UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

ALBERT A. MARTINE,

Plaintiff-Appellant,

and

GINA MARIE MARTINE, individually

and as parent, guardian and

custodian on behalf of Christian

Martine, an infant,

Plaintiff,

v.

THE HERTZ CORPORATION,

No. 95-2648

Defendant-Appellee,

and

US BENEFIT & RISK MANAGEMENT,

INCORPORATED, a/k/a Public

Employees Insurance Agency,

Defendant-Appellee,

and

PAUL SWINTON, a/k/a Gilliam C.

Swinton,

Defendant.
ALBERT A. MARTINE,

Plaintiff-Appellee,

and

GINA MARIE MARTINE, individually

and as parent, guardian and

custodian on behalf of Christian

Martine, an infant,

Plaintiff,

v. No. 96-1225

US BENEFIT & RISK MANAGEMENT,

INCORPORATED, a/k/a Public

Employees Insurance Agency,

Intervenor-Appellant,

and

THE HERTZ CORPORATION; PAUL

SWINTON, a/k/a Gilliam C. Swinton,

Defendants.

Appeals from the United States District Court

for the Southern District of West Virginia, at Charleston.

John T. Copenhaver, Jr., District Judge.

(CA-94-592-2)

Submitted: September 20, 1996

Decided: December 5, 1996

Before WILKINSON, Chief Judge, HAMILTON, Circuit Judge,

and PHILLIPS, Senior Circuit Judge.

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Affirmed by unpublished per curiam opinion.

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COUNSEL

Richard Kranis, RICHARD KRANIS, P.C., Roslyn Heights, New

York, for Appellant. Charles R. Hurt, Charleston, West Virginia, for

Appellee.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

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OPINION

PER CURIAM:

In these consolidated appeals, Albert Martine challenges the dismissal by summary judgment of his claim against The Hertz Corporation (Hertz) for personal injuries received by Martine in a collision

with an automobile rented to its operator by Hertz, and US Benefit &

Risk Management, Incorporated (USB) appeals the dismissal of its

subrogation claim arising from the payment of medical expenses

incurred by Martine. We conclude that the district court did not err

in dismissing either claim and affirm in both appeals.

I.

Albert Martine and Gina Maria Martine, individually and as parent,

guardian and custodian on behalf of Christian Martine, an infant, filed

this action in the Circuit Court of Kanawha County, West Virginia,

against Paul Swinton and the Hertz Corporation to recover compensatory and punitive damages for injuries suffered in an automobile accident that occurred in Kanawha County on September 5, 1993. The

accident occurred when the vehicle in which the Martines were travelling collided head-on with a vehicle driven by Swinton, an English

tourist who had rented the vehicle from Hertz. The defendants

removed the case to federal court on diversity grounds.

USB moved to intervene in this action after learning that Gina and

Christian Martine had settled their tort actions, leaving only Albert's

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claim for trial. USB is the legal administrator of Equifax Health Care

Information Services, Inc., which is the health claims administrator

for the West Virginia Public Employees Insurance Agency (PEIA).

All of the members of the Martine family are beneficiaries under the

PEIA health insurance plan, and USB submitted a subrogation claim

in excess of $124,000 for medical benefits paid by PEIA on behalf of

Albert Martine. The district court granted USB's motion to intervene.

Before trial, the district court granted summary judgment in favor of

Defendant Hertz Corporation on all claims of negligence and negligent entrustment, leaving only Albert Martine's claim against Swinton for trial.

The district court held a four-day trial by jury solely on the issue

of Albert Martine's damages, Swinton having conceded liability.

Before the jury announced its verdict, Martine moved to dismiss

USB's complaint on the ground that he would not be"made whole"

because Swinton had insufficient funds to satisfy the probable judgment. The only asset Swinton possessed to satisfy the judgment was

a $100,000 insurance policy provided when he rented the automobile.

The jury returned a verdict in favor of Martine in the amount of

$650,000, specifically including $36,800 for past medical expenses

and $5,000 for future medical bills. The jury awarded these amounts

despite evidence presented at trial that PEIA had paid in excess of

$124,000 in medical benefits to Martine related to the accident and

that Martine would require further medical care.

After the jury returned its verdict, the district court granted Martine's motion to dismiss USB's complaint as intervenor. Relying on

the West Virginia Supreme Court's decision in Kittle v. Icard, 405

S.E.2d 456 (W. Va. 1991), the court concluded that USB was not

entitled by subrogation to recover any portion of Martine's judgment

because Martine would not be "made whole" by the amount he would

be able to collect. On that basis, the district court determined that in

equity Martine should not be further undercompensated by apportioning any part of his judgment to USB despite PEIA's medical payments to him.

Martine appeals in No. 95-2648 from the grant of summary judgment to Hertz, and USB appeals in No. 96-1225 from the district

court's dismissal of its subrogation claim.

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II.

No. 95-2648

On Martine's appeal, we conclude that the district court did not err

in granting summary judgment to Hertz.

The court first rejected Martine's negligent entrustment theory as

a matter of law. The court reasoned that on the undisputed facts of

record a finder of fact could not properly find that in renting its vehicle to Swinton Hertz could have known that he was likely to cause

an unreasonable risk of harm to others. That is an essential element

of the tort of negligent entrustment under West Virginia law. See

Huggins v. Tri-County Bonding Co., 337 S.E.2d 12, 17 (W. Va.

1985). The mere fact that Swinton was known to be a citizen of Great

Britain where motorists drive on the left of roadways would not suffice to support such a finding. It was undisputed that Swinton had a

valid operator's license that was presented to Hertz before the vehicle

was entrusted to him by rental. There is no forecast of evidence in the

record that Swinton had any discernible physical or mental disabilities

when he obtained the car from Hertz.

We affirm the grant of summary judgment rejecting the negligent

entrustment claim on the reasoning of the district court.

The district court then rejected, as a matter of law, Martine's

claims of negligence by Hertz in failing, through its employees, to

inquire of Swinton whether he was familiar with applicable local rules

of the road and in failing specifically to warn him of the rule of rightside driving, and in failing to train and supervise their employees to

make such inquiries and give that warning. The district court concluded that on the undisputed facts of record, such failures could not

rationally be found to have been the proximate causes of the accident

and its consequences. It was undisputed, indeed conceded by Swinton, that he was aware of the local rules of the road, and specifically

of the right-side driving rule, and had in fact observed those rules in

driving in other countries when they also obtained.

We affirm the grant of summary judgment rejecting these negligence claims on the reasoning of the district court.

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III.

No. 96-1225

USB makes several arguments in its effort to overturn or alter the

district court's judgment dismissing its subrogation claim. The first

contention is that the "made-whole" rule announced in Kittle v. Icard,

supra, does not apply when a jury has rendered a verdict determining

the plaintiff's damages. Alternatively, USB contends that if the madewhole rule does apply, equitable principles demanded that it nevertheless receive a partial recovery of the amount it paid as medical

expenses measured in either of two proposed mathematical methods.

A.

As a preliminary matter, we note that the West Virginia legislature

has provided PEIA with a statutory right to subrogation. See W. Va.

Code § 5-16-3(c) (1990). The legislative rules specifying an insured's

rights under the Public Employees Insurance Act provide: "In the

event that benefits are paid to any insured for bodily injury caused by

a third party, the Public Employees Insurance Board shall be and is

hereby subrogated (substituted) with respect to any insured's right (to

the extent of the value of the benefits paid) to any such claim against

such third party causing such bodily injury." W. Va. Code State R. tit.

151, § 1-11.1 (1985). In addition, the PEIA plan agreement providing

Martine's insurance contract includes a statement that reads, "To the

extent of the value of benefits paid, the [PEIA] shall be subrogated

and succeed to all rights of an insured to recover from any person or

entity which may be liable for expenses incurred for covered services." JA at 4. The West Virginia Supreme Court has held that subrogation clauses in insurance contracts are valid and enforceable.

Nationwide Mutual Ins. Co. v. Dairyland Ins. Co., 445 S.E.2d 184,

186 (W. Va. 1994); Federal Kemper Ins. Co. v. Arnold, 393 S.E.2d

669, 671 (W. Va. 1990).

The seminal case defining West Virginia's law of subrogation is

Kittle v. Icard, 405 S.E.2d 456 (W. Va. 1991). In that case the West

Virginia Supreme Court considered the right of the state's Department of Human Resources (DHS) to subrogation in the amount paid

in medical expenses of a settlement payment made by an insurer that

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did not adequately compensate the injured party for his damages. The

case involved a twenty-three month-old child who was struck by a car

and dragged 70 feet on a concrete road. The child's mother was

receiving assistance from DHS, and the mother executed an assignment of benefits form in favor of DHS in exchange for eligibility for

DHS's assistance with the child's medical expenses. The child's initial medical expenses totalled $27,317, and the car driver's insurance

company paid a settlement of $100,000, the limit of the policy. However, the child's guardian ad litem testified that the value of the

child's claim was between $200,000 and $250,000, and the trial court

found the driver to be judgment proof.

DHS sought subrogation of the award in the amount of the child's

medical expenses that it had paid; the child's mother claimed that

subrogation was inappropriate because the settlement payment had

not "made her whole." As does USB in this case, DHS argued that the

trial court erred in applying common law subrogation principles such

as the "made-whole rule" instead of a statutory provision that specifically provided for subrogation. As part of the Medicaid program, the

West Virginia Code stated, "[DHS] shall be legally subrogated to the

rights of the recipient against the person so liable, but only to the

extent of the reasonable value of the medical assistance paid . . . ."

W. Va. Code § 9-11-5(a) (1990). The West Virginia Supreme Court

began by noting, "`Absent a clearly expressed legislative intent

requiring otherwise, "subrogated" is to be given its usual, ordinary

meaning.'" Kittle, 405 S.E.2d at 460 (quoting White v. Sutherland,

585 P.2d 331, 334 (N.M. 1978)). Because the legislature did not

evince an intent to vary the ordinary meaning of the concept, the court

then noted that "subrogation gives the payor the right to collect what

it has paid from the party who caused the damage. However, because

this right to collect is an equitable remedy, it is subject to equitable

principles." Id.

After canvassing the decisions in a number of other states that held

that a legislature's use of the term "subrogation" demonstrated an

intent to import the equitable consequences of that remedy, the West

Virginia court stated that "`the right of subrogation depends upon the

facts and circumstances of each particular case.'" Id. at 463 (quoting

Huggins v. Fitzpatrick, 135 S.E. 19, 20 (W. Va. 1926)). Continuing,

the court held that "`[s]ubrogation, being a creature of equity, will not

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be allowed except where the subrogee has a clear case of right and

no injustice will be done to another.'" Id. (quoting Buskirk v. StatePlanters' Bank Trust Co., 169 S.E. 738, 738 (W. Va. 1933)). Because

the legislature did not alter the usual and ordinary meaning of the concept of subrogation in the applicable statute, the Court held that equity

should be considered. And, on that basis, the Court then held that the

trial court properly had considered the equities in deciding not to permit subrogation when the child had been unable to collect the full

value of the claim. "[W]e conclude that the lower court did not err

when it ruled that the DHS was not entitled to be subrogated to [the

child's] settlement proceeds because the settlement had not made him

`whole.'" Id. at 464.*

USB cites Bell v. Federal Kemper Ins. Co., 693 F. Supp. 446 (S.D.

W. Va. 1988), for the proposition that the existence of a jury verdict

in this case precludes Martine from arguing that he was not "made

whole." In Bell, the federal district court interpreted West Virginia

law to prevent plaintiffs from avoiding subrogation claims based on

the "not made whole" theory when they have obtained a jury verdict

and collected on the award. Citing a case from Washington, the court

noted, "`[T]he jury determined the money necessary to make [the

defendant] "whole." The fact [that defendant] has placed a greater

value on his damage than the jury did does not allow him to relitigate

the issue in a subsequent proceeding.'" Bell , 693 F. Supp. at 450

(quoting United Pacific Ins. Co. v. Boyd, 661 P.2d 987, 990 (Wash.

1983)).

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*The West Virginia Supreme Court more recently upheld the equitable

doctrines of subrogation in the context of uninsured and underinsured

motorists. The West Virginia legislature has provided, "An insurer paying a claim under the endorsement or provisions . . . shall be subrogated

to the rights of the insured to whom such claim was paid against the person causing such injury . . . to the extent that payment was made." W.

Va. Code § 33-6-31(f) (1990). However, in State ex rel. Allstate Ins. Co.

v. Karl, 437 S.E.2d 749 (W. Va. 1993), the court held "that the right of

subrogation [under section 33-6-31(f)] is not available where the policyholder has not been fully compensated for the injuries received and still

has the right to recover from other sources. Subrogation is permitted only

to the extent necessary to avoid a double recovery by such policyholder."

Karl, 437 S.E.2d at 757.

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USB's reliance upon Bell is unavailing. In both Bell and Boyd,

supra, the plaintiff obtained a jury verdict or a settlement and then

collected its full value. The plaintiffs in those cases then sought to

avoid their insurers' subrogation rights by claiming their damages

were greater than the awards, but the courts recognized that a jury

verdict defines the full value of a plaintiff's damages. In this case, by

contrast, Martine does not contend that the jury verdict does not represent the full value of his damages, but rather that he is unable to collect the full value of the verdict. For this reason, Bell is inapposite.

USB also argues that Kittle is distinguishable from this case

because USB has a contractual right to subrogation while the insurer

in Kittle only had a statutory right to the plaintiff's settlement proceeds. In support of its theory USB cites Fields v. Farmers Ins. Co.,

Inc., 18 F.3d 831 (10th Cir. 1994). In that case, involving Oklahoma

state law, the Tenth Circuit held that a "not made whole" rule should

not apply when an insurance contract has unambiguously provided

the insurance company with subrogation rights in the event an insured

obtains a verdict or a settlement. Though the Oklahoma Supreme

Court had not expressly ruled on the issue of whether a plaintiff must

submit to subrogation when he has not been fully compensated, the

federal appellate court there distinguished between"equitable subrogation" and subrogation provided by contract. Id. at 835. Where the

contract provided, "Subrogation means the Plan's right to recover any

of its payments . . . which you or your dependent later recover from

the third party or the third party's insurer," the court held that the "not

made whole" rule should not apply. Id."`Without discounting the

equitable properties of subrogation, we can conceive of no sound reason why broad principles of equity should be imbued with dominance

over clear and specific provisions of a contract agreed to by the parties, at least where public policy considerations are wanting.'" Id. at

836 (quoting Higginbotham v. Arkansas Blue Cross & Blue Shield,

849 S.W.2d 464, 466 (Ark. 1993)).

USB claims that despite Kittle's application to cases of equity, the

logic of Fields requires that West Virginia law enforce subrogation

rights when an insurance contract specifically provides for them.

However, Kittle defines subrogation in such a way as to require that

equity be considered whenever an insurer invokes its right. "`Whether

legal or conventional, subrogation is an equitable remedy. The rem-

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edy is for the benefit of one secondarily liable who has paid the debt

of another and to whom in equity and good conscience should be

assigned the rights and remedies of the original creditor.'" Kittle, 405

S.E.2d at 460 (quoting State Farm Mut. Auto Ins. Co. v. Foundation

R. Ins. Co., 431 P.2d 737, 741 (N.M. 1967)). Completing that idea,

the West Virginia court noted, "`"Subrogation" is a term of legal art

which we assume would not be employed by the drafters . . . unless

they intended it to be construed in its normal sense.'" Id. (quoting

United States v. Greene, 266 F. Supp. 976, 979 (N.D. Ill. 1967)). The

district court therefore properly utilized equitable principles in construing PEIA's contract in this case.

B.

Assuming Kittle's application to this case, USB contends that the

district court should have employed equitable principles to allow it

subrogation at least in the amount the jury awarded specifically for

medical expenses. The district court determined that the West Virginia Supreme Court's pronouncements in Kittle and Karl, supra,

defined equity as per se denying insurers any recovery when insureds

were not fully compensated by a settlement or judgment. And, noting

that Martine received less than one-sixth of the amount to which he

was entitled and would be further undercompensated for his injuries

if USB were entitled to subrogation the district court held that even

aside from any per se rule, the equities favor Martine over USB. We

find no abuse of discretion or legal error in that conclusion.

In No. 95-2648 - AFFIRMED

In No. 96-1225 - AFFIRMED

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