Opinion ID: 2650308
Heading Depth: 2
Heading Rank: 4

Heading: ANPAC’s Liability to PLICO

Text: Having established that ANPAC breached its duty to defend Dr. Cohlmia, we turn to the question of whether PLICO can compel ANPAC to reimburse some or all of the costs it incurred during its initial defense of Dr. Cohlmia. The district court held that by defending Dr. Cohlmia under a reservation of rights, PLICO’s policy enabled it to step into the shoes of its insured to recover one-half of its defense costs under a theory of subrogation. See Jorksi Mill & Elevator Co. v. Farmers Elevator Mut. Ins. Co., 404 F.2d 143, 147 (10th Cir. 1968) -24- (“Subrogation is the substitution of one person in the place of another with reference to a lawful claim, demand or right.”). We agree. The district court determined that “[t]he doctrines of contractual and equitable subrogation support PLICO’s claim for reimbursement.” Yousuf, 718 F. Supp. 2d at 1296. The Oklahoma Supreme Court explained the difference between these two doctrines in Brown v. Patel, 157 P.3d 117 (Okla. 2007): Conventional (or contractual) subrogation is created by an agreement or contract between parties granting the right to pursue reimbursement from a third party in exchange for payment of a loss. Equitable subrogation allows a party who has paid to stand in the shoes of the party to whom the amount was owed and proceed against the third party primarily responsible for the amount paid. In both circumstances the subrogation is based upon payment. Id. at 125 (citations omitted); see also U.S. Fid. & Guar. Co. v. Federated Rural Elec. Ins. Corp., 37 P.3d 828, 831 (Okla. 2001) (“Equitable subrogation . . . arises by implication in equity to prevent an injustice. The . . . doctrine is based on the relationship of the parties and equitable principles of establishing substantial justice, and it is broad enough to include every instance where one person who is not a mere volunteer, pays a debt for which another is primarily answerable, and which in equity and good conscience should have been discharged by the latter.”). Although the facts of this case would arguably support recovery under both contractual and equitable subrogation, an equitable subrogation claim is subject to a three-year statute of limitations under Oklahoma law and thus is time-barred. See Republican Underwriters Ins. Co. v. Fire Ins. Exch., 655 P.2d 544, 546 (Okla. -25- 1982) (three-year statute of limitations for unwritten, implied-in-law contracts applies to claims of equitable subrogation). A contractual subrogation claim, however, is governed by Oklahoma’s five-year statute of limitations for written contracts and is not untimely. 5 See Paul Holt Drilling, Inc. v. Liberty Mut. Ins. Co., 664 F.2d 252, 253, 255 (10th Cir. 1981) (applying Oklahoma’s five-year statute of limitations where insured brought suit against insurer alleging breach of contract for failure to defend); see also id. at 255-56 (“[T]he insurer’s continued refusal to defend the insureds constituted a series of breaches of its contractual obligations. As the limitations period runs with each breach, the insureds are only precluded from recovering those litigation expenses incurred prior to limitations period, here, five years.”). With respect to contractual subrogation, the clause in PLICO’s policy covering Dr. Cohlmia provided, in relevant part: “In the event of any payment under this policy, the company shall be subrogated to all the Insured’s rights of recovery therefor against any person or organization . . . .” Aplt. App., vol. II at 332. PLICO paid for the costs of defending Dr. Cohlmia and thereby gained Dr. Cohlmia’s cause of action against ANPAC for breach of its duty to defend him. 5 Assuming PLICO’s cause of action accrued when ANPAC rejected PLICO’s demands to share in the costs of defense on June 29, 2005, PLICO filed its Complaint in Intervention on October 15, 2009, well within the five-year statute of limitations for contractual subrogation. -26- The district court reasoned that PLICO could only be reimbursed for onehalf of its defense costs rather than the full amount because its policy obligated PLICO to defend both negligent and willful torts committed by its insured, even though its policy only provided indemnity for non-intentional acts. The court determined that “both PLICO and ANPAC were obligated to defend the negligence as well as the intentional interference with business relationship claims” and, accordingly, concluded that ANPAC and PLICO should each bear one-half of the costs of Dr. Cohlmia’s defense. Yousuf, 718 F. Supp. 2d at 129596, 1298. ANPAC argues that United States Fidelity & Guaranty Co. v. Tri-State Insurance Co., 285 F.2d 579 (10th Cir. 1960), dictates a contrary result. In TriState, we held under Oklahoma law that as between two primary insurers, each with an equal duty to defend a claim against their common insured, “[t]he duty to defend is personal to each insurer” and a “carrier is not entitled to divide the duty nor require contribution from another absent a specific contractual right.” Id. at 582. ANPAC’s reliance on Tri-State is misplaced because the plaintiff insurance company in that case did not assert a contractual subrogation claim but was instead seeking equitable contribution, a remedy not sought by PLICO in this case. See id. (“[N]o contractual relationship existed between Tri-State and U.S.F. & G. and the latter does not claim by subrogation.” (emphasis added)). Accordingly, Tri-State does not control our decision here. -27- PLICO’s policy covering Dr. Cohlmia clearly gives it a right of contractual subrogation. ANPAC has provided no Oklahoma case suggesting that right does not extend to defense costs. We therefore affirm the district court’s grant of summary judgment requiring ANPAC to reimburse PLICO for one-half of its defense costs.