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 Honorable William J. Speare, Judge presiding. 

COUNSEL OF RECORD: 

For Appellants: 

Lloyd E. Hartford argued, Billings, Montana 

For Respondents: 

Crowley Law Firm; Ronald Lodders argued, Billings, 

Montana 

Submitted: March 2, 1984 

Decided: July 12, 1984 

-- Clerk 
Hon. John C. Sheehy 

Justice, Supreme Court 

Room 414 ~ustice Building 

215 North Sanders 

Helena, Montana 59620 

August 9, 1984 

CORRECTION. In preparing thig opinioil for publication, we noted in our verification of titles and 

citations the matters listed below. Corrections have 

been made on our copy of the opinion. 

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

dissenting 

Page 14, line 2 from bottom - - (Section 33-33-201, - MCA) should read 

(Section 33-23-201, MCA). 

/Page 17, line 14 sm bottom - - (Wash.Rev.Code S48-22-303) should read "/ (Wash.Rev.Code 548-22-0301. 

- , line 12 from bottom - - Toole v. Paumie Persian Dye House 

should read Toole v. Paumie perisian Dye House. 

line 11 from bottom - - (1935) should read (1938). 

Page 22, line 3 from bottom - - 576 P.2d at 592 should read 576 P.2d at 

J 492. 

WEST PUBLISHING COMPANY 

Box 3526 

St. Paul, MN 55165 
Justice John Conway Harrison delivered the Opinion of 

the Court. 

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 the defendants' 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 Hinckley were minors at the time of the 

accident. Christenson had no insurance on the vehicle when 

the accident occurred. 

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 $71000 paid on the personal 

injury claim. The Christensons received proper service of 

the complaint and summons. The Christensons failed to 

answer or take any action to defend against this action. On 

April 1, 1982, Farmers filed a motion for default judgment 

and on July 29, 1982, the court granted said motion. 

On January 11, 1983, the Christensons filed a motion 
to vacate the default judgment and stay the execution. 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 clause to Farmers. Following a hearing on their 

case, the court found that the subrogation occurred properly 

and that the default judgment was entered properly. 

Appellants raise two issues on 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 to the 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 subrogate a personal injury claim to an 

insurance company. Such subrogation is invalid. Therefore, 

the insurance company is not a real party in interest in the 

suit and 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 subrogate personal injury claims to 

an insurance company. 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 to cover the total 

expenses. 

She then settled with Reitler's insurance company 
(Farmers Insurance 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 

judgment was 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 to medical payments subrogation clauses: 

"We hold 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." 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 shall 
do nothing after loss to prejudice such 

rights." (Emphasis added. ) 

In our opinion under this clause it could be possible 

that the insurance compa.ny could 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 subrogation may 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 

can make 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 the 
insured against the uninsured motorist in order to 

effectuate the subrogation interest of the uninsured 

motorist carrier. But said action must 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 real 
party 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 to the fact we find the subrogation is proper, we 

will not treat the second issue due to mootness. 

The District Court properly found such judgment valid. 

We hereby affirm. 

We concur: 

DA&J.wab& 

Chief Justice 

Justices 

Nr. Justice Daniel J. Shea will file a separate opinion later. 
Mr. Justice Frank B. Morrison, Jr., specially concurring: 

I concur in the result but 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 is void. 

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 the merits 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 of both 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 judgment of the District Court 

cannot be 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. Justice Fred J. Weber specially concurs as follows: 

I concur in the result reached in the majority opinion 

for the reasons set forth in the foregoing special 

concurrence of Justice Morrison. I therefore vote to affirm. 
Mr. Justice John C. Sheehy, dissenting: 

I dissent. 

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. I am implying that the members of the majority 

should look over their shoulders to the past and their earlier 

pronouncements. 

On May 28, 1981, we stated it was 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 a personal 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 first be 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 automobile was Kristine N. Hinckley, 

a minor at the time. The automobile overturned on a county 

road in Yellowstone County and Kristine suffered personal 

j n juries. 

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 most 
parents 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 the minor 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-ow Mark and provide him coverage, 

unless the automobile Mark was driving was owned by a member 

of the same household, but was not insured under the parents' 

policy. In that situation, the parents' policy of insurance 

coverage does not follow the minor 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 

the majority of this Court. While the parents were always at 

risk to Kristine, if she were injured through Mark'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. The policy 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 Kristine 
Hinkley 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.n K. Hinckley, as the fath.er and 

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 Insurance Group, 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.1 become subrogated to and 

entitled to indemnity for the payment made, namely 

Seven Thousand 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 conditional provision for indemnity in the event 

that either Kristine or her guardian presses a claim against 

the uninsured motorist. No mention is made in the release of 

a suit by the insurance companl7, acting for itself, aga-inst 

the parents of Mark Allen Christenson. 

This is not the first release that the Hinckley's signed 

for Farmers Insurance Exchange, but I will discuss that later 

in thi.s dissenting 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-id in Montana. 

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 

right was not. As recently as May 28, 1981, this was 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 (citing a case). Whether an 

insurance policy pr0~7ides 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 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-owing clause: 

"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.nd do 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 real party in interest aga.inst 

the tortfeasor for the insured's right of recovery, and 

against all persons or organiza-tions from whom recovery might 

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.tion for property 

damage payments for which i.t might make. 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 of 
this Court's long standing position that personal injury 

claims could not be assigned or subrogated. It is this 

clause upon which Farmers Insurance Exchange right of action 

must stand or fall. 

The majority members are injudicious in permitting 

Farmers' action here on at least the following grounds: 

(I) The Court has no statutory authority to permit it; (2) 

The Court fails to distinguish between subrogation proper 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) There will 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 (Section 41-12-21.1 UC) have 

provisions nearly the same as ours (Section 33-)3-201, MCA). 

No hint of subrogation is found in those statutes. 
The California legislature has adopted the following 

provision (Section 11 580.2 (7) (g) ) : 

"Subrogation. The insurer paying a claim under an 

uninsured motorist ind-orsement or 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 the payment was made. . ." 

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 compensated by the recovery of the limits 

of the uninsured motorist coverage, and has an action against 

other joint tortfeasors, the insurer making payment under the 

uninsured motorist coverage has 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 ~ational Insurance 

Co. v. Hand (1973), 107 Cal.Rep. 439. The majority opinion 

in this case ignores this restrictive provisi.on protecting 

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-ons of 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 the majority 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 of payment 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 that may result from the exercise 

of any rights of recovery of such person against any 

uninsured motorist . . ." Clause 11 (b) provides that "such 

person shall hold in trust for the benefit 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 uninsured motorist or other parties 

if the insured is requested to do so by 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 the motorist. It may 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 of 
action to the insurer is given where the responsible motorist 

is insolvent against his insolvent estate. 

From the foregoing, it can be seen that the issue is not 

simply should the Court without statutory authority, allow 

subrogation of uninsured motorist coverage payments and 

direct action therefore by 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 

subrogation and 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-eys contemplated. I would 

agree if the majority held that the subrogation clause 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 that distinction. 

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 the 
Hinckleys, 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 distinction and 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 a bar 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.irect suits do not bar further action 

by the injured parties against the same uninsured motorist 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 obtained by 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. In view of those coverages, 

it is curious that the release also includes the following 

"In this rega.rd, the parties agree that the 

origina.1 release, dated. September 16, 1981, was 

incorrect so far as the recitations therein 

concerning the insurance provisions under which the 

$7,000 payment was made. It is now expressly 

understood that the sum of $7,000 was paid pursuant 

to the uninsured motorist coverage." 

The release goes on to say, however, that the $7,000 

payment is full and final payment of every -- kind of claim 
against Farmers Insurance Group by the Hinckleys, presumably 

including medical coverage payments. 

Two possibilities exist with respect to the release: 

(1-1 payment was made exclusively under the uninsured motorist 

coverage, and no payment was 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 for medical benefits 

paid, under medical payments coverage, which, under our 

holding in Reitler, is invalid in Montana. 

Of course, the statute of limitations may now have run 

as far as the Hinckley suit against the uninsured motorist 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 insurer has no right of 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), 172 Mont. 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 be made whole for his 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-tion is 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 inevitable result of 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), 101 Mont. 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), 32 Mont. 46, 79 P. 544; and 40 A.L.R.2d 480, relating 

to assignability of claims for personal injury, and the 

Restatement (Second) of Contracts S 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 providing 
insurance 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 motorists who 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 

other party. 

(5) There --- will be no accompanying reduction - in premiums 

Montanans pay - for uninsured motorist coverage. 

The right of subrogation granted 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-nction between 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 to his insurer the benefits for which 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 to pay 

out in exchange for the receipt of premium payments 

which are presumably actuarially adequate would be 

the lowering of premium rates as the result of 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) (citing authority) . " 576 P. 2d at ,592. '+ 

Thus, although the majority has opened up to insurance 

companies a right of subrogation to sue in its own name 
wherever it might make recovery, not only aga.inst uninsureds, 

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 not we 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, it may be fairly predicted, 

a court will apply to a given set of facts. Predicability is 

of the essence. A court which swings unpredictably from one 

end of the spectrum to the other, not pa.using at any shades 

between, is not a-pplying law. It is actina as no more than 

an -- ad hoc committee. 

I would reverse and dismiss. 
WHEREAS, on June 6, 1981, Xristine f!inckcly received inj;l-ie. when the automobile ia which silo w~s ridirig as a passenger, 

wh~ch automobile was operated by Kark Ailan Christenson, on County 

?ozd ~745 near the junction with 2i.y Crack Ttoad went out of control, 

left the road, and overturned. Said a~toaobile driven by Mark Allari 

Christenson was uninsured; and i 

Wi-iEilEAS, the un2ersigna$ :.an K. iiizckiey holls a policy 

2: insurance issued by Farners Icsurancc Exchafiye which iricludes 

..-. ,,, ;...sured - motorist coverage ar,d a f;,ec?ical payzent 2rovision; and 

f 

. WdEREAS, the undersi5ced Dan X. Xinckley was appointez 

coaservator of the estGte of Kristine liincXley, and in his indivlduzl 

ez;acity as fathzr and as conservator of t?.c cstate of Kristine 

I:i~.ckley, his minor daughter, has aow ~grccd u?on a Zull and final 

zcttlaxent with Famers Xnsurcincc Zxchancjo nr.d Farmers Insurance 

Gzb.;p; & 

% NOW, THEREFORE, Dhe un<ersigned, in6ivid~ally, as father 

of Kristine Zinckley, and as conservator of the estate of Kristine 

Zinckley, protected fierson, in consiZcrztion of the payment of 

Seven Tnoasand acd rio/lOG Dollcrs ($7,GC0.00), receive2 by him, 

does hereby forever release and discharge FaLmers Insurance Exchanqe 

2r.Z Tamers Icsurance Group, its agcrits, and employees, of and froin 

;zy and all claims and causes 02 action of every kind and character 

arising out of the injuries to Lristine Ziinckley on or about June 6,. 

1981. The parties expressly agree, in the event that Kristine Hinckley 

or Dan X. Binckley, as her guardidn, successfully pursue any claim 

agzinst the driver of the autonohLle, Xark Allan Christenson, 

Psrmers Insurance Exchange,shail bedorcie subrogated to and entitled 

to indemnity for the payxeAt aade, namely $7,000.00. 

' In this regard, the parzies agree that the original release, 

Gated Septe~'3er 16, 1981, was incorrsct so far as the recitations 

r.i..erein concerning the insurance ";?revisions under which the $7,000 

,~yxent .- - was made. It is now expressly understood that the sum of 

:7,000 was paid pursuant to the ~ninsured xotorist coverage. 

It is the intent hersof that ail claims of every kind 

er4d character acjainst Farmers Insurance Group and Farmers Insurance 

Zxchange be hersby fully and finaily coxpror,ised and settled. 

This release is given p~rsuant to an orCer of the District 

Court of the Thirteenth Judicial District of the State of Montana, 

-2 and for the County of Yellowstone. 

Dated this' 

father, and as conservator of the 

estate of Kristine Hinckley, protected prson. 

Rae D. John 

Appendix to Sheehy's dissenting opinion. 
CONCURRENCE OF MR. JUSTICE DANIEL J. SHEA 

No. 83-177 

FARMERS INSUPANCE EXCHAIIGE, 

MARK ALLEN CHRISTEhTSON, ROLAND 

J. CHRISTENSON a.nd KARENSE M. 

CHRISTENSON. 

Dated: January 6, 1985 
Mr. Justice Daniel 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. In particular, in order for the 

insurance company to properly sue in its own name as the realparty in interest, it must have received a ~7al.i.d assignment 

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-aims was 

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.