Court Opinion

ID: 9698465
Source: CourtListenerOpinion
Date Created: 2023-08-25 19:51:31.57876+00
Date Added: 2024-06-11T18:20:41.191291
License: Public Domain

CARTER, Justice
(dissenting).
I dissent.
Although Farm Bureau Mutual Insurance Co. v. Allied Mutual Insurance Co., 580 N.W.2d 788 (Iowa 1998), is not strictly in conflict with the majority’s holding because the right of the subrogated insurer to sue the tortfeasor was not an issue in that case, the conclusions upon which that *831decision was based and the conclusions in Kmpf'l v. Farm Bureau Mutual Insurance Co., 548 N.W.2d 877 (Iowa 1996), and United Security Insurance Co. v. Johnson, 278 N.W.2d 29 (Iowa 1979), leave no doubt that under Iowa law a partially indemnified insured is empowered to control the litigation. A subrogated insurer’s only interest is to share in any recovery that may be had.
In Farm Bureau we relied on Kmpfl and Johnson to observe:
Pursuant to the principles recognized in the Kmpfl and United Security cases, it is the subrogor that is the trustee of the settlement proceeds and not the tortfea-sor or the tortfeasor’s liability insurer.
Farm Bureau, 580 N.W.2d at 790. We had previously stated in the opinion that:
Under Iowa law, however, a partially subrogated insurer may not pursue its subrogation claim directly against the tortfeasor at any time absent some inability or unwillingness of the subrogor to pursue the entire claim..
Id. at 789 (citing Kmpf'l, 548 N.W.2d at 880) (emphasis added).
In Kmpfl we stated:
Although there is language in the Johnson case indicating that a subrogee may join with the subrogor in an action against a tortfeasor, we have recognized that such joinder requires the consent of the subrogor. Caligiuri v. Des Moines Ry., 227 Iowa 466, 468-69, 288 N.W. 702, 702-03 (1939). Absent such consent a subrogated party that is paid only a portion of the entire loss has no right to claim directly against the tortfeasor in competition with a subrogor who is actively pursuing the entire claim.
548 N.W.2d at 879. Some of the language in the Johnson case, which was referred to in Kmpfl involved the following quotation from Firemen’s Insurance Co. v. Bremner, 25 F.2d 75, 76 (8th Cir.1928):
[A]m insurer who is paid a loss is thereby subrogated (to the extent of the payment) to the rights of the insured; that, where the insurance payment covers the entire loss,, the insurer becomes the party in interest and may bring an action; that, where the insurance covers only a portion of the loss, the right of action remains in the insured for the entire loss, the insured becoming a trustee for the insurer (to the extent of the loss paid by the insurer) in the recovery secured by it; that the right of action for the entire loss is single and cannot be split and separately maintained by the owner and the various insurers who have paid parts of the loss.
Kmpf'l, 548 N.W.2d at 879 (quoting Bremner, 25 F.2d at 76) (emphasis added).
I submit that if the insured is empowered to bring the entire claim it is completely illogical to conclude that the insured may not settle the case against the tortfeasor with finality. It is unrealistic to expect a party sued by the insured to protect the insurer who has no legal right to bring the claim. To suggest that a failure to dp so amounts to fraud against the insurer, and to fabricate an exception to the rule against the, splitting of causes of action based on that fiction is complétely untenable.
Another reason that the majority is mistaken is that, even if we were to accept the premise that the subrogated insurer may sue the tortfeasor notwithstanding the release, that should provide no basis for relieving the insured from liability. Orn-eases make clear that, if the insured re-cfeives proceeds as part of a settlement, it holds them as trustee for the subrogated insurer. Consequently, even if a settlement does not cut off the subrogated insurer’s right to sue the tortfeasor, it should still be allowed to sue its insured to collect the proceeds that under Iowa law *832are held by the insured as a trustee. Contrary to the majority’s conclusion, the claim against the insured in the present case is broad enough to include this theory of recovery. The summary-judgment proceedings had not sufficiently narrowed the issues to eliminate such a claim.
I am not at all convinced that the fact that there were no cash proceeds paid to the insured in the present case precludes the insurer from suing its insured to recover the cash value of the setoff that was negotiated against the mechanics-lien claim. Obviously, that value is not apparent in the record, but it could become the subject of proof at trial.
I would reverse the district court.