Riley v. State Farm Mutual Automobile Insurance Co.
381 S.W.3d 840
| Ark. | 2011Background
- Riley sought a declaratory judgment that State Farm lacked a proper lien or subrogation right under Arkansas law after a 2008 car accident and medical payments.
- State Farm paid $5,000 in medical benefits to Riley and notified GEICO of its subrogation rights in September 2008.
- Riley settled with GEICO on March 10, 2009 for $11,500, with checks issued to Riley and to Riley’s counsel and to State Farm.
- Riley asserted made-whole concerns, arguing State Farm’s lien was invalid for lack of judicial determination that she was made whole.
- The circuit court held State Farm had a valid but unenforceable lien and that Riley must prove she was not made whole; it dismissed Count I with prejudice and certified Rule 54(b).
- On review, the Arkansas Supreme Court reversed the dismissal, holding subrogation rights generally arise only after the insured is made whole and a judicial determination (absent agreement) confirms that fact.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Count I was properly dismissed | Riley argues dismissal was improper without a motion for summary judgment. | State Farm asserts Riley invited the dismissal by agreement during the July 2010 hearing. | Dismissal was invited/acquiesced; not preserved for review. |
| When does subrogation/reimbursement accrue under made-whole doctrine | Subrogation cannot arise until a court determines Riley was made whole. | Right to subrogation begins when benefits are paid, though enforceability waits on made-whole determination. | Subrogation/right to reimbursement generally accrues after made whole and a judicial determination, absent agreement. |
| Application of made-whole doctrine to statutory reimbursement (23-89-207) | Riley contends the lien cannot attach without a made-whole judicial determination. | State Farm position relies on statute to permit an earlier right to reimbursement. | Ryder and Tallant require made-whole determination before subrogation arises; statute aligns with made-whole doctrine. |
| propriety of Rule 54(b) certification | Rule 54(b) certification upheld as proper to address the severable issue. |
Key Cases Cited
- Tallant v. Southern Farm Bureau Cas. Ins. Co., 362 Ark. 17 (2005) (made-whole doctrine governs insurer subrogation rights)
- Ryder v. State Farm Mut. Auto. Ins. Co., 371 Ark. 508 (2007) (made-whole doctrine applies to statutory reimbursement under 23-89-207)
- Franklin v. Healthsource of Arkansas, 328 Ark. 163 (1997) (insured must be wholly compensated before insurer’s right to subrogation arises)
- Shelter Mut. Ins. Co. v. Kennedy, 347 Ark. 184 (2001) (subrogation considered in light of insured being wholly compensated)
- Shelter Mut. Ins. Co. v. Bough, 310 Ark. 21 (1992) (insurer not entitled to subrogation unless insured fully compensated, but not precluded when fully compensated)
- Daves v. Hartford Accident & Indem. Co., 302 Ark. 242 (1990) (letters asserting intent to subrogate can precede a lien filing)