Title: ALLSTATE INSURANCE CO v REITLER

State: montana

Issuer: Montana Supreme Court

Document:

No. 80-261 IN THE SUPREME COURT OF THE STATE OF MONTANA 1981 ALLSTATE INSURANCE COMPANY, a Corporation, Plaintiff and Respondent, vs. AURELIA REITLER and FARMERS INSURANCE EXCHANGE, a Reciprocal Insurer, Defendant and Appellant, Appeal from: District Court of the Thirteenth Judicial District, In and for the County of Yellowstone. Honorable Charles Luedke, Judge presiding. Counsel of Record: For Appellant: Crowley, Haughey, Hanson, Toole & Dietrich, Billings, Montana Cynthia Ford argued, Billings, Montana For Respondent: Fred N. Dugan argued, Billings, Montana Submitted: April 23, 1981 Filed: JfiN 2 8 I 9 8 1 c M r . J u s t i c e Frank B. Morrison, Jr., delivered the Opinion of t h e Court. P l a i n t i f f , A l l s t a t e Insurance Company ( A l l s t a t e ) brought t h i s a c t i o n i n t h e D i s t r i c t Court a s s e r t i n g t h a t it was e n t i t l e d t o subrogation t o t h e e x t e n t of payments A l l s t a t e had made under a medical payments provision of an automobile policy. Defendants answered by a l l e g i n g t h a t such subrogation c l a u s e s are i n v a l i d . Both p a r t i e s f i l e d a motion f o r summary judgment. The D i s t r i c t Court entered an order granting t h e p l a i n t i f f ' s motion f o r summary judgment and denying t h e motion of the defendants. From t h i s judgment, defendants appeal. This case a r i s e s from an automobile accident which occurred i n B i l l i n g s , Montana, on August 22, 1976. I n t h e accident, an automobile driven by one Beverly Welton was h i t from behind by an automobile driven by t h e defendant, Aurelia R e i t l e r . Welton sustained personal i n j u r i e s and incurred medical expenses of more than $2,000. A t t h e time of t h e accident, Welton was insured by t h e p l a i n t i f f , A l l s t a t e . Her policy provided f o r medical expense coverage i n the amount of $2,000. A l l s t a t e d i d pay t o Welton t h e sum of $2,000 f o r medical expenses. Welton made a claim a g a i n s t R e i t l e r which was s e t t l e d f o r $9,500. During the pendency of the claim, A l l s t a t e s e n t n o t i c e of i t s subrogation i n t e r e s t t o Farmers I n s . Exchange ( ~ a r m e r s ) . Subsequent t o r e c e i v i n g t h i s n o t i c e , Farmers entered i n t o a settlement with We1 ton and obtained a r e l e a s e s t a t i n g t h a t i t was released of any and a l l claims r e s u l t i n g from personal i n j u r y t o Welton. There was no evidence t h a t A l l s t a t e asked i t s insured, Welton, f o r reimbursement from the proceeds of t h e settlement, nor i s t h e r e any evidence t h a t they intend t o pursue a claim a g a i n s t t h e i r insured, Welton. The A l l s t a t e p o l i c y provided, i n p e r t i n e n t p a r t , a s follows: "upon payment under (medical expense provision of t h e policy) A l l s t a t e s h a l l be subrogated t o the e x t e n t of such payment t o a l l of t h e i n s u r e d ' s r i g h t s of recovery therefor." Appellants contend t h a t the subrogation c l a u s e s r e l a t i n g t o medical payments c o n s t i t u t e an assignment of claims be- longing t o the insured i n j u r e d person and t h a t such assign- ment r e s u l t s i n t h e s p l i t t i n g of a s i n g l e cause of a c t i o n . Appellants argue t h a t the common law and public policy both p r o h i b i t assignment of personal i n j u r y claims and t h e s p l i t - t i n g of a s i n g l e cause of action. Appellants r e l y on t h e case of Coty v. Cogswell (1935), 100 Mont. 496, 50 P.2d 249. I n t h a t case one Maude Adams sued Cogswell t o recover f o r personal i n j u r i e s . During t h e pendency of the s u i t Coty commenced an a c t i o n a g a i n s t Adams based on a promissory note. Coty issued a w r i t of attachment a g a i n s t t h e p l a i n t i f f Adams, and t h e s h e r i f f proceeded t o a t t a c h Adams' cause of a c t i o n a g a i n s t Cogswell. Although Cogswell knew of the attachment, he proceeded t o s e t t l e Adams' claim. Later Coty obtained a judgment a g a i n s t Adams which was n o t s a t i s f i e d . Coty then sued Cogswell and h i s i n s u r e r , seeking t o hold them l i a b l e f o r s e t t l i n g t h e Adams' a c t i o n a f t e r an attachment had been l e v i e d thereon. This Court held t h a t a claim f o r personal i n j u r i e s was n o t as- signable and, t h e r e f o r e , not s u b j e c t t o attachment. Appellants c i t e t h e following j u r i s d i c t i o n s i n support of t h e i r position: H a r l e y s v i l l e Mutual Insurance Company v. Lea (1966), 2 Ariz. App. 538, 410 P. 2d 495, and two subsequent Arizona cases, t h e l a t e s t of which i s A l l s t a t e I n s . Co. v. Druke (1978), 118 Ariz. 301, 576 P.2d 489; Berlinski v. Ovellette (1973), 164 Conn. 482, 325 A.2d 239; Fifield Manor v. Finston (1960), 54 Cal.2d 632, 354 P.2d 1073, 7 Cal.Rptr. 377; State Farm Fire & Cas. Ins. Co. 9 . Farmers Ins. Exch. (Okla. 1971), 489 P.2d 480; Wrightsman v. Hardware Dealers Mutual Fire Ins. Co. (1966), 113 Ga.App. 306, 147 S.E.2d 860; Travelers Indemnity Company v. Chumbley (Mo.App. 1965), 394 S.W.2d 418; Forsthove v. Hardware Dealers Mutual Fire Ins. Co. (Mo.App. 1967), 416 S.W. 2d 208. Respondent replies by arguing that a subrogation clause is not an assignment of claim. Respondent cites the following cases which have recognized subrogation clauses as being valid: Alabama Farm Bureau Mut. Cas. Ins. Co. v. Anderson (1972), 48 Ala.App. 172, 263 So.2d 149, cert.den., 288 Ala. 538, 263 So.2d 155; Shipley v. Northwestern Mutual Ins. Co. (1968), 244 Ark. 1159, 428 S.W.2d 268; Western Cas. & Sur. Co. v. Bowling (1977), 39 Colo.App. 357, 565 P.2d 970; Higgins v. Allied American Mutual Fire Ins. Co. (1968), 237 A.2d 471; DeCespedes v. Prudence Mutual Casualty Company of Chicago, Illinois (1967), 202 So.2d 561; Maryland Casualty Company v. Plant (1968), 208 So.2d 280; Rinehart v. Farm Bureau Mut. Ins. Co. of Idaho, Inc. (1974), 96 Idaho 115, 524 P.2d 1343; Home Ins. Co. v. Hertz Corp. (1978), 71 I11.2d 210, 375 N.E.2d 115; Damhesel v. Hardware Dealers Mutual Fire Ins. 2 9 9 - Co. (1965), 60 I11.App. ad, .209 N.E.2d 876; Bernardini v. Home & Automobile Insurance Co. (1965), 64 II.l.App.2d 465, 212 N.E.2d 499; Imel v . Travelers Indemnity Company (1972), 152 1nd.App. 75, 281 N.E.2d 919; Mutual Hospital Ins., Inc. v. MacGregor (1977), - I n d , ~ @ 368 N.E.2d 1376; City of Detroit v. Bridgeport Brass Company (1970), 28 Mich.App. 54, 184 N.W.2d 278; Travelers Indemnity Co. v. Vaccari (1976), 310 Minn. 97, 245 N.W.2d 844; Davenport v. State Farm Mutual Automobile Ins. Co. (1965), 81 Nev. 361, 404 P.2d 10; Anderson v. Allstate Insurance Company (1966), 266 N.C. 309, 145 S.E.2d 845; Schuldt v. State Farm Mut. Auto. Ins. Co. (1975), 89 S.D. 687, 238 N.W.2d 270; Smith v. Motor Club of America Ins. Co. (1959),54 N.J.Super. 37, 148 A.2d 37; Motto v. State Farm Mutual Automobile Insurance Co. (1969), 81 N.M. 35, 462 P.2d 620; Jacobson v. State Farm Mutual Automobi1.e Ins. Co. (1971), 83 N.M. 280, 491 P.2d 168; Miller v. Liberty Mutual Fire Insurance Co. (1965), 264 N.Y.S.2d-319; Smith v. Travelers Ins. Co. (1977), 50-Ohio St.2d-43, 362 N.E.2d 264; Geertz v. State Farm Fire and Casualty (1969), 253 Or. 307, 451 P.2d 860; Bradford v. American Mutual ~iability Insurance Co. (1968), 213 Pa.Super.Ct. 8, 245 A.2d 478; Demrnery v. National Union Fire Insurance Company (1967), 210 Pa.Super.Ct. 193, 232 A.2d 21; Hospital Service Corp. of R.I. v. Pennsylvania Ins. Co. (19671, 101 R.I. 708, 227 A.2d 105; Wilson v. Tennessee Farmers Mutual Insurance Co. (1967), 219 Tenn. 560, 411 S.W.2d 699; Foundation Reserve Insurance Company v. Cody (Tex. 1970), 458 S.W.2d 214; State Farm Mut. Ins. Co. v. Farmers Insurance Exch. (1969), 22 Utah 2d 183, 450 P.2d 458; State Farm Mut. Ins. Co. v. Farmers Insurance Exch. (1972), 27 Utah 2d 166, 493 P.2d 1002; ~ollins v. ~ l u e Cross of Virginia (1973), 213 Va. 540, 193 S.E.2d 782; ~etropolitan Life Insurance Company v. Ritz (1967), 70 wash. 2d 317, 422 P.2d 780; Travelers Indemnity Company v. Rader (1969), 152 W . . V a . ' / & 166 S.E.2d 157; State Farm Mutual Automobile Ins. Co. v. Geline (1970), 48 Wis. 2d 290, 179 N.W.2d 815; Associated Hospi Serv. v. Milwaukee Auto. Mut. I . Co. (1967), 33 Wis.2d 170, 147 N.W.2d 225. Most of the cases cited by the respondent involve situations.where the insurance company sued its own insured t o recover medical payments advanced o r where the insured brought an a c t i o n a g a i n s t t h e insurance company t o c o l l e c t medical payments coverage. The r a t i o n a l e expressed i n cases c i t e d by respondent v a r i e s . Some of t h e cases hold t h a t t h e "subrogation" pro- v i s i o n i n t h e insurance policy i s n o t an assignment of a cause of a c t i o n , b u t r a t h e r simply impresses an e q u i t a b l e l i e n upon t h e proceeds of any settlement. Some of t h e cases a r e from j u r i s d i c t i o n s where assignment of claims i s s p e c i f i - c a l l y authorized by s t a t u t e . I n o t h e r of t h e cases t h e r e was evidence t h a t the subrogation provision i n t h e medical pay portion of t h e i n s u r e d ' s policy r e s u l t e d i n a reduction of premium t o t h e insured. Some d e c i s i o n s a r e premised upon t h e f a c t t h a t t h e insured, i n s e t t l i n g t h e case with a t o r t - f e a s o r , breached t h e cooperation c l a u s e i n t h e policy. ' W e hol-d-that medical payment subrogation clauses a r e i n v a l i d . I n doing so, w e a r e mindful t h a t t h i s Court i s joining a minority of j u r i s d i c t i o n s so holding. However, t h e public policy considerations m i l i t a t e i n favor of such a r e s u l t . F i r s t , the insured has paid a premium f o r medical payments coverage. This Court has previously given g r e a t weight t o such a consideration i n allowing stacking of in- surance p o l i c i e s . See Kemp v. A l l s t a t e Ins. Co. (1979), - Mont. - , 601 P.2d 20, 36 St.Rep. 1381. The a l l e g a t i o n t h a t t h e insured w i l l make a double recovery i n t h e absence of medical payments subrogation i s not persuasive f o r t h e insured has paid f o r t h a t a d d i t i o n a l coverage. Second, t h e i n j u r e d person is t h e one l i k e l y t o s u f f e r most i f medical payments received must be repaid o u t of a third-party recovery. The one i n j u r e d bears the c o s t of s u i t including a t t o r n e y f e e s and l i t i g a t i o n expenses. Y e t under a subrogation c l a u s e t h e i n s u r e r c o l l e c t s 1 0 0 percent of payments made with no corresponding o b l i g a t i o n f o r expenses. Furthermore, t h e i n j u r e d person o f t e n must compromise t h e personal i n j u r y claim, e i t h e r because of l i a b i l i t y problems o r because of l i m i t e d coverage c a r r i e d by t h e t o r t f e a s o r . Y e t under subrogation t h e p l a i n t i f f ' s i n s u r e r makes a f u l l recovery. Third, the t o r t f e a s o r ' s c a r r i e r may consider t h a t t h e i n j u r e d person has already been paid medical expenses and can make a smaller o f f e r which allows f o r such payment having been previously made. I f a subrogation i n t e r e s t must then be repaid, t h e i n j u r e d p a r t y may recover nothing f o r medical expenses. Montana has long opposed t h e assignment of personal i n j u r y claims. Coty v. Cogswell, supra. Whether an insurance p o l i c y provides f o r subrogation ( a s i n t h i s case) o r provides t h a t the c a r r i e r has a l i e n on t h e proceeds of an i n s u r e d ' s third-party recovery, t h a t policy has t h e e f f e c t of assigning a p a r t of t h e i n s u r e d ' s r i g h t t o recover a g a i n s t a t h i r d - p a r t y t o r t f e a s o r . W e hold t h a t such an assignment i s i n v a l i d . Summary judgment entered i n favor of respondent A l l s t a t e Insurance Company i s s e t aside. W e remand t h e case t o t h e D i s t r i c t Court with d i r e c t i o n s t o e n t e r judgment f o r t h e a p p e l l a n t s , Aurelia R e i t l e r and Farmers Insurance Exchange. > W e concur: Chief J u s t i c e / .+&us tices