### 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: ForAppellant: 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:

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cMr. 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 itwas 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 inBillings, Montana, on August 22, 1976. In the accident, an automobile drivenby 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. Atthe time of the accident, Welton was insured by the plaintiff, Allstate. Her policy provided for medical expense coverage inthe amount of $2,000. Allstate did pay to Welton the sum of $2,000 formedical expenses. Welton made
a claim againstReitler which was settled for $9,500. During the pendency of the claim, Allstate sentnotice of its subrogation interest toFarmers Ins. Exchange (~armers). Subsequent toreceiving this notice, Farmers entered intoa settlement with We1ton and obtaineda release stating that itwas released of any and allclaims resulting from personal injury toWelton. There was no evidence thatAllstate asked its insured, Welton, for reimbursement from the proceeds of the settlement, nor is there any evidence that they intendtopursue a claim against their insured, Welton. The Allstatepolicy provided, inpertinentpart, as follows: "upon payment under (medical expense provision of the policy) Allstate shallbe subrogated to the extent of such payment to allof the insured's rights of recovery therefor." Appellants contend that the subrogation clauses relating tomedical payments constitute an assignment of claims belonging to the insured injured person and that such assignment results in the splittingof a singlecause 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), 100Mont. 496, 50 P.2d 249. In that case one Maude Adams sued Cogswell torecover for personal injuries. During the pendency of the suitCoty commenced an action againstAdams based on a promissory note. Coty issued a 

### writof attachment against the plaintiff Adams, and the sheriff proceeded to attachAdams' cause of action against Cogswell. Although Cogswell knew of the attachment, he proceeded to settle Adams' claim. Later Coty obtained a judgment againstAdams which was not satisfied. Coty then sued Cogswell and his insurer, seeking tohold them liable for settling the Adams' action after an attachment had been levied thereon. This Court held that a claim for personal injurieswas not 

### assignable and, therefore, not subject to attachment. Appellants cite the following jurisdictions in support of their position: HarleysvilleMutual Insurance Company v. Lea (1966), 2 Ariz. App. 538, 410 P.2d 495, and two subsequent Arizona cases, the latest of which 

### isAllstateIns. Co. 

### v.

### Druke (1978), 118Ariz. 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; Forsthovev. Hardware Dealers Mutual Fire Ins. Co. (Mo.App. 1967), 416 S.W. 2d 208. Respondent repliesby arguing that a subrogation clause is not an assignmentof claim. Respondent cites the following
caseswhich have recognized subrogation clauses as being valid: Alabama Farm Bureau Mut. Cas. Ins. Co. v. Anderson (1972), 48Ala.App. 172, 263 So.2d 149, cert.den., 288Ala. 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), 237A.2d 471; DeCespedesv. PrudenceMutual 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;Damheselv. Hardware Dealers Mutual Fire Ins. 

# 299

# - Co. (1965), 60 I11.App.ad, .209N.E.2d 876; Bernardini v. Home & 

### Automobile Insurance Co. (1965), 64 II.l.App.2d 465, 212N.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 Detroitv. BridgeportBrass Company (1970), 28 Mich.App. 54, 184N.W.2d 278; Travelers Indemnity Co. 

### v. Vaccari (1976), 310

### Minn. 97, 245N.W.2d 844; Davenportv. State Farm Mutual Automobile Ins. Co. (1965), 81Nev. 361, 404 P.2d 10; Anderson
v. Allstate InsuranceCompany (1966), 266 N.C. 309, 145 S.E.2d 845; Schuldtv. State Farm Mut. Auto. Ins. Co. (1975), 89 

### S.D. 687, 238 N.W.2d 270; Smithv. Motor Club of America Ins. Co. (1959),54N.J.Super. 37, 148A.2d 37; Motto v. State Farm Mutual Automobile Insurance Co. (1969), 81N.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-OhioSt.2d-43,362N.E.2d 264; Geertzv. State Farm Fire and Casualty (1969), 253 Or. 307, 451 P.2d 860;Bradford v. American Mutual ~iability InsuranceCo. (1968), 213 Pa.Super.Ct. 8, 245 A.2d 478; Demrnery v. National Union Fire InsuranceCompany (1967), 210 Pa.Super.Ct. 193, 232A.2d 21; Hospital Service Corp. of R.I.
v. Pennsylvania Ins. Co. (19671,101 R.I. 708, 227A.2d 105; Wilson 

### v. Tennessee Farmers Mutual InsuranceCo. (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), 70wash. 2d 317, 422 P.2d 780; Travelers Indemnity Company 

### v. Rader (1969), 152W..Va.

# '/& 166 S.E.2d 157; State Farm 

### Mutual 

### Automobile Ins. Co. v. Geline (1970), 48Wis.2d 290, 179 N.W.2d 815;Associated Hospi Serv. 

### v. Milwaukee Auto. Mut. I. 

### Co. (1967), 33 Wis.2d 170, 147N.W.2d 225. Most of the cases cited by the respondent involve situations.wherethe insurance company sued its own insuredtorecover medical payments advanced orwhere the insured brought an action against the insurance company tocollect medical payments coverage. The rationale expressed incases cited by respondent varies. Some of the cases hold that the "subrogation" provision inthe insurancepolicy 

### isnot an assignment of a
cause of action, but rather simply impresses an equitable lienupon 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 inthe medical pay portion of the insured's policy resulted 

### ina reduction of premium to the insured. Some decisions arepremised upon the fact that the insured, in settling the case with a tortfeasor, breached the cooperation clause in the policy. ' Wehol-d-thatmedical payment subrogation clauses are invalid. In doing so, 

### we aremindful that this Court 

### is joining a minority of jurisdictions so holding. However, the public policy considerationsmilitate infavor of such a result. First, the insured has paid a premium formedical payments coverage. This Court has previously given great weight to such a consideration inallowing 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 willmake 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 ifmedical payments received must be repaid out of a third-party recovery. The one injured bears the costofsuitincluding attorney fees and litigation expenses. Yet under a subrogation clause the insurer collects 100percent of payments made with no corresponding obligation for expenses. Furthermore, the injured person oftenmust compromise the personal injury claim, either because of liabilityproblems
orbecause of limited coverage carriedby the tortfeasor. Yetunder subrogation the plaintiff's insurer makes a full recovery. Third, the tortfeasor's carriermay consider that the injured person has already been paid medical expenses and
canmake a smaller offer which allows for such payment having been previously made. If a subrogation interestmust 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 (asinthis case) orprovides that the carrier has a lien on the proceeds of an insured's third-party recovery, thatpolicy has the effect of assigning
a partof the insured's right to recover against a thirdparty tortfeasor. We hold that such an assignment is invalid. Summary judgment entered infavor of respondent Allstate Insurance Company is setaside. Weremand the case to the DistrictCourt with directions toenter judgment for the appellants, Aurelia Reitler and Farmers Insurance Exchange. >Weconcur:



### Chief Justice



### / .+&ustices