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 I981 c 
Mr. Justice Frank B. Morrison, Jr., delivered the Opinion of 

the Court. 

Plaintiff, Allstate Insurance Company (Allstate) brought 

this action in the District Court asserting that it was 

entitled to subrogation to the extent of payments Allstate 

had made under a medical payments provision of an automobile 

policy. Defendants answered by alleging that such subrogation 

clauses are invalid. Both parties filed a motion for summary 

judgment. The District Court entered an order granting the 

plaintiff's motion for summary judgment and denying the 

motion of the defendants. From this judgment, defendants 

appeal. 

This case arises from an automobile accident which 

occurred in Billings, Montana, on August 22, 1976. In the 

accident, an automobile driven by one Beverly Welton was hit 

from behind by an automobile driven by the defendant, Aurelia 

Reitler. Welton sustained personal injuries and incurred 

medical expenses of more than $2,000. 

At the time of the accident, Welton was insured by the 

plaintiff, Allstate. Her policy provided for medical expense 

coverage in the amount of $2,000. Allstate did pay to 

Welton the sum of $2,000 for medical expenses. Welton made 

a claim against Reitler which was settled for $9,500. 

During the pendency of the claim, Allstate sent notice 

of its subrogation interest to Farmers Ins. Exchange (~armers). 

Subsequent to receiving this notice, Farmers entered into a 

settlement with We1 ton and obtained a release stating that 

it was released of any and all claims resulting from personal 

injury to Welton. There was no evidence that Allstate asked 

its insured, Welton, for reimbursement from the proceeds of 

the settlement, nor is there any evidence that they intend 
to pursue a claim against their insured, Welton. 

The Allstate policy provided, in pertinent part, as 

follows: "upon payment under (medical expense provision of 

the policy) Allstate shall be subrogated to the extent of 

such payment to all of the insured's rights of recovery 

therefor." 

Appellants contend that the subrogation clauses relating 

to medical payments constitute an assignment of claims belonging to the insured injured person and that such assignment results in the splitting of a single cause of action. 

Appellants argue that the common law and public policy both 

prohibit assignment of personal injury claims and the splitting of a single cause of action. 

Appellants rely on the case of Coty v. Cogswell (1935), 

100 Mont. 496, 50 P.2d 249. In that case one Maude Adams 

sued Cogswell to recover for personal injuries. During the 

pendency of the suit Coty commenced an action against Adams 

based on a promissory note. Coty issued a writ of attachment 

against the plaintiff Adams, and the sheriff proceeded to 

attach Adams' cause of action against Cogswell. Although 

Cogswell knew of the attachment, he proceeded to settle 

Adams' claim. Later Coty obtained a judgment against Adams 

which was not satisfied. Coty then sued Cogswell and his 

insurer, seeking to hold them liable for settling the Adams' 

action after an attachment had been levied thereon. This 

Court held that a claim for personal injuries was not assignable and, therefore, not subject to attachment. 

Appellants cite the following jurisdictions in support 

of their position: Harleysville Mutual Insurance Company v. 

Lea (1966), 2 Ariz. App. 538, 410 P. 2d 495, and two subsequent 

Arizona cases, the latest of which is Allstate Ins. 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. 

299 - 

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), -Ind,~@ 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. ~lue 

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..Va. '/& 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 
to recover medical payments advanced or where the insured 

brought an action against the insurance company to collect 

medical payments coverage. 

The rationale expressed in cases cited by respondent 

varies. Some of the cases hold that the "subrogation" provision in the insurance policy is not an assignment of a 

cause of action, but rather simply impresses an equitable 

lien upon the proceeds of any settlement. Some of the cases 

are from jurisdictions where assignment of claims is specifically authorized by statute. In other of the cases there 

was evidence that the subrogation provision in the medical 

pay portion of the insured's policy resulted in a reduction 

of premium to the insured. Some decisions are premised upon 

the fact that the insured, in settling the case with a tortfeasor, breached the cooperation clause in the policy. ' 

We hol-d-that medical payment subrogation clauses are 

invalid. In doing so, we are mindful that this Court is 

joining a minority of jurisdictions so holding. However, 

the public policy considerations militate in favor of such a 

result. 

First, the insured has paid a premium for medical 

payments coverage. This Court has previously given great 

weight to such a consideration in allowing stacking of insurance policies. See Kemp v. Allstate Ins. Co. (1979), - 

Mont. - , 601 P.2d 20, 36 St.Rep. 1381. The allegation 

that the insured will make a double recovery in the absence 

of medical payments subrogation is not persuasive for the 

insured has paid for that additional coverage. 

Second, the injured person is the one likely to suffer 

most if medical payments received must be repaid out of a 

third-party recovery. The one injured bears the cost of 
suit including attorney fees and litigation expenses. Yet 

under a subrogation clause the insurer collects 100 percent 

of payments made with no corresponding obligation for expenses. 

Furthermore, the injured person often must compromise the 

personal injury claim, either because of liability problems 

or because of limited coverage carried by the tortfeasor. 

Yet under subrogation the plaintiff's insurer makes a full 

recovery. 

Third, the tortfeasor's carrier may consider that the 

injured person has already been paid medical expenses and 

can make a smaller offer which allows for such payment 

having been previously made. If a subrogation interest must 

then be repaid, the injured party may recover nothing for 

medical expenses. 

Montana has long opposed the assignment of personal 

injury claims. Coty v. Cogswell, supra. Whether an insurance 

policy provides for subrogation (as in this case) or provides 

that the carrier has a lien on the proceeds of an insured's 

third-party recovery, that policy has the effect of assigning 

a part of the insured's right to recover against a thirdparty tortfeasor. We hold that such an assignment is invalid. 

Summary judgment entered in favor of respondent Allstate 

Insurance Company is set aside. We remand the case to the 

District Court with directions to enter judgment for the 

appellants, Aurelia Reitler and Farmers Insurance Exchange. 

> 
We concur: 

Chief Justice 

/ .+&us tices