to consider parol evidence (evidence of antecedent negotiations) that supported his interpretation of the provision.
The court stated it did not believe that the language of the exclusion was reasonably susceptible to Doneson’s interpretation and concluded that the trial court did not err in failing to consider any of Doneson’s parol evidence. The court affirmed the trial court’s ruling and awarded Farmers its costs on appeal.
Doneson v. Farmers Insurance Exchange-Court of Appeals of Arizona, Division 2-October 3, 2018-No. 2 CA-CV 2017-0174.