This appeal presents two basic questions. They are: (1) Is the particular clause in the uninsured motorist coverage of the liability policy issued by National Farmers Union Property and Casualty Company (hereafter called NFU) to Calvin E. McCord, deceased, providing that any amount payable under that coverage because of bodily injury shall be reduced by the amount paid and the present value of all amounts payable on account of such injury under any workmen’s compensation law valid? (2) Is the workmen’s compensation carrier for Calvin McCord’s employer entitled to subrogadon against uninsured motorist benefits payable to McCord’s administratrix? We answer both questions in the negative.
McCord was killed while performing his duties as an employee of Mitchell Machinery Company when he was struck by a vehicle driven by Kenneth Green, an uninsured motorist. Travelers Insurance Company had paid $3,558.-82 in workmen’s compensation benefits to McCord dependents at the time the judgment appealed from was rendered in the circuit court. It was stipulated that a sum in excess of $10,000 was payable under the workmen’s compensation coverage. It was also stipulated that McCord’s administratrix was entitled to recover a sum in excess of $10,-000 from the uninsured motorist.
Denise McCord, as administratrix of McCord’s estate, filed a suit against NFU seeking to recover the $10,000 uninsured motorist coverage, without any deduction for workmen’s compensation benefits. Travelers Insurance Company intervened seeking subrogation by virtue of its workmen’s compensation payments. The circuit court, upon motions for summary judgment by NFU and McCord’s administratrix, dismissed Travelers’ intervention on the ground that it was not entitled to subrogation, gave NFU credit for all workmen’s compensation payments made by Travelers up to the date of the judgment, and rendered judgment for the administratrix against NFU for the balance of the uninsured motorist coverage. All parties have appealed.
The circuit judge made a painstaking and thorough analysis of the possible results which might be reached on these questions of first impression in this jurisdiction. We agree with him that the intervention of Travelers should have been dismissed, but we do not agree that NFU was entitled to any credit for workmen’s compensation payments.
Travelers contends that it is entitled to subrogation under Ark. Stat. Ann. § 81-1340 (a) (Repl. 1960). Principal reliance is placed upon § 81-1340 (a) (1), wherein it is provided that the making of a claim for workmen’s compensation “shall not affect the right of the employee, or his dependents, to make claim or maintain an action in court against any third party for such injury” and that when the compensation carrier joins in the action, it shall have a lien upon two-thirds of the net proceeds. A literal reading of these words without further exploration of the section might lead one to the conclusion that it was the intent of the act to provide a lien in favor of the compensation carrier on any amounts the employee or his dependents were entitled to recover from any source because of the employee’s injury. We have held, however, that uninsured motorist coverage is a form of accident or indemnity insurance. Farm Bureau Mut. Ins. Co of Arkansas v. Mitchell,
We cannot accept the theory that the recovery on the uninsured motorist coverage is a tort recovery subject to the lien just because liability depends upon a tortious injury. This would mean that the coverage is a type of liability insurance on the uninsured motorist — a premise we have rejected. Farm Bureau Mut. Ins. Co. of Arkansas v. Mitchell, supra. An action against the carrier of uninsured motorist coverage is in no sense an action in tort. It is clearly an action upon a contract by the insured as one of the contracting parties against the insurer as the other. See Farm Bureau Mut. Ins. Co. of Arkansas v. Mitchell, supra. A workmen’s compensation carrier has no more right under the subrogation statute to benefit from this type of insurance which a covered employee elects to take at his own expense than it would from the proceeds of health, accident or hospital insurance. We find the language of a New York court particularly applicable here. In Commissioners of the State Insurance Fund v. Miller, 4 App. Div. 2d 481,
The Fund argues that this makes no difference, that it has a lien on all tort recoveries, and the defendant’s insurer has agreed to stand in the shoes of the tortfeasor. Defendant’s insurer cannot, however, be deemed the alter ego of the tortfeasor. It does not insure the tort-feasor against liability, it insures its policyholder against the risk of inadequate compensation for his compensable injuries. Its liability to defendant is contractual, although premised in part upon the contingency of a third party’s tort liability.
The compensation carrier has a right to expect an injured employee to pursue whatever remedies he may have against a third-party tort-feasor, and if the employee fails to do so, the compensation carrier may protect its lien by pursuing his remedies for him [Workmen’s Compensation Law, § 29 (2).] It has no right to expect an employee to supplement his common law remedies and the compensation carrier’s statutory lien, by purchasing his own insurance. If the employee does choose to expend his own funds to provide additional protection for himself, whether by paying for an accident and health policy, or by having a Medical Payments or Uninsured Drivers Benefits clause added to his liability policy, the compensation carrier does not thereby acquire additional rights. It does not become a third-party beneficiary of the employee’s insurance contract. Nor is it subrogated to the employee’s contractual rights if the employee fails to assert them.
See also, Rhodes v. Automotive Ignition Co.,
The trial court’s holding allowing credit for workmen’s compensation is based upon a portion of a policy “condition” reading:
6. Limits of liability:
(a) The limit of liability stated in the schedule as applicable to “each person” is the limit of the company’s liability for all damages, *** because of bodily injury sustained by one person as the result of any one accident and, subject to the above provision respecting each person, the limit of liability stated in the schedule as applicable to “each accident” is the total limit of the company’s liability for all damages, including damages for care or loss of services, because of bodily injury sustained by two or more persons as the result of any one accident, (b) any amount payable under the terms of this endorsement because of bodily injury sustained in an accident by a person who is an insured under this coverage shall be reduced by ***
(2) the amount paid and the present value of all amounts payable on account of such bodily injury under any workmen’s compensation law, disability benefits law or any similar law.
NFU is entitled to credit under this clause unless it is void as contrary to public policy or is contrary to the uninsured motorist act. Ark. Stat. Ann. § 66-4003 (Repl. 1966) reads:
No automobile liability insurance, covering liability arising out of the ownership, maintenance, or use of any motor vehicle shall be delivered or issued for delivery in this State with respect to any motor vehicle registered or principally garaged in this State unless coverage is provided therein or supplemental thereto, in not less than limits described in section 27 of Act 347 of 1953 [§ 75-1427], as amended, under provisions filed with and approved by the Insurance Commissioner, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom; provided, however, that the coverage required under this section shall not be applicable where any insured named in the policy shall reject the coverage. [Acts 1965, No. 464, § 1, p. 1570.]
Ark. Stat. Ann. § 75-1427 (Repl. 1957 and Supp. 1971) requires security subject to a limit, exclusive of interest and costs, for not less than $10,000 because of bodily injury to or death of one person in any one accident, subject to said limit for one person, to a limit of not less than $20,000 because of bodily injury to or death of two or more persons in any one accident. It would appear that, in this policy for the statutory amounts, the condition stated would on its face amount to a reduction of the stated policy limits.
There is a division of authority on the question of the validity of such clauses. They have been held void in Standard Accident Ins. Co. v. Gavin,
This clause has been held void by two eminent jurists in separate Arkansas Federal District Courts because the purpose of the statute was to provide a basic minimum coverage against the actions of financially irresponsible motorists. See Carter v. Saint Paul Fire & Marine Insurance Company,
It is true that the parties are free to contract upon any terms not contrary to public policy or the terms of our statutes. MFS Mutual Ins. Co. v. Bradshaw,
We cannot hold this particular provision valid simply because it was approved by the Insurance Commissioner. We cannot believe that the General Assembly intended that the coverage for which the insured paid his premium could be reduced simply because this official approved a policy provision that would have this effect. We do not find any indication that the legislative branch of the government intended to vest such broad authority in the Insurance Commissioner. We agree with the United States District Court for the Eastern District of Arkansas and the Supreme Court of Oregon that such action is beyond the scope of the authority of the Commissioner. Carter v. St. Paul Fire & Marine Ins. Co., supra; Peterson v. State Farm Mutual Automobile Ins. Co., supra. See also, State Farm Mutual Automobile Ins. Co. v. Barnard,
We further doubt that there was any intention that the covered employee be afforded greater indemnity by his own insurance carrier against the hazards of injury by an uninsured motorist while following recreational pursuits, for example, than he would have while about his daily labors for his employer. We certainly do not believe that there was any legislative intent that the covered employee’s dependents be deprived of any protection by his uninsured motorist coverage, if workmen’s compensa don benefits paid and the commuted value of payments to be made should exceed the minimum indemnity required by Ark. Stat. Ann. § 66-4003. Yet if the credit clause were permitted to stand, this result could be reached in some cases.
We affirm the judgment insofar as it relates to the dismissal of Travelers’ intervention, but reverse the judgment allowing NFU credit for workmen’s compensation benefits paid, and remand the cause to the circuit court for further proceedings consistent with this opinion.
Notes
For other cases holding that indemnity from collateral sources does not diminish the amount an injured party is entitled to recover from one liable to him on account of his injury or loss, see Freeman v. Reeves,