Opinion ID: 2049700
Heading Depth: 2
Heading Rank: 1

Heading: is there a justiciable controversy existing between the parties?

Text: Atlantic argues that the agreement between Aetna on the one hand and the Mongillos and Etheridge on the other hand constitutes an assignment of a personal-injury claim and is therefore void as against public policy. See Tyler v. Superior Court, 30 R.I. 107, 109, 73 A. 467, 467 (1909). Atlantic argues that such assignments are forbidden in order to avoid the evils of champerty and maintenance. The trial justice rejected this argument even though he found the agreement between Aetna and Etheridge not to be a subrogation as contemplated in Hospital Service Corp. v. Pennsylvania Insurance Co., 101 R.I. 708, 227 A.2d 105 (1967). He found as a fact that there was no danger of champerty and maintenance in such an arrangement. With this finding we are in full agreement. In Hospital Service Corp., we described subrogation as either legal or conventional. We stated that [l]egal subrogation has its source in equity and arises by operation of law.    Conventional subrogation arises by acts of the parties and rests on contract. Id. at 712, 227 A.2d at 109. In that case we approved a subrogation agreement set forth in a Hospital Service Corporation contract whereunder the corporation was entitled to recover against third-party tortfeasors for sums paid on behalf of the corporation's subscribers for medical and hospital expenses. We approved this provision even though the Hospital Service Corporation was determined not to be in the insurance business so as to come within the terms of Rule 17(a) of the Superior Court Rules of Civil Procedure. 101 R.I. at 716-17, 227 A.2d at 111. In commenting upon the enforceability of this provision, we stated: We have come a long way since the ruling in Tyler v. Superior Court, supra . A plan such as offered by Blue Cross [Hospital Service Corp.] which affords a measurable degree of protection for the medical and financial well-being of its subscribers was unknown when the prohibition against assignment of personal injuries was set forth by this court. Id. at 715, 227 A.2d at 110. In Corning Glass Works v. Seaboard Surety Co., 112 R.I. 241, 308 A.2d 813 (1973), we upheld the validity of a conditional loan receipt given by Corning with a factual context somewhat analogous to that of the case at bar. Corning had suffered a loss that was due to an apparent theft under circumstances wherein employee dishonesty might be inferred. Corning was covered by a fidelity policy issued by Seaboard Surety Company (Seaboard) against loss caused by the fraudulent, dishonest, or criminal conduct of an employee. Corning was also covered by an all-risk policy issued by Appalachian Insurance Company (Appalachian) which covered all risks save those caused by acts of a dishonest employee. Each insurer sought to cast responsibility upon the other. Appalachian paid the loss to Corning and took a loan receipt under an agreement whereby Corning would bring an action against Seaboard for the benefit of Appalachian and trial counsel would be designated by Appalachian. Id. at 242-43, 308 A.2d at 815. We upheld the validity of this agreement, in the face of Seaboard's challenge, with the following observations: Courts generally have found this type of insurance loan receipt to be an acceptable business practice and have given full effect to its terms. 13 A.L.R.3d 56, § 5 (1967). The loan-receipt transaction performs a useful purpose in that it gives the insured a prompt supply of cash and protects the insurer's right of subrogation. Id. at 245, 308 A.2d at 816. Generally courts have upheld and enforced subrogation agreements against a primary insurer of a liability carrier that provided secondary insurance. Aetna Casualty & Surety Co. v. Buckeye Union Casualty Co., 157 Ohio St. 385, 392-93, 105 N.E.2d 568, 571-72 (1952); see Annot. 31 A.L.R.2d 1324-27 (1953). Unless courts espouse such a doctrine, an insured person may frequently find himself the helpless victim of a technical dispute between insurers each of which claims that primary responsibility or sole responsibility rests with an insurance carrier other than itself. Under such circumstances, a company that pays the loss and absolves the insured from liability, except for the right to proceed against the other carrier, has performed a function that furthers rather than impedes public policy. Such agreements ought not to be rendered void or impeded by the simplistic maxim that the common-law assignments of personal-injury claims were unenforceable. The ruling of Tyler v. Superior Court, supra , was designed to avoid the evils of champerty and maintenance. Applying this rule under circumstances in which champerty and maintenance are completely absent would be to throw the baby out with the bath water. We do not reject the general prohibition against the purchasing of personal-injury claims by intermeddling volunteers for their own profit. We simply cannot allow a salutary rule to be applied in a context in which it has no meaning and thereby obstruct an appropriate device for the payment of a claim by an insurance carrier that has an obligation to its insured to absolve him of liability without depriving itself of the right to pursue action against another insurance carrier that it considers to be wholly or partly liable for the loss. In examining such an agreement, we shall look to substance rather than to form. Although the agreement in the case at bar does not track the loan-receipt device used in Corning Glass Works v. Seaboard Surety Co., supra , it is designed to accomplish the same result. The contention by Atlantic that the agreement between Aetna and Etheridge constitutes a wagering contract is so lacking in merit as to require neither extended discussion nor analysis. This agreement was designed to transfer to Aetna in part the right that Etheridge might have in his direct action against Atlantic. Aetna, on behalf of its insured, had committed itself to substantial payments to Etheridge, even though its liability would not begin until losses in excess of $300,000 had been incurred. Aetna had committed itself irrevocably to this obligation and had earned the right to be compensated at least in part from the proceeds that might have been obtained by Etheridge. There is no element of wagering or gambling involved in this agreement. Consequently, we sustain the holding by the trial justice that there is a justiciable controversy between the parties and that neither Austin Etheridge nor Alice Mongillo has illegally assigned his or her rights to Aetna.