No. 83-177 IN THE SUPREME COURT OF THE STATE OF MOI'JTAZJA 1984

FAPaERS INSURANCE EXCHANGE Plaintiff and Respondent,

MARK ALLEN CHRISTENSON,ROLAND J. CIIRISTENSON and KARENSE M. CHRISTENSON, Defendants and Appellants.

APPEAL FROM: The District Court of the Thirteenth Judicial District, In and for the County of Yellowstone, The HonorableWilliam J. Speare,Judgepresiding.

COUNSEL OF RECORD:

ForAppellants: Lloyd E. Hartford argued, Billings,Montana

For Respondents: Crowley Law Firm;Ronald Lodders argued, Billings, Montana

Submitted: March 2, 1984 Decided: July 12, 1984

-- ClerkHon. John C. Sheehy Justice, SupremeCourt Room 414 ~ustice Building 215 North Sanders Helena,Montana 59620 August 

### 9,1984 CORRECTION.Inpreparingthigopinioilforpublication,wenoted inourverificationoftitlesand citations the matterslisted below.Correctionshave beenmadeonourcopyoftheopinion.

Farmers Ins. Exchange v. Christenson,No. 83-177,July 12,1984, dissenting

Page 14,line 2 frombottom

## -- (Section 33-33-201, 

### - MCA) should read (Section33-23-201,MCA). /Page 17,line 14sm bottom

## -- (Wash.Rev.Code S48-22-303) should read "/ (Wash.Rev.Code 548-22-0301. 

## - ,line 12 frombottom 

### - - Toolev. Paumie Persian DyeHouse should read Toolev. Paumieperisian DyeHouse. line 11 frombottom

## - - (1935)should read (1938). Page 22, line 3 frombottom

## -- 576 P.2d at 592 should read 576 P.2d at J 492.

WESTPUBLISHINGCOMPANY Box3526 St.Paul,MN55165Justice John Conway Harrison delivered the Opinion of theCourt. This is an appeal from an order denying a motion to vacate a default judgment and stay of execution. The defendants sought to vacate a default judgment by claiming the judgment to be void. The District Court of the Thirteenth Judicial District, in and for the County of Yellowstone, denied thedefendants' motion. On June 6, 1981, defendant Mark A. Christenson apparently caused an accident by improperly operating a motor vehicle. Kristine N. Hinckley, a passenger in the vehicle, sustained injuries as a result of the accident. Both Christenson and Hinckleywere minors atthetimeof the accident. Christenson had no insurance on the vehicle when theaccidentoccurred. Farmers Insurance Exchange (Farmers) insured Hinckley and paid $7,000 on her claim arising out of the injuries she sustained in the accident. Farmers paid this under an uninsured motorist provision in the Hinckley insurance policy. As required in the policy, the Hinckleys assigned their personal injury action to Farmers as part of a subrogation clause. On February 10, 1982, Farmers filed an action against Christenson and his parents for $71000paid on thepersonal injury claim. The Christensons received proper service of the complaint and summons. The Christensons failed to

answer or take any action todefend against thisaction. On April 1, 1982, Farmers filed a motion for default judgment and on July29, 1982, thecourt granted saidmotion. On January 11, 1983, the Christensons filed a motiontovacate the defaultjudgment and staytheexecution. They asserted the judgment was void because Farmers was an improper party in the action. The Hinckleys lacked the ability to assign their personal injury action via the subrogation clausetoFarmers. Following a hearing on their case, the court found that the subrogation occurred properly and that thedefaultjudgment was entered properly. Appellants raisetwo issueson appeal: (1) Can an insured party subrogate a personal injury action to an insurance company following the payment of claims arising out of a policy protection against uninsured motorist? (2) Was the default judgment void if Farmers was an improper party tothe action? Appellants contend the District Court erred in determining that respondent received a valid subrogation interest from Kristine Hinckley. They contend that an injured party cannot subrogatea personal injuryclaim toan insurance company. Such subrogation is invalid. Therefore, the insurance company is not a real party in interest inthe suitand cannot sue the tortfeasor. Appellants rely heavily on Allstate v. Reitler (Mont. 1981), 628 P.2d 667, 38 St.Rep. 821, for the proposition that the insured cannot subrogatepersonal injury claims to

an insurancecompany. Reitler involved a woman, Welton, who suffered an injury in an automobile accident caused by Reitler. Welton received $2,000 from Allstate for her medical expenses, but that amount failed tocover the total expenses. She then settled with Reitler's insurance company(FarmersInsurance Exchange) and signed a release of claims against them. Allstate then claimed a right to subrogation and tried to recover the $2,000 it paid to Welton from Reitler

# . This Court held that subrogation clauses on medical insurance policies are invalid, and went on to say the insured could not subrogate their personal injury claim to the insurance company. Appellants also cite Cody v. Cogswell (1935), 100 Mont. 496, 50 P.2d 249, to support their claim that personal injury claims cannot be assigned. That case involved a writ of attachment on a personal injury cause of action before a judgmentwas rendered. This Court held that personal injury suits were not subject to writs of attachment. Respondent distinguishes Reitler in that it involved medical payment coverage and not uninsured motorist coverage. It dismisses the broad statements against assignment of personal injury claims as dicta. Justice Morrison, the author of Reitler, carefully limited the holding tomedical payments subrogation clauses: "Wehold thatmedical 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." 628 P.2d at 670,38 St.Rep. at 824. This is not to say we approve of the wording of the clause in this contract which in our opinion could be abused by the insurance company. The clause reads: "Subrogation. In the event of any pa.yment under this policy, the company shall be subrogated to all the insured's right of recovery therefore, against any person or organization, and the insured shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights. The insured shalldo nothing after loss to prejudice such rights." (Emphasisadded.) In our opinion under this clause it could be possible that the insurance compa.nycould collect an amount in excess of what was paid out to the insured. That will not be permitted. The insurance company can only be permitted to be subrogated for the amount paid out to insured. Respondent asserts that equity dictates the need for subrogation. It cites Skauge v. Mountain States Tel. & Tel. (1977)

## , 172 Mont. 521, 565 P.2d 628, to support this claim. In Skauge, this Court permitted subrogation of a claim for damages to personal property that resulted from defendant's negligence. We said subrogationmay occur after the insured has been made whole for his entire loss. Respondent argues that public policy requires subrogation in this case. If this Court precluded subrogation of claims against uninsured motorists, then the uninsured motorist would probably benefit. Once the insured plaintiff receives the insurance compensation for the accident, it is less likely he will pursue litigation against the uninsured motorist. Therefore, subrogation enhances the chances that the uninsured motorist will pay for his wrongdoing, and promote the policy requiring motorists to carry insurance. As noted above, the controlling issue here is one of public policy. We hold that an uninsured motorist carrier

canmake payment to an insured, and when the insured settles his claim or obtains a judgment against a third party, the carrier can subrogate and collect back the amount paid to the insured. Further, the uninsured motorist carrier can require that the action be instituted in the name of theinsured against the uninsured motorist in order to effectuate the subrogation interest of the uninsured motorist carrier. But said actionmust not impair,diminish

or jeopardize insured's ability to recover any damages in

excess of the subrogation amount. If a subrogation occurs, then the uninsured motorist carrier must, in good faith, seek for the insured any other damages (general, special or punitive) that he may not have received in his payment from the carrier. While it is argued that this issue hinges on this Court's interpretation of Reitler, where we denied subrogation to medical payment coverage, we believe that public policy demands that our holding in that case is limited to medical payment coverage. Appellants1 reliance on Cody, supra, also cited in Reitler for the proposition that Montana has long opposed assignment of personal injury claims, is unfounded. Cody

never dealt with the issue of assignment. That case only involved an issue of attachment. "In their briefs and argument on this question, counsel for both sides have devoted considerable time and space to the question of whether such a cause of action is assignable, or whether it survives the death of the person in whom it reposes. As we view the case, these matters have no relevancy to the real issue presented here. The only question to be determined is whether a cause of action for personal injuries is subject to attachment before judgment is rendered thereon." 100 Mont. at 500, 50 P.2d at 250. In the second issue, appellants claim that because subrogation cannot occur, then respondent cannot be a real party in interest. They cite Rule 17(a), M.R.Civ.P., that "[elvery action shall be prosecuted in the name of the realparty in interest

# . . . " The lack of a real party in interest renders the judgment void. A void judgment is always subject to collateral attack as provided in Rule 60(b)(4),M.R.Civ.P. Due tothe factwe find the subrogation is proper, we willnot treat the second issuedue tomootness. The DistrictCourtproperly found suchjudgment valid. Wehereby affirm.

We concur: 

# DA&J.wab&

Chief Justice

Justices

Nr. Justice Daniel J. Sheawillfilea separateopinion later.Mr. Justice Frank B. Morrison, Jr., specially concurring: I concur in the resultbut for a different reason. This action was initiated by Farmers Insurance Exchange filing a complaint against Mark Allen Christenson, Roland J. Christenson and Karense M. Christenson seeking to recover damages in the sum of $7,000. The record reflects that proper service was had upon defendants and they failed to appear. A default judgment was entered on July 29, 1982. Defendant's motion to vacate judgment was not filed until January 11, 1983, some 166 days later. Defendants acknowledge that the default judgment cannot be set aside upon any grounds other than that the judgment isvoid. Christensons argue that the damages sought by Farmers Insurance Exchange resulted from an unlawful assignment of a personal injury claim belonging to Farmers assignor. This argument was urged in the District Court and the District Court ruled against Christensons. The District Court based its ruling on themerits of the legal argument. The District Court held that Farmers' claim rested on a valid subrogation interest. The District Court should not have reached the merits. There simply is no basis for arguing that the judgment entered July 29, 1982 was void. The District Court clearly had jurisdiction ofboth the subject matter of the action and of the parties personally. When a court ha.s jurisdiction then a judgment can only be collaterally attacked if the court's action involves a "plain usurpation of power.l1 7 Moore's Federal Practice, §60.25[2]. Here it is clear that the judgmentof the DistrictCourt cannotbe collaterally attacked. Christenson's motion to set aside the default judgment is not timely. This Court cannot reach the merits involving validity of Farmers' subrogation interests.Mr. JusticeFred J. Weber speciallyconcurs as follows: I concur in the result reached inthemajority opinion for the reasons set forth in the foregoing special

concurrence of JusticeMorrison. I thereforevote toaffirm.Mr. Justice John C. Sheehy,dissenting: Idissent. The ancients tell us that Aeneas descended with the Sibyl to the melancholy regions of the dead. He was shown, near the river of oblivion, a place of torment for one who perverts the law, making it say one thing today and another tomorrow. I am not implying that by this decision the members of the majority will go to Hades. That is not in my jurisdiction. Iam implying that themembers of the majority should look over their shouldersto the past and their earlier pronouncements. On May 28, 1981,we stated itwas invalid in Montana to assign a personal injurv claim against a tortfeasor to a subrogee. Today, in 1384,we permit such assignment. The Court today is approving the assignment, in the name of subrogation, of apersonal injury claim so the insurer can

sue as the real party in interest. No statute supports the Court's action. The facts of the case must firstbe understood. On June 6, 1981,Mark Allen Christenson, 17 years old,was operating

a 1968 Ford motor vehicle owned by Eric T. Christenson. Mark's passenger in the automobilewas KristineN. Hinckley,

a minor at the time. The automobile overturned on a county road in Yellowstone County and Kristine suffered personal jnjuries. Mark Allen Christenson,the driver,was the minor son of Roland J. and Karense M. Christenson. Mark's parents, in compliance with &Iontana law, had agreed to assume Mark

### 's liability so that he could get a driver's license. These parents undoubtedly did not realize,and I am sure that mostparents do not realize, that in Montana, when they assume full liability for the issuance of a driver's license to a minor person, they are on the legal hook for absolute liability without limit if the minor person is driving an uninsured vehicle which injures someone, or if their own policy of liability insurance does not follow theminor when he drives a non-owned automobile. In this case, the minor was driving an automobile owned by Erick T. Christenson, a brother, and not owned by his parents. It is quite possible (we have no record on this point) that the parents here had a policy of liability insurance, which would foll-owMark and provide him coverage, unless the automobileMark was drivingwas owned by a member of the same household, but was not insured under the parents' policy. In that situation, the parents' policy of insurance coveragedoes not follow theminor driver. Because of this unfortunate situation, the net result to the parents of Mark Allen Christenson is that they will probably be called upon to pay the judgment required now by themajority of this Court. While the parents were always at risk to Kristine, if shewere injured throughMark's driving an uninsured vehicle, the parents were never at risk to her insurer until the majority opinion of this Court. At the time of the collision, Kristine N. Hinckley was insured by Farmers Insurance Exchange, probably through a policy of automobile liability insurance owned by her parents, Dan K. and Rae D. Hinckley. Thepolicy of insurance owned by the Hinckleys with the Farmers Insurance Exchange provided uninsured motorists coverage as is required in Montana. Farmers I~surance Exchange, without suit, entered into a settlement agreement with the parents of KristineHinkley for the sum of $7,000. It should.be remembered that when an automobile accident occurs to which an uninsured motorist coverage applies, the insurance company becomes an adversary of its own insured, taking the part of the uninsured motorist as aga.inst its insured in nesotating a settlement. On February 10, 1982,Da.nK. Hinckley,as the fath.erand conservator of the estate of Kristine and Rae D. Hinckley as her mother, entered into a release agreement with Farmers Insurance Exchange for the sum of $7,000, which release contains the following language. "NOW THEREFORE the undersigned, individually, as father of Kristine Hinkley and as conservator of the estate of Kristine N. Hinkley, protected person, in consideration of the payment of Seven Thousand Dollars ($7,000.00) received by him, does hereby forever release and discharge Farmers Insurance Exchange and Farmers InsuranceGroup, its agents, and employees, of and from any and all claims and causes of actions of every kind and character arising out of the injuries to Kristine Hinkley on or about June 6, 1981. The parties expressly agree, in the event that Kristine Hinkley or Dan K. Hinckley, as her guardian, successfully pursue a.ny claim against the driver of the automobile, Mark Allen Christenson, Farmers Insurance Exchange shal.1become subrogated to and entitled to indemnity for the payment made, namely SevenThousand Dol-Lars ($7,000.00)

# ."

Note please that the language in the release instrument does not constitute a transfer of the cause of action, but instead is a conditionalprovision for indemnity in the event that either Kristine or her guardian presses a claim against the uninsured motorist. No mention ismade in the release of

a suit by the insurance companl7, acting for itself, aga-inst the parents ofMark Allen Christenson. This isnot the first release that the Hinckley's signed for Farmers InsuranceExchange, but Iwill discuss that later 

### in thi.sdissenting opinion.Farmers Insurance Exchange, instead of following the language of its release, above,and allowing Kristine Hinkley

or her guardian to pursue the personal injury claim against Mark and his parents, chose instead to file its action in its

own name directly in the District Court for the $7,000 it paid on Kristine's claim. It took a default judgment. Some nine months after the default judgment was entered, the financial responsibility division of the Montana Highway Patrol suspended the driver's license of the father of Mark Christenson. It was this unlooked-for incident that triggered the motion of the parents of Mark to set aside the default judgment obtained against them in favor of Farmers Insurance Exchange on the ground that the assignment of a personal injury claim is inval-idinMontana. The assignment of a personal injury claim based on tort in Montana is indeed invalid, or was until now. That a personal injury claim could not be assigned was established in Caledonia Insurance Co. v. Northern Pacific Railroad Co. (1.905), 32 Mont. 46, 79 P. 544. There Judge Holloway noted the distinction that a right of action growing out of a violation of property rights was assignable,but a right of action growing out of the violation of a purely personal rightwas not. As recently asMay 28, 1981,thiswas the law in Montana. This Court affirmed that position in All-State Insurance Co. v. Reitler and Farmers Insurance Exchange (Mont. 1981), 628 P.2d 667, 670, 38 St.Rep. 821, 824-25 (authored by Morrison, J., and concurred in by Haswell, C. J., Harrison, Shea, and Weber, J.). In that case it is stated: "Montana has long opposed the assignment of personal injury claims (citinga case). Whether an insurance policy pr0~7idesfor subrogation [as inthis case] or provides that the carrier has a lien on the proceeds of an insured's third party recovery,thatpolicy has the effect of assigning a part of the insured's right to recovery against a third party tortfeasor. We hold that such an assignment is invalid." (Material in brackets added.) As I have pointed out above, the release agreement does not permit Farmers Insurance Exchange to sue in its own name against the tortfeasor, since the release agreement is one for indemnity between the insurance company and its insured. If Farmers Insurance Exchange has an independent right of subrogation at all it must come from its insurance policy isued to the Hinkleys which includes the foll-owingclause: "Subrogation. In the event of any payment under this policy, this company shall be subrogated to all the insured's right of recovery therefor, against any person or organization,and the insured shall execute and deliver instruemtns and papers a.nddo whatever else is necessary to secure such rights. The insured shall do nothing after loss to prejudice such rights." This is the clause on which Farmers Insurance Exchange claims the right to sue as the realparty in interestaga.inst the tortfeasor for the insured's right of recovery, and against allpersons or organiza-tionsfromwhom recoverymight he obtained, including the parents of the uninsured driver. That constitutes a transfer of the personal injury claim of Kristine Hinkley. The clause appears in the general provisions of the insurance policy, and not on the insured motorist endorsement itself. I recognize that a general subrogation clause is necessary in an insurance policy because the company has a right of subroga.tionfor property damagepayments forwhich i.tmightmake. There is no quarrel in Montana about that. Applying the clause however to personal injury claims paid for under the endorsement was invalid at the time of the issuance of the policy because ofthis Court's long standing position that personal injury claims could not be assigned or subrogated. It is this clause upon which Farmers InsuranceExchange right of action must stand or fall. The majority members are injudicious in permitting Farmers' actionhere on at least the followinggrounds:

(I) The Court has no statutory authority to permit it; (2) The Court fails to distinguish between subrogationproper and assignment; (3) Farmers' action is not a bar to further suits by the Hinckleys against the tortfeasor; and (4) The insurer's action is improper when the insured 

### is not fully compensated;and (5) Therewill be no accompanying reduction in the premiums Montanans pay for uninsured motorist coverage. (1) 

### -- Lack of Sta-tutory Authority In the absence of statutory authority permitting subrogation of.uninsured motorist coverage claims we should scruple to permit subrogation. Other states have adopted such permitting legislation. An analysis of cases rising in other states,under permissive statutes, reveals a number of incidental questions relating to subrogation that require legislation to solve. Waiting for legislative direction in the field would undoubtedly help close the avenues to some needless litigation in our state opened up by the majority. In examining the statutes of other states within the Pacific Digest system, we find Arizona (Section 20.259.01 Ariz. Stat.)

## , Col-orado (Colo. Rev. Stat. S10-4-609)

## , Hawaii

(Section 431-448 HRS)

## , and Utah (Section41-12-21.1 UC) have provisions nearly the same as ours (Section33-)3-201, MCA). No hint of subrogation is found in those statutes.The California legislature has adopted the following provision (Section11 580.2(7)(g) ) : "Subrogation. The insurer paying a claim under an uninsured motorist ind-orsementor coverage, shall be entitled to be subrogated to the rights of the insured to whom such claim was paid against a.ny person causing such injury or death to the extent that thepayment wasmade. 

# .." Note that the California provision provides for subrogation not only against the uninsured motorist but against "any person causing such injury or death." This

means that joint and several tortfeasors can be made to respond in subrogation to an insurer who has made a payment under the uninsured motorist coverage. In California, however, the right of the subrogating insurer to collect from others in sublimated to the right of the injured party to be made whole. Thus, if the injured party is not fully compensatedby the recovery of the limits of the uninsuredmotorist coverage,and has an action against other joint tortfeasors, the insurermaking payment under the uninsured motorist coveragehas no right of subrogation until the injured party has been made whole from the other tortfeasors. United Pacific-Reliance Insurance Companies v. Kelly (1983), 189 Cal.Rep. 323; Security ~ationalInsurance Co. v. Hand (1973), 107 Cal.Rep. 439. The majority opinion in this case ignores this restrictive provisi.onprotecting insureds. In the case we are deciding here, the general grant of authority for subrogation by the majority of this Court to the insurer does not take into account the result as to joint tortfeasors. I submit the legislature should decide such issue.Here is the other side of the joint tortfeasor coin: In Washington, section 48.22.040(3), R.C.W., provides: "In the event of payment to an insured under the coverage required by this chapter and subject to the terms and conditi-onsof such coverage, the insurer making such payments shall, to the extent thereof, be entitled to the proceeds of any settlement or judgment resulting from the exercise of any rights of recovery of such insured against any person or organization legal responsible for the bodily injury for which such payment made,.

# .." In Hawaiian Insurance and Guaranty Company v. Mead (1975), 538 P.2d 865, 869, the Washington Appellate Court held that the statute provided subrogation only against the uninsured motorist, the person causing the damage, and no right. of recovery existed against other parties. The Washington decision recites that four states, Mississippi, Michigan, Missouri, and Georgia have held likewise. The majority in this case permit suit by the insurance company against the parents of the uninsured driver. Subrogation is founded upon the equitable theory that

one who pays the legal obligation of another should stand in the shoes of the payee to recover the payment from the one who should have made payment. That makes equitable sense. The five states which limit the right of recovery in subrogation against the uninsured motorist, and no others, recognize that the theory on which subrogation is founded should not be extended to grant a right of recovery against parties who have not participated in the condition of being uninsured. Again themajority has deficiently considered the implications of its majority decision in this case with respect to third parties, other than the uninsured motorist. In section 743.795 ORS, the state of Oregon is careful to keep the right of action in the insured, not the company,in the event ofpayment under an uninsured motorist coverage. Its statute sets out clauses to be included in the policy of motor vehicle insurance including ll(a) "the insurer shall be entitled to the extent of such payment to the proceeds of any settlement or judgment thatmay result from the exercise of any rights of recovery of such person against any uninsured motorist

# . .." Clause 11(b)provides that "such person shallhold in trust for thebenefit of the insurer all rights of recovery which he may have against the uninsured person 

# ..." Clause 11(c)allows recovery to be made from joint tortfeasors. Clause llle) provides the insured shall bring action against the uninsuredmotorist or other parties if the insured is requested to do soby the insurer. Clearly Oregon still observes the common law sanction against assignment of personal injury claims. The statutes of Kansas (Kan.Stat.Ann. § 40-287), Idaho (Idaho Code S 41-2505)

## , Washington (Wash.Rev.Code § :03L 48-22-303)

## , and Wyoming (F7yo.Stat. 5 31-10-104) point to another interesting result. In those states where the statutes are nearly the same, it is provided that the insurer making a payment on the uninsured motorist coverage, "shall, to that extent,be entitled to the proceeds of any settlement or judgment resulting from the exercise of any right of recovery" against a responsible party. Each of those statutes goes on to provide that the insurer shall have a direct right of action only if the insurer is required to make an uninsured motorist payment by virtue of the insolvency of themotorist. Itmay be deduced from the terms of these statutes that the right to sue remains in the insured, subject to reimbursement of the insurer making payment after judgment or set.tlement,but a direct right ofaction to the insurer is givenwhere the responsible motorist is insolvent againsthis insolventestate. From the foregoing, it canbe seen that the issue isnot simply should the Court without statutory authority, allow subrogation of uninsured motorist coverage payments and directaction thereforeby the insurer. The related problems are too complex to be answered by a court in a single case and the whole subject should be decided by the legislature. (2 

### - The majority failed - to distinguish between subrogationand assignment. The gist of the issue in this case is whether Farmers

can bring a direct action against the uninsured motorist and his guarantors. This Court noted in Allstate Insurance Co.

v. Reitler, supra, that a subrogation which results in a transfer of the cause of action to the insurer, is in effect

an assignment and not subrogation. The distinction should be kept clearly in mind. There is, of course, no reason why Farmers should not be able to

recover to the extent it made payment its settlement un.der the uninsured motorist coverage clause, if that recovery is made by the insureds. Certainly that is what the release which Farmers took from the Hinckl-eyscontemplated. Iwould agree if themajority held that the subrogationclause on an automobile policy merely asserted a right to reimbursement, contribution or indemnity, but I cannot agree that the insurer became the owner of the cause of action. Idaho, in Rinehart v. Farm Bureau Mutual Insurance Co. (Idaho 19741, 524 P.2d 1343,was careful to note thatdistinction. If Farmers according to its release was simply seeking to recover here to the extent of its payment from any judgments or settlement received in the name of theHinckleys, I would have no quarrel with its right to such recovery. When it insists on the right to sue directly, in its own name, as a real party in interest, its subrogation becomes an assignment. In Fifield Manor v. Finsten (Cal. 1960), 354 P.2d 1073, the California Supreme Court was careful to preserve the distinctionand to refuse subrogation where no statutory authority for the assiqnment of the cause of action existed. (3) Farmers action against 

## - the uninsured motorist 

### - is not abar t.o further action Q the Hinckley's. 

### ---- 

## - An excellent reason for refusing at this juncture, in the absence of legislative action, to permit direct suit by insurers who have made payments under uninsured motorist coverage is that such d.irectsuits do not bar further action by the injured parties against the sameuninsuredmotorist or his guarantors. Thus, the cause of action is split, which goes against the grain of all jurisprudential sense and finality. This case is an excellent i-llustration. Attached as an appendix is a copy of the release obtainedby Farmers in this

case. In the second "whereas" clause, it is noted that the policy issued to the Hinckleys included uninsured motorist and medical payments coverages. Inview of those coverages, it is curious that the release also includes the following

"In this rega.rd, the parties agree that the origina.1release, dated. September 16, 1981, was incorrect so far as the recitations therein concerningthe insuranceprovisions under which the $7,000 payment was made. It is now expressly understood that the sum of $7,000was paid pursuant to the uninsuredmotorist coverage." The release goes on to say, however, that the $7,000 payment is full and final payment of every 

### -- kind of claimagainst Farmers Insurance Group by the Hinckleys,presumably includingmedical coveragepayments. Two possibilities exist with respect to the release: (1-1paymentwasmade exclusively under the uninsured motorist coverage, and no paymentwas made to the Hinckleys under the medical payment provision. In such case,Hinckleys have the right to recover medical expenses against the uninsured motorist or his guarantors. Thus, permitting Farmers to

recover on the uninsured motorist coverage and the Hinckleys to recover on the medical payments expenses constitutes a splitting of the cause of action. (2) Or, the medical payments were subsumed by Farmers in the single payment of $7,000. In that event, Farmers is suing formedical benefits paid, under medical payments coverage, which, under our holding in Reitler, is invalid inMontana. Of course, the statute of limitations may now have run

as far as the Hinckley suitagainst the uninsuredmotorist is concerned, but at the time of the taking of the release here in question, only seven months had elapsed. Again, this Court should consider the rule in California, quoted above, that the insurerhas no rightof subrogation where an insured has not been fully compensated. I would hope that we would continue the rule adopted in Skauge v. Mountain States Tel. and Tel. Co. (Mont. 1977), 172Mont. 521, 565 P.2d 628, 632, to the effect that when an insured has sustained a loss in

excess of the reimbursement by the insurer, the insured is entitled to bemade whole forhis entire loss and any cost of recovery including attorneys fees before the insurer can assert its right of legal subrogation against the insured or the tortfeasors.(4) Action 

### % the insurer would 

### - be improper where the insured is 

### -- not fully compensated. We have cited the California cases above, and Skauge,

our case, indicating that subroga-tionis not available to an insurer unless the insured is fully compensated. When, as in this case, a right is granted to an insured to bring direct action, there will be a race to the courthouse between the insurer and the insured to achieve a first recovery. That is the inevitableresultof splitting a cause of action. It should be a matter of embarrassment to this Court, and to the law firm involved, that the arguments made in this case, and the stance adopted by this Court, are exactly opposite to the arguments and stances adopted in Reitler, supra. In Reitler, the same law firm then representing Farmers Insurance Exchange filed a brief in this case in which it urged upon this Court that 

### we had expressly recognized the rule that causes of action against personal injury are not assignable. It cited in support of that $' proposition Coty v. Cogswell (193,5), 100 Mont. 496, 50 P.2d 

### i ,/1n~ 249; Toole v. Paumie Persian Dye House (1935), 101Mont. 74, 52 P.2d 162;Baker v. Tullock (1935), 106 Mont. 375, 77 P.2d 1035; Caledonia Insurance Co. v. Northern Pac. Ry. Co. (1905),32Mont. 46, 79 P. 544; and 40A.L.R.2d 480,relating to assignability of claims for personal injury, and the Restatement (Second)of ContractsS 547. Now, three years later, the same law firm and the same insurance company take an opposite stance,and in the name of public policy, ask this Court to reverse without statutory a.uthority our longstanding position with respect to the non-assignability of personal injury claims. Farmers argued and the majority swallowed, that public policy in providinginsurance on all motor vehicles in the state is enhanced by allowing insurers to bring direct actions against uninsured motorists! It should be evident to all of us that Farmers is not going to sue uninsured motoristswho are judgment-proof. It is only because in this case the parents signed a liability form for Mark that suit had been brought in this

case. Insurance companies are not eleemosynary institutions. There are no more apt to chase good money after bad than a.ny otherparty. (5) Therewill 

### --- be no accompanying reduction 

### - inpremiums Montanans

### pay

## - for uninsured motorist coverage. The rightof subrogationgranted by the majority in this

case is complete gravy to the insurance company. Subrogation is not a factor used by insurance companies in determining the rate of premiums charged. Arizona took note of this fact in refusing to make any disti-nctionbetween assignment and subrogation with respect to the right of the insurer to

recover. It held in Allstate Insurance Co. v. ~urke(~rj.2.

"Also, to require an injured policy holder to return tohis insurer the benefits forwhich he has paid premiums is to deny him the benefits of his thrift and foresight. In terms of public policy the only justification for allowing an insurance company to recoup the benefits it contracted topay out in exchange for the receipt of premium payments which are presumably actuarially adequate would be the lowering of premium rates as the resultof such a recoupment. This is generally not the case: "'Subrogation is a windfall to the insurer, it plays no part in the rate schedules (or only a minor one), and no reduction is made in insuring interest 

# . . 

# . where the subrogation right will obviously be worth something.' Patterson, Essentials of Insurance Law at 151-152 (2d ed. 1957) (citingauthority)

# ." 576 P.2d at,592. 

### '+ Thus, although the majority has opened up to insurance companies a right of subrogation to sue in its 

### own namewherever itmight make recovery,not only aga.instuninsureds, but against other parties, no accompanying benefit will

accrue in the form of reduced premiums to be paid by Montanans for their uninsured motorist coverage. The insurers will toll-ect the same amount of money from us for that coverage whether or notwe permit subrogation. Insurers can rejoice in that. Subrogation is not factored in by insurers when they set the premiums for uninsured motorist coverages. The loss cost is spread among the policy holders without regard to subrogation. Montanans won't see a drop in uninsured motorist coverage premiums because of this decision. They will see a proliferation of lawsuits by insurers "enforcing public policy" as the majority believes, to collect that gravy. The term "law" can be defined as that group of principles and precedents which, itmay be fairly predicted, a courtwill apply to a given set of facts. Predicability is of the essence. A court which swingsunpredictably from one end of the spectrum to the other, not pa.usingat any shades between, is not a-pplyinglaw. It is actina as no more than

an ad hoc committee. 

### -- Iwould reverse and dismiss.

### WHEREAS, on June 

### 6, 1981, Xristinef!inckcly received in

### j;l-ie. when theautomobile iawhich silow~s ridirig asa passenger, 

### wh~ch automobile was operated

### by Kark

### Ailan Christenson, on County ?ozd ~745 

### near thejunction with2i.y Crack Ttoad went outof control, left

### the road, and overturned. Said a~toaobile drivenby Mark Allari Christenson

### was uninsured; and i Wi-iEilEAS, theun2ersigna$ :.an K. iiizckiey holls a policy 2: insurance issued by Farners IcsuranccExchafiye which iricludes 

### ..-. ,,, ;...sured 

### - motorist coverage ar,d af;,ec?ical payzent 2rovision; and f



### . WdEREAS, theundersi5ced Dan X. Xinckley was appointez coaservator of theestGteof KristineliincXley, and 

### inhis indivlduzl ez;acity as fathzrand as conservator of t?.c cstate of Kristine I:i~.ckley,his

### minor daughter, has aow ~grccd u?on a Zulland final zcttlaxent

### with FamersXnsurcincc Zxchancjo nr.d Farmers Insurance Gzb.;p; &

% NOW, 

### THEREFORE, Dhe un<ersigned, in6ivid~ally, as father 

### ofKristineZinckley, and asconservator of theestateof Kristine Zinckley, protectedfierson, inconsiZcrztion of thepayment of SevenTnoasandacd rio/lOG Dollcrs ($7,GC0.00), receive2by him, does hereby foreverreleaseand discharge FaLmersInsurance Exchanqe 2r.Z Tamers

### Icsurance Group, itsagcrits, and employees, of and froin ;zy and 

### all

### claims and causes 02 actionof every kind and character arisingoutof theinjuries

### toLristineZiinckley on

### orabout June 

### 6,. 1981. Thepartiesexpressly agree, 

### inthe event thatKristineHinckley or

### DanX. Binckley, as

### her guardidn, successfullypursue any 

### claim agzinstthedriverof theautonohLle, Xark Allan Christenson, 

### Psrmers InsuranceExchange,shailbedorcie subrogated

### toand entitled toindemnity for thepayxeAt aade, namely $7,000.00.

' Inthisregard, theparzies agree that 

### the originalrelease, Gated Septe~'3er 

### 16, 1981, was incorrsct 

### so farastherecitations r.i..erein concerning theinsurance

### ";?revisions 

### under which the 

### $7,000 

## .- ,~yxent



# - was made. It is

### now expresslyunderstood thatthe

### sum of :7,000 

### waspaidpursuant 

### to the~ninsured xotorist coverage. It is

### the intenthersof thatail claims of everykind er4dcharacter acjainstFarmers Insurance Group and Farmers Insurance Zxchangebehersby fullyand finaily coxpror,ised and settled. 

### This releaseis

### given p~rsuant toanorCer of theDistrict 

### CourtoftheThirteenthJudicialDistrictof theStateof 

### Montana, -2and

### fortheCounty 

### of Yellowstone. 

### Dated this'

father, and asconservatorof the estateof KristineHinckley, protectedprson.

Rae D. John

Appendix toSheehy's dissentingopinion.CONCURRENCE OFMR. JUSTICE DANIEL J. SHEA

No. 83-177

FARMERS INSUPANCE EXCHAIIGE,

MARK ALLEN CHRISTEhTSON, ROLAND J. CHRISTENSON a.nd KARENSE M. CHRISTENSON.

Dated: January 6, 1985Mr. JusticeDaniel J. Shez, specially concurring:

I agree with the special concurrence of Mr. Pustice Morrison and would decide this appeal without reaching the substantive issues presented. The first trial court,having acquired proper subject matter jurisdiction over this controversy and personal jurisdiction over the parties, entered a valid default judgment against the defendants. This default judgment was binding, and could not be attacked directly. Upon the defendant's motion to vacate the default judgment, the second trial court incorrectly decided the case

on the merits of the subrogation claim, and this Court improperly affirmed that decision. If it would have been proper for the trial court and this Court to reach the subrogation issue, I would then join jn the dissent of Mr. Justice Sheehy and agree with the arguments expressed therein. Inparticular, in order for the insurance company toproperly sue in its own name as the realparty in interest, it must have received a ~7al.i.dassignment of Kristine Hinckley's personal injury cause of action. In All-State Insurance Co. v. Reitler and Farmers Insurance Exchange (Mont. 1981), 628 P.2d 667, 38 St.Rep. 821-,this Court held that assignment of personal injury cl-aimswas invalid. Further, it held that such an assignment was invalid even when it takes the form of subrogation or indemnification. This is not to say that an insurance company cannot truely subrogate or indemnify itself to a. valid claim of its insured,but it must do so in the name of the insured and maintain the jnsured as the real party in interest.If this case could properly be decided on the merits of the subrogation claim, I would reverse the trial court's decision and dismiss.