2018 UT App 170

THE UTAH COURT OF APPEALS

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA,

Appellee,

v.

MICHAEL W. SMAISTRALA,

Appellant.

Opinion

No. 20160401-CA

Filed August 30, 2018

Second District Court, Ogden Department

The Honorable W. Brent West

No. 130902158

Paul M. Belnap and Chet W. Neilson, Attorneys

for Appellant

Randall R. Smart and Jeffrey A. Callister, Attorneys

for Appellee

JUDGE DAVID N. MORTENSEN authored this Opinion, in which 

JUDGES MICHELE M. CHRISTIANSEN FORSTER and RYAN M. HARRIS

concurred.

MORTENSEN, Judge:

¶1 Michael W. Smaistrala found himself sucked into the 

vortex of Utah insurance subrogation law when his insurer,

National Union Fire Insurance Company of Pittsburgh, PA

(National Union), demanded that he return $127,000 that the 

company had paid out on his behalf. When the district court 

ruled as a matter of law that Smaistrala was indeed required to

return the money because he had settled a lawsuit with a group 

of potential tortfeasors, Smaistrala filed an appeal in this court. 

Specifically, Smaistrala claims that the district court erred in 

concluding that he breached the insurance contract as a matter of 
National Union v. Smaistrala

20160401-CA 2 2018 UT App 170

law. Further, Smaistrala claims that the district court erred by 

ruling that National Union did not need to show the liability of 

the parties with whom Smaistrala had settled. We agree and 

reverse.

BACKGROUND

¶2 Smaistrala’s injuries occurred while he was resting in the 

sleeper unit of his uncle’s semi-truck. Uncle, who employed 

Smaistrala, was driving the truck at the time; Uncle lost control

of the semi-truck on an icy overpass and rolled the vehicle.

National Union, as Smaistrala’s insurer, paid Smaistrala roughly 

$127,000 for medical services and disability benefits as a result of 

the accident.

¶3 Smaistrala sued Uncle, SRF LLC, KB Trucking, and Fleet 

Car Lease,1 alleging negligence by Uncle and negligent 

supervision and entrustment by SRF, KB, and Fleet Car. The case 

proceeded, and the parties made preparations for mediation. 

Counsel for Smaistrala informed National Union of the pending 

mediation and offered to “represent and protect [National 

Union’s] interests regarding the subrogation.”2 National Union 

 

1. The four original defendants in this action were: (1) Uncle—

driver of semi-truck; (2) SRF LLC—Uncle’s limited liability 

company; (3) KB Trucking—entity that sold tractor unit to Uncle;

and (4) Fleet Car Lease—entity that contracted with Uncle to pull 

a trailer for transporting vehicles for the purpose of training new 

drivers.

2. “The doctrine of subrogation allows an insurer, having paid a 

loss resulting from a peril insured against, to step into the shoes 

of its insured and recoup its losses from a tort-feasor whose 

(continued...)
National Union v. Smaistrala

20160401-CA 3 2018 UT App 170

declined that offer. At no time did National Union provide

Smaistrala with any forms to complete, nor did National Union 

request that Smaistrala sign any subrogation forms.

¶4 The case subsequently settled. In the settlement 

agreement, the defendants agreed to pay Smaistrala $300,000. 

The settlement included a release of all claims Smaistrala may 

have had against the defendants and stated that the parties 

“acknowledge and agree that the settlement of the Lawsuit is the 

compromise of disputed claims and no terms of the Agreement 

are to be taken as any admission of liability or damages.” After 

the settlement was finished, the court granted a stipulated order 

of dismissal of the action with prejudice.

¶5 National Union learned of the settlement and eventually 

filed this lawsuit against Smaistrala, alleging that he breached 

the insurance contract by failing to preserve National Union’s 

right of subrogation against SRF and KB and by refusing to 

reimburse the $127,000 that National Union had paid to 

Smaistrala as a result of the accident.3 The subrogation provision 

in the insurance policy states,

 

(...continued)

negligence caused the loss.” Birch v. Fire Ins. Exch., 2005 UT App 

395, ¶ 7, 122 P.3d 696 (cleaned up).

3. Uncle and Fleet Car were insured under the same policy as 

Smaistrala. Accordingly, the district court ruled that National 

Union had no right of subrogation against them. See Fashion Place 

Inv., Ltd. v. Salt Lake County, 776 P.2d 941, 944 (Utah Ct. App. 

1989) (“[I]t is a well-established rule that an insurer cannot 

recover by means of subrogation against its own insured or a 

coinsured under the policy.”). No party has appealed this 

determination.
National Union v. Smaistrala

20160401-CA 4 2018 UT App 170

To the total extent the Company pays for losses 

incurred, the Company may assume the rights and 

remedies of the Insured Person relating to such 

loss. The Insured Person agrees to assist the 

Company in preserving its rights against those 

responsible for such loss, including but not limited 

to, signing subrogation forms supplied by the 

Company.

Additionally, the “Conditional Claim Payment” (CCP) provision 

in the policy, which National Union believes requires Smaistrala 

to reimburse the $127,000, states as follows:

If an Insured Person suffers a Covered Loss(es) as 

the result of Injuries for which, in the opinion of 

the Company, a third party may be liable, the 

Company will pay the amount of benefits 

otherwise payable under this Policy. However, if 

the Insured Person receives payment from the 

third party, the Insured Person agrees to refund to 

the Company the lesser of: (1) the amount actually 

paid by the Company for such Covered Loss(es); or 

(2) an amount equal to the sum actually received 

from the third party for such Covered Loss(es). If 

the Insured Person does not receive payment from 

the third party for such Covered Loss(es), the 

Company reserves the right to subrogate under the 

Subrogation clause of this Policy.

At the time such third party liability is determined 

and satisfied, this amount shall be paid whether 

determined by settlement, judgment, arbitration or 

otherwise. This provision shall not apply where 

prohibited by law.

¶6 National Union eventually filed a motion for summary 

judgment, which the district court granted. First, the district 
National Union v. Smaistrala

20160401-CA 5 2018 UT App 170

court found that “[National Union’s] action is a breach of 

contract and therefore [National Union] does not need to show 

liability of the underlying tortfeasors.” In so concluding, the 

district court maintained that the Utah Supreme Court held “that 

if a person is not ‘made whole’ by a settlement, then that 

person’s insurer has the burden to show that it could have 

successfully subrogated against the underlying tortfeasors to 

recover the settlement award.” (Quoting Hill v. State Farm 

Mutual Auto Ins. Co., 765 P.2d 864 (Utah 1988), overruled on other 

grounds by Sharon Steel Corp. v. Aetna Cas. & Surety Co., 931 P.2d 

127 (Utah 1997).) However, the court further elaborated that 

subrogation is an “equitable doctrine” and that “Hill specifically 

states that the subrogation doctrine ‘can be modified by 

contract.’” (Quoting Hill, 765 P.2d at 866.) The court then cited 

the CCP provision, and concluded that this provision modified 

the made whole doctrine by addressing the insurer’s 

subrogation rights and requiring that Smaistrala reimburse the 

funds. Finally, the court concluded that the existence of the 

insurance contract “render[ed] the equitable subrogation 

analysis of Hill inapplicable.”

¶7 The district court concluded that “[National Union] 

performed under the contract by paying for covered losses 

[Smaistrala] suffered as a result of the accident. [Smaistrala] 

breached the contract by settling with [KB] and [SRF] and 

agreeing to dismiss his lawsuit against them with prejudice. This 

breach interfered with [National Union’s] contractual 

subrogation right.” Accordingly, the district court ordered 

Smaistrala to reimburse National Union for all payments it made 

as a result of the accident. Smaistrala appeals.

ISSUE AND STANDARD OF REVIEW

¶8 Smaistrala contends that the district court erred in 

granting National Union’s motion for summary judgment. “An 
National Union v. Smaistrala

20160401-CA 6 2018 UT App 170

appellate court reviews a trial court’s legal conclusions and 

ultimate grant or denial of summary judgment for correctness 

and views the facts and all reasonable inferences drawn 

therefrom in the light most favorable to the nonmoving party.” 

Orvis v. Johnson, 2008 UT 2, ¶ 6, 177 P.3d 600 (cleaned up).

ANALYSIS

I. The Subrogation Provision

¶9 The district court concluded that Smaistrala breached the 

contract by settling with SRF and KB and “agreeing to dismiss 

his lawsuit against them with prejudice,” thereby “interfer[ing] 

with [National Union’s] contractual subrogation right.”

Smaistrala argues that “the evidence in the record . . . creates an 

issue of material fact,” precluding summary judgment on this 

point. We agree.

¶10 Smaistrala contracted to “assist [National Union] in 

preserving its rights against those responsible” for his injuries. 

That assistance is defined in the subrogation provision as aiding

the “Company in preserving its rights against those responsible 

for such loss, including but not limited to, signing subrogation 

forms supplied by the Company.” Only where the subrogation 

right has not been preserved can a breach be found. Here, there 

are no possible subrogation rights against Uncle and Fleet Car,

4

and it remains a disputed issue of fact whether SRF and KB have 

any fault at all. Under Utah law, in a tort action, a fact-finder is 

to “allocate the percentage or proportion of fault attributable” to 

 

4. Indeed, the policy itself states: “This provision shall not apply 

where prohibited by law.” And Utah law prohibits subrogation 

against co-insureds such as Uncle and Fleet Car. See Fashion 

Place, 776 P.2d at 944; see also supra note 3.
National Union v. Smaistrala

20160401-CA 7 2018 UT App 170

the plaintiff and all defendants, whether the defendants are 

immune or not. Utah Code Ann. § 78B-5-818(4)(a) (LexisNexis 

2012); see also Graves v. North E. Services, Inc., 2015 UT 28, ¶ 47, 

345 P.3d 619.

¶11 In this case, the determination of relative liability never 

occurred. Were it determined in a future proceeding that SRF 

and KB bore no fault, there would be no subrogation claim to 

preserve. For this reason alone, summary judgment should not 

have been granted. Further, even if SRF and KB were found to be 

minimally at fault, a disputed issue of fact precluding summary 

judgment would still exist as to the amount of the subrogation 

right that had not been preserved. National Union was thus not 

entitled to judgment as a matter of law, and the district court 

erred in granting summary judgment as to the full amount of the 

claim.

¶12 In addition, Smaistrala argues that he took action to assist 

National Union in preserving its subrogation rights. Specifically, 

Smaistrala argues that his attorney contacted National Union 

and offered to represent its subrogation right at the mediation, 

but National Union refused. Additionally, Smaistrala argues that 

he never received the forms indicated in the subrogation 

provision, so he never had an opportunity to assist National 

Union by signing anything. These facts, at least at this stage of 

the proceedings, show a dispute as to whether Smaistrala 

assisted National Union in preserving its rights against 

potentially liable parties. Because issues of material fact exist on 

the issue of breach, summary judgment was not appropriate.5

 

5. Although not raised by the parties, we note the following case 

law. A settlement may not necessarily extinguish an insurer’s 

ability to subrogate. See Sharon Steel Corp. v. Aetna Cas. & Surety

Co., 931 P.2d 127, 138 (Utah 1997) (“In third-party insurance 

(continued...)
National Union v. Smaistrala

20160401-CA 8 2018 UT App 170

II. The CCP Provision

¶13 National Union also claimed that Smaistrala breached the 

CCP provision. In relevant part, the CCP provision states:

[I]f the Insured Person receives payment from the 

third party, the Insured Person agrees to refund to 

the Company the lesser of: (1) the amount actually 

paid by the Company for such Covered Loss(es); or 

(2) an amount equal to the sum actually received 

from the third party for such Covered Loss(es).

However, this provision also specifies:

At the time such third party liability is determined 

and satisfied, this amount shall be paid whether 

determined by settlement, judgment, arbitration or 

otherwise.

¶14 The parties differ in their interpretations of this provision. 

Smaistrala plausibly argues that the provision is triggered only 

when “liability is determined,” and points out that liability has 

never been determined in this case. On the other hand, National 

Union argues that the separate paragraphs of the provision 

apply to two distinct situations, and that the second paragraph 

 

(...continued)

contexts, this court has held that where the insured settles with a 

tortfeasor, and the tortfeasor and/or its insurer was on notice of 

the other insurer’s subrogation right, then the settlement and 

release will not affect the insurer’s right of subrogation.”); 

Educators Mutual Ins. Ass’n v. Allied Prop. & Cas. Ins. Co., 890 P.2d 

1029, 1031 (Utah 1995) (“[A] settlement between an injured party 

and a tort-feasor who has knowledge of the subrogation rights of 

the injured party’s insurer does not destroy the subrogation 

claim of the injured party’s insurer.”).
National Union v. Smaistrala

20160401-CA 9 2018 UT App 170

should not be applied to the situation in this case. Assuming, 

without deciding, that National Union’s reading of the provision 

is also plausible, it would mean that the provision is ambiguous. 

See S.W. Energy Corp. v. Continental Ins. Co., 1999 UT 23, ¶ 14, 974 

P.2d 1239 (“A policy may be ambiguous if it is unclear, omits 

terms, or is capable of two or more plausible meanings.”). In that 

event, we liberally construe the policy in favor of Smaistrala and 

arrive at the same result—the district court should not have 

applied the CCP provision on summary judgment. See Farmers 

Ins. Exch. v. Versaw, 2004 UT 73, ¶ 24, 99 P.3d 796 (“Although we 

construe insurance contracts using the same interpretive tools 

we use to review contracts generally, we have frequently 

declared that because insurance policies are adhesion contracts, 

they are to be construed liberally in favor of the insured and 

their beneficiaries so as to promote and not defeat the purposes 

of insurance.” (cleaned up)).6

¶15 In the present case, the settlement expressly stated that 

liability was not being determined. No party admitted fault as 

part of the settlement agreement, and the settlement agreement 

in no way apportioned fault between the various tortfeasors. The 

record reflects that there was no judgment entered nor any 

arbitration conducted. National Union was the insurer and the 

moving party in the summary judgment proceeding. Construing 

the provision against National Union, the provision requires that 

 

6. Ordinarily, where a contract’s language is ambiguous we look 

to extrinsic evidence before applying the rule to construe the 

relevant language against the drafter. Hillcrest Inv. v. Sandy City, 

2010 UT App 201, ¶ 19, 238 P.3d 1067. While there may exist

insurance contracts that are negotiated in arm’s length 

transactions, typically insurance contracts are true adhesion 

contracts, offered only on a take-it-or-leave-it basis. There is no 

evidence in the record that the insurance contract here is 

anything other than an adhesion contract.
National Union v. Smaistrala

20160401-CA 10 2018 UT App 170

liability be determined before the payment obligation is 

triggered. The provision itself states that the amount shall be 

paid only when third party liability is otherwise “determined 

and satisfied.” Therefore, summary judgment should not have 

been granted in National Union’s favor based on this provision.

III. Additional Guidance

¶16 While we recognize that the analysis to this point resolves 

the issue presented on appeal, because the issues discussed in 

the district court’s ruling are likely to arise again, we address 

additional issues that may be pertinent and helpful on remand. 

State v. Cloud, 722 P.2d 750, 755 (Utah 1986) (“When a new trial 

or further proceeding is ordered, it is our duty to pass upon 

questions of law which may be pertinent and helpful in arriving 

at a final determination of the case.” (cleaned up)).

¶17 In its ruling, the district court concluded that National 

Union’s action is for “breach of contract and therefore [National 

Union] does not need to show liability of the underlying 

tortfeasors.” The district court then explained that the CCP

provision of the parties’ insurance contract modified the made 

whole doctrine, as articulated in Hill v. State Farm Mutual 

Automobile Insurance Co., 765 P.2d 864 (Utah 1988), overruled on 

other grounds by Sharon Steel Corp. v. Aetna Casualty & Surety Co., 

931 P.2d 127 (Utah 1997), which rendered the analysis in Hill 

“inapplicable” to this case.7 This analysis is incorrect.

 

7. Under the made whole doctrine, an insured must be made 

whole (i.e., fully compensated) before an insurer is entitled to be 

reimbursed from a recovery obtained from a third-party 

tortfeasor or the tortfeasor’s insurer. Hill v. State Farm Mutual 

Auto. Ins. Co., 765 P.2d 864, 866 (Utah 1988), overruled on other 

grounds by Sharon Steel Corp. v. Aetna Cas. & Surety Co., 931 P.2d 

(continued...)
National Union v. Smaistrala

20160401-CA 11 2018 UT App 170

¶18 The contractual obligation to show liability of the 

underlying tortfeasor does not necessarily have anything to do 

with the made whole doctrine. Assuming that the insurance 

contract modified the made whole doctrine,8 the particular 

modification in this case—at least when construed in favor of 

Smaistrala, as we have construed it here—would not relieve 

National Union of needing to prove liability of, and the 

proportion of liability amongst, the released parties. The district 

court’s reading of Hill focuses needlessly on whether the made 

whole doctrine has been expressly modified, and ignores the Hill

court’s statement that an insurer can recover for breach of a 

contractual subrogation provision only “if [the insurer] shows it 

could have recovered” from the tortfeasor. See id. at 869.

 

(...continued)

127 (Utah 1997). The doctrine applies in the absence of express 

contractual terms to the contrary. Id. In this case, the district 

court ruled that the contractual terms quoted constituted an 

express repudiation of the made whole doctrine, and Smaistrala 

does not actually challenge this determination on appeal. And 

we express no opinion whether the quoted contract language 

meets this standard. Cf. Kramer v. State Ret. Board, 2008 UT App 

351, ¶ 30, 195 P.3d 925 (examining an insurance policy that 

stated the insurer “shall be and is hereby subrogated . . . 

regardless of whether the Insured has been made whole”)

(cleaned up).

8. The issue of whether Smaistrala’s damages actually exceeded 

the combined settlement proceeds and the $127,000 National 

Union had already paid out—in other words, whether 

Smaistrala has been made whole—was not addressed by the 

parties below and does not appear to have been a focus of the 

proceedings before the district court, nor is it mentioned in the 

briefs on appeal. Thus, the discussion of the made whole 

doctrine before the district court and on appeal is a red herring.
National Union v. Smaistrala

20160401-CA 12 2018 UT App 170

¶19 In Hill, the Utah Supreme Court examined State Farm’s 

subrogation rights, as an insurer, where an insured, Hill, settled 

with the underlying tortfeasor. Id. at 865. Because the record did 

not contain a “complete copy of the [parties’] insurance policy” 

and therefore the court was unaware of the “extent of the 

subrogation terms,” the court analyzed subrogation under 

principles of equity. Id. at 867. The court held that State Farm’s 

only avenues to recovery were to show either (a) “that plaintiffs 

were fully compensated and thus State Farm is entitled to be 

reimbursed from [the tortfeasor’s] insurance policy proceeds,” or

(b) “that [Hill’s] action in releasing [the tortfeasor] breached the 

insurance policy, and if State Farm shows it could have recovered 

from [the tortfeasor], it will be entitled to the proceeds as a matter 

of equity.” Id. at 869 (emphasis added). Thus, the questions of 

whether an insured was made whole and whether the insurer 

could have recovered from a tortfeasor are separate inquiries. 

Simply put, Hill does not establish the distinction upon which 

the district court’s decision rested.

¶20 The district court here further erroneously concluded that 

“the equitable subrogation analysis of Hill [is] inapplicable” to 

this case because the parties’ subrogation rights are governed by 

contract. The district court again misreads Hill and its progeny. 

It seemed to conclude that subrogation is a completely equitable 

doctrine and that because this case involved a contract, the 

“equitable” subrogation doctrine in Hill did not apply at all. Lost 

in such reasoning is the fact that Hill and every other Utah case 

addressing the made whole doctrine involved an insurance 

policy—a contract.9

 

9. The following are some examples of cases addressing the 

made whole doctrine that involved an insurance policy: Wilson v. 

Educators Mutual Ins. Ass’n, 2017 UT 69, ¶ 19, 416 P.3d 355; 

Anderson v. United Parcel Service, 2004 UT 57, ¶ 10, 96 P.3d 903; 

(continued...)
National Union v. Smaistrala

20160401-CA 13 2018 UT App 170

¶21 This analysis fails first because Hill in no way holds that 

an insurance contract generally displaces equitable subrogation. 

Hill instead holds that an insurance contract can modify 

equitable subrogation principles to the extent the contract does 

so expressly. Id. at 866. Second, the contract here not only fails to 

modify the requirement that liability of potential tortfeasors be 

shown, but the contract—as we have construed it—expressly 

embraces the concept. As referenced above, the contract’s 

subrogation provision states that National Union “may assume 

the rights and remedies of the Insured Person relating to such 

loss.” And in turn, Smaistrala agreed “to assist [National Union] 

in preserving its rights against those responsible for such loss[.]” 

(Emphasis added.) Further, the CCP provision provides that the 

obligation to reimburse National Union is triggered when “third 

party liability is determined.” Taken together, these provisions 

delineate that National Union’s subrogation rights are limited to 

the rights and remedies Smaistrala had and that Smaistrala’s 

duties only extended to rights against “those responsible,” or in 

other words, those liable. Therefore, to determine the amount of 

the subrogation claim and whether rights have been preserved, 

National Union must first establish the rights and remedies 

Smaistrala had against “those responsible”—the liability of the 

alleged tortfeasor or tortfeasors.

¶22 Finally, even if the distinction the district court 

misapprehended did exist, that difference alone fails to explain 

why a showing by National Union of liability against settling 

parties does not apply under principles of contract. One of the 

 

(...continued)

State Farm Mutual Auto. Ins. Co. v. Green, 2003 UT 48, ¶ 35, 89 

P.3d 97; Transamerica Ins. Co. v. Barnes, 505 P.2d 783, 785–86 

(Utah 1972); Kramer v. State Ret. Board, 2008 UT App 351, ¶ 30, 

195 P.3d 925; Birch v. Fire Ins. Exch., 2005 UT App 395, ¶ 9, 122 

P.3d 696.
National Union v. Smaistrala

20160401-CA 14 2018 UT App 170

most basic tenets of contract law is that a party must prove 

damages to recover under a breach of contract claim. See America

West Bank Members, LC v. State, 2014 UT 49, ¶ 15, 342 P.3d 224; 

Nuttall v. Berntson, 30 P.2d 738, 741 (Utah 1934).

¶23 The record demonstrates that questions of fact remain on 

what level of liability SRF, KB, and the other entities released by 

the settlement had, if any. The liability of those entities is 

material to the question of damages. See Hill, 765 P.2d at 869 

(explaining that “if [the insurance company] shows it could have 

recovered from [the tortfeasor], it will be entitled to the 

[insurance] proceeds”). That the potentially liable parties paid 

money to Smaistrala is of no consequence because the settlement 

expressly says that “no terms of the Agreement are to be taken 

as any admission of liability or damages.” And, as stated, the 

settlement included other parties likely to be found more 

comparatively liable than SRF or KB, but for which subrogation 

is not allowed because those parties are insured under the same 

policy.

¶24 This is not a case where an insured has settled with the 

only potentially liable party. The need to prove liability is 

especially acute here because National Union is legally barred 

from seeking subrogation against some of the at-fault parties—

indeed perhaps even the most at-fault party, Uncle—because 

they are a co-insured under the policy.

CONCLUSION

¶25 The district court erred by entering summary judgment in 

favor of National Union. Questions of fact remain that preclude 

summary judgment. Further, the district court should not have 

applied the CCP provision because liability had not yet been 

established. We therefore reverse the district court’s grant of 
National Union v. Smaistrala

20160401-CA 15 2018 UT App 170

summary judgment in favor of National Union, and we remand 

this case for further proceedings consistent with this opinion.