ALLSTATE INSURANCE CO v REITLER

Annotate this Case

Download PDF

No. 80-261 IN THE SUPREME COURT OF THE STATE OF MONTANA 1981 ALLSTATE INSURANCE COMPANY, a Corporation, Plaintiff and Respondent, vs. AURELIA REITLER and FARMERS INSURANCE EXCHANGE, a Reciprocal Insurer, Defendant and Appellant, Appeal from: District Court of the Thirteenth Judicial District, In and for the County of Yellowstone. Honorable Charles Luedke, Judge presiding. Counsel of Record: For Appellant: Crowley, Haughey, Hanson, Toole & Dietrich, Billings, Montana Cynthia Ford argued, Billings, Montana For Respondent: Fred N. Dugan argued, Billings, Montana Submitted: Filed: JfiN2 8 I981 c April 23, 1981 M r . J u s t i c e Frank B. Morrison, J r . , d e l i v e r e d t h e Opinion of t h e Court. P l a i n t i f f , A l l s t a t e I n s u r a n c e Company ( A l l s t a t e ) b r o u g h t t h i s a c t i o n i n t h e D i s t r i c t C o u r t a s s e r t i n g t h a t i t was e n t i t l e d t o s u b r o g a t i o n t o t h e e x t e n t of payments A l l s t a t e had made under a m e d i c a l payments p r o v i s i o n of a n a u t o m o b i l e policy. Defendants answered by a l l e g i n g t h a t such s u b r o g a t i o n c l a u s e s a r e i n v a l i d . Both p a r t i e s f i l e d a motion f o r summary judgment. The D i s t r i c t C o u r t e n t e r e d an o r d e r g r a n t i n g t h e p l a i n t i f f ' s motion f o r summary judgment and denying t h e motion of t h e d e f e n d a n t s . From t h i s judgment, d e f e n d a n t s appeal. T h i s c a s e a r i s e s from a n a u t o m o b i l e a c c i d e n t which o c c u r r e d i n B i l l i n g s , Montana, on August 2 2 , 1976. I n the a c c i d e n t , an a u t o m o b i l e d r i v e n by one B e v e r l y Welton was h i t from behind by a n a u t o m o b i l e d r i v e n by t h e d e f e n d a n t , A u r e l i a Reitler. Welton s u s t a i n e d p e r s o n a l i n j u r i e s and i n c u r r e d m e d i c a l e x p e n s e s of more t h a n $2,000. A t t h e time of t h e a c c i d e n t , Welton was i n s u r e d by t h e plaintiff, Allstate. Her p o l i c y p r o v i d e d f o r m e d i c a l expense c o v e r a g e i n t h e amount of $2,000. A l l s t a t e d i d pay t o Welton t h e sum of $2,000 f o r m e d i c a l e x p e n s e s . Welton made a c l a i m a g a i n s t R e i t l e r which was s e t t l e d f o r $9,500. During t h e pendency of t h e c l a i m , A l l s t a t e s e n t n o t i c e of i t s s u b r o g a t i o n i n t e r e s t t o Farmers I n s . Exchange ( ~ a r m e r s ) . Subsequent t o r e c e i v i n g t h i s n o t i c e , Farmers e n t e r e d i n t o a s e t t l e m e n t w i t h We1 t o n and o b t a i n e d a r e l e a s e s t a t i n g t h a t i t was r e l e a s e d of any and a l l c l a i m s r e s u l t i n g from p e r s o n a l i n j u r y t o Welton. There was no e v i d e n c e t h a t A l l s t a t e a s k e d i t s i n s u r e d , Welton, f o r reimbursement from t h e p r o c e e d s of t h e s e t t l e m e n t , n o r i s t h e r e any e v i d e n c e t h a t t h e y i n t e n d t o p u r s u e a c l a i m a g a i n s t t h e i r i n s u r e d , Welton. The A l l s t a t e p o l i c y p r o v i d e d , i n p e r t i n e n t p a r t , a s follows: "upon payment under (medical expense p r o v i s i o n of t h e p o l i c y ) A l l s t a t e s h a l l be s u b r o g a t e d t o t h e e x t e n t of such payment t o a l l of t h e i n s u r e d ' s r i g h t s of r e c o v e r y therefor." Appellants contend t h a t t h e subrogation c l a u s e s r e l a t i n g t o m e d i c a l payments c o n s t i t u t e an a s s i g n m e n t of c l a i m s bel o n g i n g t o t h e i n s u r e d i n j u r e d p e r s o n and t h a t such a s s i g n ment r e s u l t s i n t h e s p l i t t i n g of a s i n g l e c a u s e of a c t i o n . A p p e l l a n t s a r g u e t h a t t h e common law and p u b l i c p o l i c y b o t h p r o h i b i t a s s i g n m e n t of p e r s o n a l i n j u r y c l a i m s and t h e s p l i t t i n g of a s i n g l e c a u s e of a c t i o n . A p p e l l a n t s r e l y on t h e c a s e of Coty v. Cogswell ( 1 9 3 5 ) , 100 Mont. 496, 50 P.2d 249. I n t h a t c a s e one Maude Adams sued Cogswell t o r e c o v e r f o r p e r s o n a l i n j u r i e s . During t h e pendency of t h e s u i t Coty commenced a n a c t i o n a g a i n s t Adams based on a p r o m i s s o r y n o t e . Coty i s s u e d a w r i t of a t t a c h m e n t a g a i n s t t h e p l a i n t i f f Adams, and t h e s h e r i f f proceeded t o a t t a c h Adams' c a u s e of a c t i o n a g a i n s t Cogswell. Although Cogswell knew of t h e a t t a c h m e n t , he proceeded t o s e t t l e Adams' c l a i m . L a t e r Coty o b t a i n e d a judgment a g a i n s t Adams which was n o t s a t i s f i e d . Coty t h e n sued Cogswell and h i s i n s u r e r , s e e k i n g t o h o l d them l i a b l e f o r s e t t l i n g t h e Adams' a c t i o n a f t e r a n a t t a c h m e n t had been l e v i e d t h e r e o n . This C o u r t h e l d t h a t a c l a i m f o r p e r s o n a l i n j u r i e s was n o t ass i g n a b l e and, t h e r e f o r e , n o t s u b j e c t t o attachment. Appellants c i t e t h e following j u r i s d i c t i o n s i n support of t h e i r p o s i t i o n : H a r l e y s v i l l e Mutual I n s u r a n c e Company v . Lea ( 1 9 6 6 ) , 2 A r i z . App. 538, 410 P . 2d 495, and two s u b s e q u e n t Arizona c a s e s , t h e l a t e s t of which i s A l l s t a t e I n s . Co. v. Druke (1978), 118 Ariz. 301, 576 P.2d 489; Berlinski v. Ovellette (1973), 164 Conn. 482, 325 A.2d 239; Fifield Manor v. Finston (1960), 54 Cal.2d 632, 354 P.2d 1073, 7 Cal.Rptr. 377; State Farm Fire & Cas. Ins. Co. 9 . Farmers Ins. Exch. (Okla. 1971), 489 P.2d 480; Wrightsman v. Hardware Dealers Mutual Fire Ins. Co. (1966), 113 Ga.App. 306, 147 S.E.2d 860; Travelers Indemnity Company v. Chumbley (Mo.App. 1965), 394 S.W.2d 418; Forsthove v. Hardware Dealers Mutual Fire Ins. Co. (Mo.App. 1967), 416 S.W. 2d 208. Respondent replies by arguing that a subrogation clause is not an assignment of claim. Respondent cites the following cases which have recognized subrogation clauses as being valid: Alabama Farm Bureau Mut. Cas. Ins. Co. v. Anderson (1972), 48 Ala.App. 172, 263 So.2d 149, cert.den., 288 Ala. 538, 263 So.2d 155; Shipley v. Northwestern Mutual Ins. Co. (1968), 244 Ark. 1159, 428 S.W.2d 268; Western Cas. & Sur. Co. v. Bowling (1977), 39 Colo.App. 357, 565 P.2d 970; Higgins v. Allied American Mutual Fire Ins. Co. (1968), 237 A.2d 471; DeCespedes v. Prudence Mutual Casualty Company of Chicago, Illinois (1967), 202 So.2d 561; Maryland Casualty Company v. Plant (1968), 208 So.2d 280; Rinehart v. Farm Bureau Mut. Ins. Co. of Idaho, Inc. (1974), 96 Idaho 115, 524 P.2d 1343; Home Ins. Co. v. Hertz Corp. (1978), 71 I11.2d 210, 375 N.E.2d 115; Damhesel v. Hardware Dealers Mutual Fire Ins. 2 99 Co. (1965), 60 I11.App. ad, .209 N.E.2d Home & 876; Bernardini v. Automobile Insurance Co. (1965), 64 II.l.App.2d 465, 212 N.E.2d 499; Imel v. Travelers Indemnity Company (1972), 152 1nd.App. 75, 281 N.E.2d Id~ v. MacGregor (1977), - n , @ 919; Mutual Hospital Ins., Inc. 368 N.E.2d 1376; City of Detroit v. Bridgeport Brass Company (1970), 28 Mich.App. 54, 184 N.W.2d 278; Travelers Indemnity Co. v. Vaccari (1976), 310 Minn. 97, 245 N.W.2d 844; Davenport v. State Farm Mutual Automobile Ins. Co. (1965), 81 Nev. 361, 404 P.2d 10; Anderson v. Allstate Insurance Company (1966), 266 N.C. 309, 145 S.E.2d 845; Schuldt v. State Farm Mut. Auto. Ins. Co. (1975), 89 S.D. 687, 238 N.W.2d 270; Smith v. Motor Club of America Ins. Co. (1959),54 N.J.Super. 37, 148 A.2d 37; Motto v. State Farm Mutual Automobile Insurance Co. (1969), 81 N.M. 35, 462 P.2d 620; Jacobson v. State Farm Mutual Automobi1.e Ins. Co. (1971), 83 N.M. 280, 491 P.2d 168; Miller v. Liberty Mutual Fire Insurance Co. (1965), 264 N.Y.S.2d-319; Smith v. Travelers Ins. Co. (1977), 50-Ohio St.2d-43, 362 N.E.2d 264; Geertz v. State Farm Fire and Casualty (1969), 253 Or. 307, 451 P.2d 860; Bradford v. American Mutual ~iability Insurance Co. (1968), 213 Pa.Super.Ct. 8, 245 A.2d 478; Demrnery v. National Union Fire Insurance Company (1967), 210 Pa.Super.Ct. 193, 232 A.2d 21; Hospital Service Corp. of R.I. v. Pennsylvania Ins. Co. (19671, 101 R.I. 708, 227 A.2d 105; Wilson v. Tennessee Farmers Mutual Insurance Co. (1967), 219 Tenn. 560, 411 S.W.2d 699; Foundation Reserve Insurance Company v. Cody (Tex. 1970), 458 S.W.2d 214; State Farm Mut. Ins. Co. v. Farmers Insurance Exch. (1969), 22 Utah 2d 183, 450 P.2d 458; State Farm Mut. Ins. Co. v. Farmers Insurance v. ~ l u e Exch. (1972), 27 Utah 2d 166, 493 P.2d 1002; ~ o l l i n s Cross of Virginia (1973), 213 Va. 540, 193 S.E.2d 782; ~etropolitanLife Insurance Company v. Ritz (1967), 70 wash. 2d 317, 422 P.2d 780; Travelers Indemnity Company v. Rader / & ' (1969), 152 W..Va. 166 S.E.2d 157; State Farm Mutual Automobile Ins. Co. v. Geline (1970), 48 Wis. 2d 290, 179 N.W.2d 815; Associated Hospi Serv. v. Milwaukee Auto. Mut. I. Co. (1967), 33 Wis.2d 170, 147 N.W.2d 225. Most of the cases cited by the respondent involve situations.where the insurance company sued its own insured t o r e c o v e r m e d i c a l payments advanced o r where t h e i n s u r e d b r o u g h t a n a c t i o n a g a i n s t t h e i n s u r a n c e company t o c o l l e c t m e d i c a l payments c o v e r a g e . The r a t i o n a l e e x p r e s s e d i n c a s e s c i t e d by r e s p o n d e n t varies. Some of t h e c a s e s h o l d t h a t t h e " s u b r o g a t i o n " pro- v i s i o n i n t h e i n s u r a n c e p o l i c y i s n o t an a s s i g n m e n t of a c a u s e of a c t i o n , b u t r a t h e r simply i m p r e s s e s an e q u i t a b l e l i e n upon t h e p r o c e e d s of any s e t t l e m e n t . Some of t h e c a s e s a r e from j u r i s d i c t i o n s where a s s i g n m e n t of c l a i m s i s s p e c i f i c a l l y a u t h o r i z e d by s t a t u t e . I n o t h e r of t h e c a s e s t h e r e was e v i d e n c e t h a t t h e s u b r o g a t i o n p r o v i s i o n i n t h e m e d i c a l pay p o r t i o n of t h e i n s u r e d ' s p o l i c y r e s u l t e d i n a r e d u c t i o n o f premium t o t h e i n s u r e d . Some d e c i s i o n s a r e premised upon the f a c t t h a t the insured, i n s e t t l i n g the case with a t o r t f e a s o r , breached t h e c o o p e r a t i o n c l a u s e i n t h e p o l i c y . ' W e h o l - d - t h a t m e d i c a l payment s u b r o g a t i o n c l a u s e s a r e invalid. I n doing s o , w e a r e mindful t h a t t h i s Court i s j o i n i n g a m i n o r i t y of j u r i s d i c t i o n s s o h o l d i n g . However, t h e p u b l i c p o l i c y c o n s i d e r a t i o n s m i l i t a t e i n f a v o r of s u c h a result. F i r s t , t h e i n s u r e d h a s p a i d a premium f o r m e d i c a l payments c o v e r a g e . This Court has previously given g r e a t w e i g h t t o such a c o n s i d e r a t i o n i n a l l o w i n g s t a c k i n g of i n surance p o l i c i e s . See Kemp v . A l l s t a t e I n s . Co. Mont. - 601 P.2d 20, 36 St.Rep. , 1381. (1979), - The a l l e g a t i o n t h a t t h e i n s u r e d w i l l make a d o u b l e r e c o v e r y i n t h e a b s e n c e of m e d i c a l payments s u b r o g a t i o n i s n o t p e r s u a s i v e f o r t h e insured has paid f o r t h a t a d d i t i o n a l coverage. Second, t h e i n j u r e d p e r s o n i s t h e one l i k e l y t o s u f f e r most i f medical payments r e c e i v e d must be r e p a i d o u t of a third-party recovery. The one i n j u r e d b e a r s t h e c o s t of s u i t i n c l u d i n g a t t o r n e y f e e s and l i t i g a t i o n e x p e n s e s . Yet under a s u b r o g a t i o n c l a u s e t h e i n s u r e r c o l l e c t s 1 0 0 p e r c e n t of payments made w i t h no c o r r e s p o n d i n g o b l i g a t i o n f o r e x p e n s e s . F u r t h e r m o r e , t h e i n j u r e d p e r s o n o f t e n must compromise t h e p e r s o n a l i n j u r y c l a i m , e i t h e r because of l i a b i l i t y problems o r b e c a u s e of l i m i t e d c o v e r a g e c a r r i e d by t h e t o r t f e a s o r . Y e t under s u b r o g a t i o n t h e p l a i n t i f f ' s i n s u r e r makes a f u l l recovery. T h i r d , t h e t o r t f e a s o r ' s c a r r i e r may c o n s i d e r t h a t t h e i n j u r e d p e r s o n h a s a l r e a d y been p a i d m e d i c a l e x p e n s e s and c a n make a s m a l l e r o f f e r which a l l o w s f o r such payment having been p r e v i o u s l y made. I f a s u b r o g a t i o n i n t e r e s t must t h e n be r e p a i d , t h e i n j u r e d p a r t y may r e c o v e r n o t h i n g f o r m e d i c a l expenses. Montana h a s l o n g opposed t h e a s s i g n m e n t of p e r s o n a l i n j u r y claims. Coty v. Cogswell, s u p r a . Whether a n i n s u r a n c e policy provides f o r subrogation (as i n t h i s case) o r provides t h a t t h e c a r r i e r h a s a l i e n on t h e p r o c e e d s of a n i n s u r e d ' s t h i r d - p a r t y r e c o v e r y , t h a t p o l i c y h a s t h e e f f e c t of a s s i g n i n g a p a r t of t h e i n s u r e d ' s r i g h t t o r e c o v e r a g a i n s t a t h i r d party tortfeasor. W h o l d t h a t such a n a s s i g n m e n t i s i n v a l i d . e Summary judgment e n t e r e d i n f a v o r of r e s p o n d e n t A l l s t a t e I n s u r a n c e Company i s s e t a s i d e . W e remand t h e c a s e t o t h e D i s t r i c t C o u r t w i t h d i r e c t i o n s t o e n t e r judgment f o r t h e a p p e l l a n t s , A u r e l i a R e i t l e r and Farmers I n s u r a n c e Exchange. > W e concur: Chief J u s t i c e / .+&us t i c e s

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.