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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. State Farm Mutual Automobile Co. v. Wilson (12/31/2008) sp-6331

State Farm Mutual Automobile Co. v. Wilson (12/31/2008) sp-6331, 199 P3d 581

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
     e-mail corrections@appellate.courts.state.ak.us.


            THE SUPREME COURT OF THE STATE OF ALASKA

STATE FARM MUTUAL AUTOMOBILE )
INSURANCE COMPANY, ) Supreme Court No. S- 12779
)
Appellant, ) Superior Court No. 3AN-06-12145 CI
)
v. ) O P I N I O N
)
BRENDA A. WILSON, in her capacity ) No. 6331 December 31, 2008
as Special Administrator of the Estate of )
William D. Wilson, )
)
Appellee. )
)
          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, Craig F. Stowers, Judge.

          Appearances:    David  S.   Carter,   Hughes,
          Pfiffner,  Gorski,  Seedorf  &  Odsen,   LLC,
          Anchorage, for Appellant.  Howard  J.  Meyer,
          Jr., Michael W. Flanigan, Walther & Flanigan,
          Anchorage, for Appellee.

          Before:    Fabe,  Chief  Justice,   Matthews,
          Eastaugh, Carpeneti, and Winfree, Justices.

          MATTHEWS, Justice.


          At  issue in this case is the application of a  statute
that provides that underinsured motorist (UIM) coverage is excess
to and may not duplicate payments made under liability or medical
payment  policies or workers compensation benefits.  The statute,
AS 28.20.445(b), provides:
               An  amount  payable under the  uninsured
          and  underinsured motorist coverage shall  be
          excess  to an amount payable under automobile
          bodily  injury,  death, or  medical  payments
          coverage, or as workers compensation benefits
          and may not duplicate amounts paid or payable
          under valid and collectible automobile bodily
          injury,  death, or medical payments coverage,
          or as workers compensation benefits.
          
Facts
          William  Wilson  was injured in an automobile  accident
while  in  the  course of his employment with  Austin  Industrial
Company.   At the time of the accident Wilson was a passenger  in
an  automobile driven by Lisa Grubb.  Grubb was also an  employee
of  Austin  and  was also on the job when the accident  occurred.
Grubb lost control of her vehicle and crashed while attempting to
avoid  a  head-on collision with an automobile driven by Jo  Lynn
Sauve.   Sauve  had driven into Grubbs lane of  travel  to  avoid
hitting a moose.
          A  subsequent  arbitration proceeding  determined  that
Wilson suffered $210,000 in damages, consisting of lost wages  of
$75,000  and  general damages of $135,000.  The arbitrators  also
determined  that Sauve bore responsibility for sixty  percent  of
the total fault of the accident.  Grubbs responsibility was forty
percent  of  the total fault.  These damages and percentages  are
accepted as controlling for the purposes of this case.
          Prior to the arbitration, Wilson sued Sauve.  Sauve had
liability  insurance of $50,000.  Wilson settled with  Sauve  for
this amount plus interest, fees, and costs. Wilson could not  sue
Grubb  because  as a co-employee she had the same  immunity  from
suit  as their mutual employer, Austin.1  As a trade-off for  its
immunity  from  suit,  Austin, through its  workers  compensation
insurer,  was responsible for the payment of workers compensation
benefits.  Austin discharged this responsibility by paying Wilson
$52,000 in benefits.2  It is undisputed that at least $44,000  of
this  sum  was for lost wages.  The remaining $8,000 was  for  an
unallocated  mix  of  anticipated future losses,  including  lost
wages.
          Grubb had three personal automobile policies issued  by
State  Farm.   Each  had UIM provisions with limits  of  $50,000.
These  provisions covered Wilson as an additional insured because
he  was  occupying a vehicle driven by Grubb at the time  of  the
accident.  Under the UIM provisions, State Farm agreed to pay  an
insured,  such as Wilson, damages for injuries the insured  would
be  entitled  to  collect  from the  driver  of  an  underinsured
vehicle, such as Sauve.
          Wilson,  as might be expected, claimed that  Sauve  was
underinsured   and  sought  damages  from  State  Farm.    Sauves
liability and Wilsons damages were disputed.  These disputes were
arbitrated.   The arbitrators decided, as indicated  above,  that
Sauve  was  sixty percent responsible for the accident  and  that
Wilson  suffered  lost wages of $75,000 and  general  damages  of
$135,000, for total damages of $210,000.3
          After   the  arbitration  decision,  Wilsons   personal
          representative4 (Wilson) and State Farm disagreed with respect to
how  the prior payment of $50,000 made by Sauves insurer and  the
$52,000  in  workers compensation benefits should be  handled  in
light  of  AS  28.20.445(b).  Wilson contended  that  State  Farm
should  pay  $76,000.5   She reasoned that Sauves  liability  was
$126,000 (sixty percent of the total damages of $210,000).   From
this  she would have deducted the $50,000 paid by Sauves insurer,
leaving $76,000 due from State Farm under its UIM policies.
          State  Farm  initially contended  that  it  should  pay
$31,000,  but later decided to pay $54,000.  It argued  that  the
lost wage and general damage components of Wilsons damages should
be treated separately.
          At  first  State  Farm contended that Sauves  liability
before  deductions should be $45,000 for past  wage  loss  (sixty
percent  of  $75,000)  plus $81,000 for  general  damages  (sixty
percent of $135,000).  State Farm contended that the $50,000 paid
by  Sauves  insurer  should  be deducted  from  $81,000,  leaving
$31,000 to be paid under the UIM policies as general damages.  As
to  lost  wages, State Farm initially contended that the  $52,000
received as workers compensation benefits should be deducted from
the  amount of lost wages that would otherwise be owed  by  Sauve
($45,000)  resulting in a negative amount and  therefore  leaving
nothing owed by State Farm for lost wages.
          Later State Farm decided to pay $23,000 for lost wages.
It  arrived  at this amount by deducting from Wilsons total  wage
loss   ($75,000)  the  compensation  benefits  he  had   received
($52,000)  without making any reduction for the fact  that  Sauve
was  only  sixty  percent at fault.  Thus State  Farm  ultimately
agreed  to pay, and paid, $31,000 for general damages and $23,000
for lost wages, for a total of $54,000.6
Proceedings
            Wilson  filed  suit  against State  Farm  seeking  to
enforce  the  arbitration award with a  deduction  only  for  the
$50,000  paid  by Sauves insurer.  After State Farm  answered  it
moved  for  summary judgment, claiming that it  owed  nothing  in
addition  to  the payments it had already made.   Wilson  opposed
State  Farms motion and moved for summary judgment on her  claim.
After further replies by both parties, the superior court granted
Wilsons motion and denied State Farms.  The court stated:
               Pursuant  to Alaskas laws applicable  to
          interpretation of insurance policies, the UIM
          coverage  under  the  applicable  State  Farm
          policy provides for plaintiff to recover 100%
          of  the damages allocated to the underinsured
          driver  by  the  Arbitration  Panel  in  this
          matter.    From  that  sum  should  then   be
          deducted   the   policy  limits   under   the
          tortfeasors  liability  policy  without   any
          further reduction for amounts received by Mr.
          Wilson   in  workers  compensation  benefits,
          where  as  here,  the  reduction  of  Wilsons
          damages  attributable to  the  fault  of  his
          employer   exceeds  the  amount  of   workers
          compensation benefits that he received.
          
               Further, this result is consistent  with
          AS   09.17.080(c),  AS  23.30.015(g)  and  AS
          28.20.445(b),   when   those   statutes   are
          harmonized.
          
          The    court    denied   State   Farms   request    for
reconsideration, and State Farm now appeals.
Contentions on Appeal
          State  Farms  general position on appeal  is  that  the
position it ultimately took following the arbitration award  that
is  described above is legally correct.  In particular, it argues
that  the  general  damage  and  lost  wage  components  of   the
arbitrators decision should be treated separately.  As to general
damages,  it  would reduce the award of $135,000  to  $81,000  to
reflect  Sauves  sixty percent share of fault,  and  then  deduct
$50,000  to  reflect the payment made by Sauves insurer,  leaving
$31,000 due under the UIM policies.  As to lost wages, State Farm
would not reduce the amount of $75,000 to reflect Sauves share of
fault, but would deduct the compensation benefits of $52,000 from
$75,000,  leaving  $23,000  due  from  State  Farm.   State  Farm
contends  that Wilson is attempting to double recover $22,000  in
lost wages  the difference between the $76,000 that Wilson claims
was  due and the $54,000 that State Farm paid.  State Farm claims
that  the $22,000 in dispute is prohibited by the excess  to  and
may not duplicate language of AS 28.20.445(b).
          Wilson  contends that the damages she recovered  should
not  be  parsed.   She  notes  that the  language  of  subsection
.445(b),  and  the State Farm policies, refer only to  amount  or
amounts  payable or paid, rather than to elements of loss  as  do
some  policies  with similar purposes.  Her basic  contention  is
that  the  amount of damages that were reduced because of  Grubbs
fault   for which Austin is responsible under respondeat superior
principles  should be compared with the benefits paid by  Austin.
Because  the benefits do not exceed the reductions, there  is  no
duplication of benefits and no adjustments are called  for  under
subsection .445(b).7
          As  noted  earlier Wilson did not seek medical  expense
damages at the arbitration.  State Farm does not argue that it is
entitled  to  a  credit  for  the workers  compensation  insurers
payment  of  Wilsons  medical expenses.  The  parties  reciprocal
conduct  reflects at least an implicit agreement that the workers
compensation   insurers  payment  of  Wilsons  medical   expenses
extinguished that aspect of Wilsons claim without impact  on  the
current  dispute.   We  will follow the  parties  convention  and
ignore  whether or how Wilsons medical expenses and  the  workers
compensation insurers payment of those expenses might affect  our
resolution of the parties dispute.
Discussion
     Purposes of UIM Coverage  Alaska Statutes and Cases
          The  idea underlying underinsured motorist coverage  is
that  the insured purchases coverage to benefit herself  in  case
she  is  injured  by  a  motorist whose  liability  insurance  is
insufficient to cover her injuries.  UIM coverage thus  is  meant
to   stand  as  supplemental  liability  insurance  covering   an
          underinsured motorist for the benefit of the insured:  The basic
public policy behind mandatory uninsured or underinsured motorist
schemes in various states is generally to ensure that the insured
recovers the damages he or she would have been able to recover if
the  insured  motorist  had maintained a (sufficient)  policy  of
liability insurance.8
          Although UIM coverage seems simple in concept, a number
of  difficulties  in  application have  arisen.   Initially,  our
statutes  permitted  a definition of underinsured  motor  vehicle
that  compared the liability coverage for the vehicle in question
with  the  UIM limits available to the insured, rather than  with
her  total damages.9  Further, under the former statutory system,
it  was  thought  that amounts paid from other sources  could  be
deducted  from UIM limits, regardless of the damages suffered  by
an insured.10  In 1990 the statutes were amended, changing this so-
called  reduction  system to one in which UIM  coverage  adds  to
available coverage from other sources.11
          The  new  statutory system, referred to  as  an  excess
approach,  still sought to ensure that UIM coverage was secondary
to other sources of coverage and that it not be available to make
duplicative  payments.  This may be seen  by  comparing  the  new
version of AS 28.20.445(b) with the subsection it replaced.   The
current version of AS 28.20.445(b) provides:
               An  amount  payable under the  uninsured
          and  underinsured motorist coverage shall  be
          excess  to an amount payable under automobile
          bodily  injury,  death, or  medical  payments
          coverage, or as workers compensation benefits
          and may not duplicate amounts paid or payable
          under valid and collectible automobile bodily
          injury,  death, or medical payments coverage,
          or as workers compensation benefits.
          
(Emphasis  added.)   Subsection  .445(b)  formerly  provided,  in
accordance with the reduction approach:
               Amounts   payable  under  the  uninsured
          motorists and underinsured motorists coverage
          may be reduced by
          
               (1)        amounts paid or  to  be  paid
          under any workers compensation law;
          
               (2)        amounts paid or payable under
          valid   and  collectible  automobile  medical
          payments insurance or bodily injury or  death
          liability insurance; and
          
               (3)        amounts paid by or on  behalf
          of the uninsured or underinsured motorist.
          
(Emphasis  added.)   Reflecting in part the  shift  in  statutory
purpose from a reduction approach to an excess approach, the  UIM
policies  in  this  case contain clauses that  may  reflect  both
approaches.12
          In  Victor v. State Farm Fire & Casualty Co.13 we  were
presented with the question of whether a reduction clause,  which
          was nearly identical to the clause in the current policies quoted
in  note 12, required a reduction from policy limits or from  the
total  damages suffered by the insured.  We held that the  phrase
any  amount payable referred to the total damages suffered by the
insured  rather than to the policy limits.  We reasoned that  the
underlying  purpose of reduction clauses .  .  .  is  to  prevent
double  recoveries and that [t]his purpose is  furthered  by  our
interpretation of the reduction clause and would not be furthered
by  an  interpretation requiring a reduction from  policy  limits
where total damages exceed policy limits.14
            In Curran v. Progressive Northwestern Insurance Co.15
we  summarized  the  purpose of UIM coverage  under  the  current
system in contrast to the former reduction approach:
               In  1990 the legislature changed Alaskas
          UIM statutes from a reduction approach to  an
          excess   approach.    Under   the   reduction
          approach,  UIM coverage protected an  insured
          person only to the extent that the UIM limits
          exceeded  the  limits of available  liability
          coverage.  This approach attempted to put the
          insured in the same position he or she  would
          have  occupied had the tortfeasors  liability
          insurance  limits  been  the  same   as   the
          underinsured    motorist   coverage    limits
          purchased  by  the insured.   It  reduced  an
          insureds   amount   of  UIM   protection   by
          subtracting  from the UIM policy  limits  any
          amount  paid  or payable to the insured  from
          other sources, including liability coverage.
          
               In   contrast,   under  Alaskas  current
          excess  approach, an underinsured  driver  is
          one  whose  liability limits are insufficient
          to  cover the injured persons actual damages.
          Under this approach, UIM coverage
          
               is premised upon the idea
               that  the injured  person
               is  entitled  to  recover
               under  his  or  her   own
               underinsured     motorist
               coverage  to  the  extent
               that    the   tortfeasors
               liability       insurance
               coverage  is insufficient
               to compensate the injured
               person  fully for his  or
               her loss, subject only to
               the    limits   of    the
               underinsured     motorist
               coverage.
               
               Excess  coverage thus strives to provide
          additional  coverage,  as  needed  to   fully
          compensate injured motorists, after available
               liability  coverage has been  completely
          exhausted.[16]
          
The Intuitive Result
          In  light  of  the purposes of Alaskas UIM system,  how
should  this case be decided?  This question lends itself  to  an
intuitive  answer that can serve as a check on the more  detailed
explanation that we offer later in this opinion.
          Wilson  has received $102,000.  The UIM policies  stand
for additional liability insurance for Sauve of $150,000.  Sauve,
according  to  the  arbitrators, is liable  for  $126,000  (.6  x
$210,000).   Because  Sauve has already paid $50,000,  which  she
should  get  credit  for (the liability policy  settlement),  she
should  be  liable for another $76,000.  This is the amount  that
should  be due under the UIM policies, which conceptually provide
additional  liability  insurance for Sauve  that  Wilson,  as  an
insured, may draw upon.
          Requiring  State Farm to pay another $76,000 under  its
UIM  policies is not a double recovery for Wilson.   Wilson  will
receive   $50,000 plus $76,000 due to Sauves responsibility,  and
another  $52,000 from his employers workers compensation insurer.
This  adds up to $178,000.  Wilson will not be doubly compensated
because his loss was $210,000.
Subsection .445(b) Considered  Aggregate Damages
          Alaska  Statute 28.20.445(b) contains two  imperatives.
UIM payments are to be excess to the other benefits specified  in
the statute and may not duplicate the other benefits.  Excess  in
this  context seems to mean that benefits payable from the  other
sources designated in the statute must be taken into account when
calculating the amount due under UIM coverage.17  The requirement
that  UIM  payments  may  not duplicate other  benefits  paid  or
payable seems to be a mandate that UIM coverage may not be called
upon to pay for damages that have been or will be fully paid  for
from the other designated sources.
          These  concepts should be easy enough to apply in cases
where the underinsured motorist is the only tortfeasor and he  is
fully responsible for the accident.  But complexities arise  when
there  are  two  tortfeasors  who share  responsibility  for  the
accident, and one is underinsured and the other settles with  the
insured.    Moreover,  additional  complexities  are   at   least
potentially  present where, as here, one of  the  tortfeasors  is
immune from liability under the Workers Compensation Act.  In the
discussion that follows, we assume that compensatory damages  are
treated   in  the  aggregate  rather  than  separately   separate
treatment  would add a further complexity, and we conclude  in  a
later  section of this opinion that it is not required.  We  also
assume  that only the anti-duplication requirement of .445(b)  is
involved  because the parties do not suggest that  benefits  from
any  of  the  other  sources designated  in  the  statute  remain
payable.
How We Determine a Duplicate Recovery.
          Under   subsection  .445(b)  automobile  bodily  injury
coverage  and workers compensation benefits are parallel  in  the
sense  that  UIM  coverage may not duplicate amounts  paid  under
either of these alternative sources of benefits.  To simplify our
analysis,  it  seems  useful to consider  how  .445(b)  would  be
applied  if  Wilson  and Grubb were not in the  course  of  their
employment  at the time of the accident, and Grubb  settled  with
Wilson  for  $52,000  from  her  liability  coverage  before  the
arbitration  decision.   How  should  this  $52,000  payment   be
treated, assuming that all the other facts are unchanged?
          To  determine if there is a duplicate recovery,  it  is
useful to create separate columns for each of the tortfeasors and
for the insured.18  Each tortfeasors share of the insureds damages
should be entered at the top of each tortfeasors column, and  the
insureds  total  damages should be entered  at  the  top  of  her
column.   Then  the credits that each tortfeasor is  entitled  to
should  be entered in the respective columns of each.   Here  the
credits  are $50,000 for the liability insurance settlement  made
for Sauve and $52,000 for the liability insurance settlement made
for  Grubb.   In  the insureds column the total  of  the  credits
should  be  entered.  Then the credits should be subtracted  from
the damages figure in each column.
          The  result in the underinsured motorists column is the
amount due unless there is a double recovery.  The result in  the
insureds  column  is the additional amount that she  can  receive
without  obtaining  a  double  recovery.   In  our  example   the
additional amount that the insured can receive without  obtaining
a  double recovery is $108,000.  Because this is greater than the
amount tentatively due from the underinsured motorist, it can  be
readily seen that there is no double recovery.  The result in the
column  of  the  settling  tortfeasor  is  $32,000.   Under   our
hypothetical  this  amount is irrelevant.   Grubb  would  not  be
required to pay more; she has made what turned out for her to  be
a good settlement, and the settlement controls.
          But  consider  what would happen if Grubb  had  settled
with  Wilson  for $100,000 from her liability insurance  and  the
facts  were  otherwise the same.19  In this case  the  result  in
Grubbs underpayment column would be a negative  in other words, a
$16,000 overpayment.  The result in the insureds column would  be
$60,000.   Because $60,000 is less than $76,000, Wilson  may  not
receive  more than an additional $60,000 from Sauves UIM coverage
without  violating the double recovery prohibition of  subsection
.445(b).  The negative $16,000 result in Grubbs column does  not,
of  course,  mean  that her liability insurer is  entitled  to  a
$16,000 refund on the settlement.  The settlement has turned  out
to   be   somewhat   unfavorable  from  her  liability   insurers
standpoint, but again, it controls.20
          This  discussion  confirms  that  there  would  be   no
duplicate recovery if Grubbs liability insurer, rather  than  her
employers workers compensation carrier, made a $52,000 settlement
with  Wilson.   The  question becomes whether a different  result
should  follow given that the actual $52,000 settlement consisted
of workers compensation benefits.
          Workers compensation insurers generally have a right to
          recover benefits that they have paid when an injured worker
obtains  a  recovery in an action against a third  party  who  is
responsible  for  the workers injury.21  But if the  employer  is
partly  responsible  for  the  injury,  the  amount  that   would
otherwise be due the employer from the third-party action must be
reduced by an amount equal to what the employers share of damages
would have been if the employer were not immune from suit.22  Here
the reduction would be $84,000, calculated by multiplying Wilsons
total  damages  by   Grubbs percentage of  fault.   Because  this
exceeds   the  $52,000  actually  paid  in  workers  compensation
benefits,  no  recovery  would be available  to  Austins  workers
compensation carrier.
          The  result in this case is therefore exactly the  same
as  in the hypothetical situation discussed earlier, in which  we
assumed  that  Grubbs liability insurer settled with  Wilson  for
$52,000.   This  example verifies the accuracy  of  the  superior
courts  observation  that where . . . the  reduction  of  Wilsons
damages  attributable  to the fault of his employer  exceeds  the
amount  of  workers compensation benefits that  he  received,  no
reduction for workers compensation benefits under subsection .445
(b) is required.23
Should the Damage Elements Be Considered Separately?
          The  discussion so far assumes that the damage elements
of  Wilsons  claim  should be considered in the aggregate  rather
than  separately.   When they are considered  in  the  aggregate,
.445(b),  as we have shown, is not violated.  But when  they  are
considered separately a different picture emerges.
          If separate calculations are made for Wilsons wage loss
and  general  damages under the method that  we  have  used,  and
assuming  that all of the $52,000 workers compensation settlement
was  for  wage  loss and that all of the $50,000 paid  by  Sauves
insurance  was  for general damages, then the maximum  additional
amount  that Wilson could receive for wage loss without receiving
a double recovery would be $23,000.24
          A  second calculation would have to be made for general
damages.   The upshot of that calculation would be that  although
Wilson  could  receive an additional $85,000 for general  damages
without receiving a double recovery, he can actually receive only
an  additional  $31,000  in UIM proceeds because  Sauves  maximum
liability  for general damages is $81,000 and $50,000 on  account
of  that  liability  that  has already been  paid.25   The  total
additional   amount   Wilson   could   receive   using   separate
calculations would be $54,000 ($23,000 + $31,000), in contrast to
the total additional recovery of $76,000 when damage elements are
considered in the aggregate.26
          The  question  is  whether subsection .445(b)  requires
that  damages  be  separated  into  their  component  parts  when
determining whether there is a double recovery.  A leading  text,
Larsons  Workers  Compensation  Law,  has  examined  the  general
question  of double recoveries and advocates considering  damages
in the aggregate:
               The  legislative purpose of helping  the
          injured  person is subject, however,  to  one
          crucial limitation:  there must not be double
               recovery.  The problem thus narrows down to
          the  question  of  what is  meant  by  double
          recovery.   Double  recovery  can  mean   two
          different  things, and it  is  a  failure  to
          recognize this primary fact that accounts for
          much  of  the confusion that has been evident
          in  this field.  It can mean recovering  from
          two sources a combined amount that is greater
          than  the  plaintiffs actual  total  damages.
          Or,  it can mean getting recoveries from  two
          sources, whether or not the aggregate  amount
          equals or exceeds actual damages.[27]
          
After  discussing  the  two  types of  double  recovery,  Larsons
concludes  that the aggregate approach is clearly  preferable  on
policy grounds:
          We  are now ready to ask: is the second  sort
          of  double recovery obnoxious to the policies
          of  compensation  acts or uninsured  motorist
          acts,  or  to public policy in general?   The
          question almost answers itself.  There can be
          no  conceivable policy objection to  allowing
          an  injured  person to retain two  recoveries
          that, when combined, still do not make him or
          her whole.[28]
          
        We  agree  with Larsons policy judgment and believe  that
an  insureds damages should be considered in the aggregate  under
subsection  .445(b)  unless there are compelling  reasons  to  do
otherwise.
        State Farm argues that considering damages separately  is
required by AS 09.17.040(a).  This statute provides:
               (a)        In  every case where  damages
          for  personal injury are awarded by the court
          or   jury,  the  verdict  shall  be  itemized
          between  economic loss and noneconomic  loss,
          if  any, as follows: (1)  past economic loss;
          (2)   past  noneconomic loss;    (3)   future
          economic loss; (4)  future noneconomic  loss;
          and  (5)       punitive damages.
          
But State Farm does not connect the requirement of itemization in
AS  09.17.040(a)  with its contention that  damages  may  not  be
treated in the aggregate under subsection .445(b).
          We   do  not  think  that  a  connection  exists.   The
itemization required by AS 09.17.040(a) is primarily designed  to
ensure  that  future losses are identified so that  they  can  be
reduced  to  present value.  Reduction to present  value  is  the
subject  of subsections (b) and (c) of .040.  Another  reason  to
itemize  is  apparent from subsections (d)  through  (g).   These
subsections  are  concerned with providing  for  the  payment  of
future  damages,  at  the  option of an  injured  party,  through
periodic payments.  These purposes bear little or no relationship
to the anti-duplicate recovery purpose of .445(b).
          The purpose of .445(b) would not be furthered by making
          separate calculations for each component of damages.  This is
especially true when the general purposes of the 1990 reforms  to
Alaskas  UIM law are considered.  Adopting the separate component
method  advocated  by  State  Farm  would  amount  to  a  partial
reintroduction  of  the  reduction method  that  the  legislature
intended  to replace with the excess approach.  The objective  of
the  excess  approach,  as  we have seen,  was  to  maximize  UIM
coverage,  reducing policy limits only as necessary  to  avoid  a
double  recovery.29  State Farms method would result  in  greater
reductions than necessary to achieve this goal.  As we  indicated
in  Victor,  where the underlying purpose of a  provision  is  to
prevent  double recoveries, a method that achieves no  more  than
that  is  to  be preferred to one that cuts more deeply  into  an
insureds recovery.30
          For  the  reasons stated, the judgment of the  superior
court is AFFIRMED.
_______________________________
     1    AS 23.30.055.

     2     All figures used in this opinion have been rounded  to
the nearest thousand.

     3     Medical expenses were not submitted as part of Wilsons
claim.

     4     William Wilson died while arbitration was pending, and
his  widow,  Brenda Wilson, continued to maintain  his  claim  on
behalf of his estate.

     5     This and all amounts hereafter mentioned are principal
sums.  Wilson also sought add-ons of interest, fees, and costs.

     6    Just as Wilson ignored medical expenses when presenting
his  damages  at the arbitration, State Farm ignored the  workers
compensation  insurers payment of Wilsons medical  expenses  when
determining the amount owed to Wilson.

     7     Wilson  also  makes  some very  complicated  arguments
concerning  the interaction of amendments to AS 09.17.080(c)  and
AS   23.30.015(g),  passed  in  1997  (relating  to  reducing  an
employers  third-party claim by the employers  share  of  fault),
with subsection .445(b).  Insofar as these arguments suggest that
the  1997  amendments changed the meaning of subsection  .445(b),
which was enacted in 1990, they are rejected.

     8    12 Couch on Insurance  171:2, at 171-7 (2006).

     9     Former  AS  28.20.445(h)  defined  underinsured  motor
vehicle as a vehicle with liability coverage for bodily injury in
an amount that

               (1)  is less than the limit for  .  .  .
          underinsured  motorists  coverage  under  the
          insureds policy;  or
          
               (2)  has  been  reduced by  payments  to
          persons other than an insured, injured in  an
          accident, to less than the limit for  .  .  .
          underinsured  motorists  coverage  under  the
          insureds policy.
          
See  Progressive Ins. Co. v. Simmons, 953 P.2d 510,  513  (Alaska
1998).

     10     Id. at 514.  But see Victor v. State Farm Fire & Cas.
Co., 908 P.2d 1043 (Alaska 1996), discussed infra p. 10.

     11     Simmons, 953 P.2d at 514.  In Simmons we  quoted  the
following  example  given  by Representative  Donley,  the  chief
sponsor of the 1990 amendments:

               [T]he  bill is aimed at underinsured  or
          uninsured automobile insurance.  The consumer
          thinks  they are buying a certain  amount  of
          insurance coverage, for example $100,000.  In
          fact,  what they are buying is protection  up
          to  $100,000.   If they were hit  by  someone
          with  $25,000 insurance, their own  insurance
          company would only pay $75,000.  Most  people
          dont   realize   this  when   they   purchase
          insurance.   [The  bill]  is  an  attempt  to
          better  compensate consumers for their actual
          damages.
          
Id.



     12    The following clause, applicable only to uninsured, not
underinsured,  motor  vehicles,  appears  to  take  a   reduction
approach:

          2.   If   the  damages  are  caused   by   an
               uninsured  motor  vehicle,  any   amount
               payable  under  this coverage  shall  be
               reduced by any amount paid or payable to
               or  for the insured by or for any person
               or  organization who is or may  be  held
               legally liable for bodily injury to  the
               insured.
               
The  excess approach is reflected by a clause that is similar  to
current AS 28.20.445(b):

          1.   Any amount payable under these coverages
               for  bodily injury shall be excess  over
               and shall not duplicate any amounts paid
               or payable to or for the insured under:
               
               a.       the    liability
               coverage;
               
               b.   the medical payments
                    coverage;
                    
               c.   the           death,
                    dismemberment    and
                    loss     of    sight
                    coverage;
                    
               d.   any          workers
                    compensation law.
                    
     13    908 P.2d 1043 (Alaska 1996).

     14    Id. at 1046.

     15    29 P.3d 829, 832 (Alaska 2001).

     16     Id. (citations omitted) (quoting Simmons, 953 P.2d at
514, 517 n.6).

     17     Excess  coverage . . . strives to provide  additional
coverage, as needed to fully compensate injured motorists,  after
available  liability  coverage  has  been  completely  exhausted.
Curran,   29   P.3d   at  832.   We  recently  re-affirmed   this
understanding of UIM coverage in Sidney v. Allstate Ins. Co., 187
P.3d  443 (Alaska 2008), citing the above explanation from Curran
to  support  our  finding  that [i]t  would  be  unreasonable  to
conclude  that  [the insured] incurred damages of  $118,432,  but
that upon exhausting $50,000 policy limits she was entitled to  a
UIM  award  that failed to reflect her receipt of the  underlying
benefits.   It would also run counter to Alaskas excess  approach
to UIM coverage.  Sidney, 187 P.3d at 450.

     18     For ease of understanding, the three columns are  set
out here:
          


     

Underinsured Motorist
(Sauve)
Settling Tortfeasor
(Grubb)
Insured
(Wilson)

Share of damages
$126,000
$84,000
Total damages $210,000

Credits
liability insurance payment $50,000
liability insurance payment $52,000
Total credits $102,000

Result: underpayment
tentative amount due
$76,000
$32,000
Result:
amount that can be received without double recovery
                            $108,000
                                
     19    In that event, the three columns would look like this:





Underinsured Motorist
(Sauve)
Settling Tortfeasor
(Grubb)
Insured
(Wilson)

Share of damages
$126,000
$84,000
Total damages $210,000

Credits
liability insurance payment $50,000
liability insurance payment $100,000
Total credits $150,000

Result: underpayment
tentative amount due $76,000
-$16,000
Result:
amount that can be received without double recovery
                             $60,000
                                
     20     This method of calculating a duplicate recovery draws
on  the  method suggested by Justice Eastaugh in his  dissent  in
Petrolane Inc. v. Robles.  154 P.3d 1014, 1030-32 (Alaska  2007).
The  issue  in  Petrolane  was whether a duplicate  recovery  was
permissible  under  Alaskas  several  liability  system  when   a
plaintiff  settles  with  one  tortfeasor  and  later  obtains  a
judgment  against another, and where the amount of the settlement
exceeds  the settling tortfeasors share of damages as  ultimately
determined  by  the  verdict.  The court held  that  a  duplicate
recovery was permissible and therefore had no occasion to explore
how   to   calculate  a  duplicate  recovery.   Justice  Eastaugh
disagreed  that  a  duplicate  recovery  should  be  allowed  and
explained  how a duplication should be calculated.   Our  use  of
Justice  Eastaughs method does not indicate backtracking  on  the
result  in Petrolane, which this court unanimously reaffirmed  in
Diggins  v.  Jackson,  164  P.3d  647  (Alaska  2007).   But  the
legislature in enacting subsection .445(b) has mandated that  UIM
coverage  may not be used to make duplicate payments and  thus  a
method  for determining duplication is needed.  For this  purpose
the  court  finds that an adaptation of the method  suggested  by
Justice Eastaugh in his Petrolane dissent is appropriate.

     21    See AS 23.30.015.

     22    AS 23.30.015(g) provides:

               If   the   employee  or  the   employees
          representative  recovers  damages  from   the
          third  person, the employee or representative
          shall  promptly pay to the employer the total
          amounts   paid   by   the   employer    under
          (e)(1)(A)-(C) of this section insofar as  the
          recovery  is  sufficient after deducting  all
          litigation  costs and expenses.   Any  excess
          recovery  by  the employee or  representative
          shall  be credited against any amount payable
          by  the employer thereafter.  If the employer
          is  allocated a percentage of fault under  AS
          09.17.080, the amount due the employer  under
          this subsection shall be reduced by an amount
          equal  to  the employers equitable  share  of
          damages assessed under AS 09.17.080(c).
          
The  underlined language was added by amendment in 1997.  Ch.  26
36 SLA 1997.

     23     What  if the workers compensation carrier had settled
with  Wilson for $100,000?  After the $84,000 reduction  required
by  AS  23.30.015(g),  the carrier would be entitled  to  recover
$16,000  from the proceeds of Wilsons third-party action  against
Sauve.   Wilsons credits would thus be reduced from  $150,000  to
$134,000,  and  the maximum additional amount that  Wilson  could
recover from the underinsured motorist without receiving a double
recovery  would  be $76,000.  Because this equals  the  tentative
amount  due in Sauves column, $76,000 would be the amount payable
under the UIM policies.  The three columns would look like this:



     

Underinsured Motorist
(Sauve)
Settling W/C Insurer
(Austin/Grubb)
Insured
(Wilson)

Share of damages
$126,000
$84,000
 $210,000

Credits
liability insurance payment: $50,000
W/C settlement $100,000
- $16,000 recovery from insured:
$84,000
$150,000
- $16,000 to
W/C carrier:
$134,000

Result: underpayment
tentative amount due
$76,000
$0
Result:
amount that can be received without double recovery
                             $76,000
                                
     24      The   three-column  calculations   explaining   this
conclusion are set out below:


Lost Wages
     

Underinsured Motorist
(Sauve)
Settling W/C Insurer (Austin/Grubb)
Insured
(Wilson)

Share of wage loss damages
$45,000
$30,000
$75,000

Credits
no credits
$52,000
$52,000

Result:
underpayment
tentative amount due
$45,000
- $22,000*
Result:
amount that can be received without double recovery $23,000

*The   parties have agreed that the workers compensation  insurer
has no claim on any proceeds in this case.

     25    The three-column calculations are set out below:


General Damages
     

Underinsured Motorist
(Sauve)
Settling W/C Insurer
(Austin/Grubb)
Insured
(Wilson)

Share of general damages
$81,000
$54,000
$135,000

Credits
$50,000
no credits
$50,000

Result:
underpayment
tentative amount due
$31,000
$54,000
Result:
amount that can be received without double recovery
                             $85,000
                                
     26    Of course, if the $50,000 paid by Sauves insurance were
split  between lost wages and general damages, the amount payable
to  Wilson  could  be  different,  depending  on  the  particular
allocation.

     27     6  Arthur  Larson  & Lex K. Larson,  Larsons  Workers
Compensation Law  110.05[8], at 110-23 (2008).

     28    Id.

     29    See supra pp. 8-12.

     30    See supra p. 10.

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