Egros v. PemptonEgros v. Pempton
This case presents the issue of whether an uninsured/underinsured motorist (UM) insurer may recover in subrogation the damages paid to its insured from a non-motorist joint tortfeasor; and if so, to what extent the UM insurer should recover when the non-motorist is only partially at fault. Considering the language of
FACTS
The facts of the case are not seriously disputed. At approximately 12:30 a.m. on July 23, 1987, Bruno Egros was driving his vehicle on Highway 73 in Ascension Parish when he collided with an 18-wheeler. The 18-wheeler, driven by Johnnie Pempton and owned by K & K Trucking, was blocking both lanes of traffic in an attempt to maneuver down a driveway to deliver a load of lumber to Orona Cabinet and Millwork Company (Orona). John McAndrew, the broker who had arranged the sale, was assisting Pempton in his attempt to back into Orona‘s driveway. Egros, traveling at approximately 50 m.p.h., slammed into the trailer. Egros died on August 4, 1987 from injuries sustained in the accident.
Nannette Egros, wife of Bruno Egros, filed a petition asserting wrongful death and survival actions in her individual capacity, as administratrix of her husband‘s estate, and on behalf of her minor child. Named defendants were Johnnie Pempton; K & K Trucking and its insurer, Royal Insurance Company; Orona and its insurer, Assurance Company of America (Assurance); and State Farm, the Egros’ UM insurer. Bruno Egros’ two major children, Jamie Egros Hughes and Bruno Joseph Egros III, filed their own petition for damages against these defendants.1 State Farm filed a cross-claim against Pempton, K & K Trucking, Orona, and Assurance, seeking to recover from them all sums it might be required to pay under its uninsured/underinsured motorist coverage.
Prior to trial, the plaintiffs settled their claims with Royal Insurance Company and released it, along with its insureds, Pempton and K & K Trucking. Trial proceeded against the remaining defendants, Orona, Assurance, and State Farm.
The jury returned a verdict in favor of the plaintiffs, awarding them $2,362,520, and allocating fault for the death of Bruno Egros as follows:
Pempton and K & K Trucking 55% Orona 15% Bruno Egros 15% John McAndrew 15% ____ 100%
The trial court reduced the amount of damages recoverable by 70%, the percentage of fault attributed to the released tortfeasors plus the fault attributed to Bruno Egros, and entered judgment for the plaintiffs for
State Farm deposited its policy limits plus interest into the registry of the cоurt. The plaintiffs withdrew the funds and executed a satisfaction of judgment in favor of State Farm.3 Orona and Assurance sought a new trial on the cross-claim. After the trial court denied their motion, Orona and Assurance appealed. The court of appeal affirmed4 and Orona and Assurance filed writs to this court.5
DISCUSSION
a. Limits of Subrogation Rights
The objective of Louisiana‘s uninsured/underinsured motorist law,
to receive (“be entitled to“) the proceeds of any settlement or judgment which has resulted or might result (“resulting“) from the exercise of the insured‘s rights against the uninsured tortfeasor (and by implication the underinsured tortfeasor).
Niemann v. Travelers Ins. Co., 368 So.2d 1003, 1007 (La.1979).
LSA-R.S. 22:1406(D)(4) provides:In the event of payment to any person under the coverage required by this Seсtion and subject to the terms and conditions of such coverage, the insurer making such payment shall, to the extent thereof, be entitled to the proceeds of any settlement or judgment resulting
from the exercise of any rights of recovery of such person against any person or organization legally responsible for the bodily injury for which such payment is made, including the proceeds recoverable from the assets of the insolvent insurer.
Although originally interpreted by this court as a right only of reimbursement, see Niemann, 368 So.2d at 1006, the court later reasoned that a UM insurer, upon payment to its insured, becomes conventionally subrogated to its insured‘s right against the uninsured or underinsured tortfeasor. See Bond, 407 So.2d at 408. “[T]his construction of the statute best conforms to the purpose of the law.” Bosch, 520 So.2d at 723.
“Subrogation is the substitution of one person to the rights of another.”
LSA-C.C. art. 1825 ; see Bond, 407 So.2d at 408. “Conventional subrogation occurs when the creditor, receiving his payment from a third person, subrogates him in his rights, actions, privileges, and mortgages against the debtor.” Bond, 407 So.2d at 409.
The UM insurer has no greater rights in subrogation than those of its insured. Bond, 407 So.2d at 410. If the UM insurer pays the whole obligation, it is completely subrogated to the insured‘s rights against thе tortfeasor. If the UM insurer pays only part of the obligation, such as when it pays to its policy limits which are less than the total amount of damages, it is partially subrogated to the insured‘s rights. Bosch, 520 So.2d at 723; Bond, 407 So.2d at 411. If partial subrogation occurs, the insured is paid in preference to the UM insurer‘s right to reimbursement through subrogation, to ensure full recovery for the accident victim.6 Johnson v. Fireman‘s Fund Ins. Co., 425 So.2d 224, 227 (La. 1982); Bond, 407 So.2d at 408 n. 1;
Orona and Assurance arguе that the UM insurer in this case, State Farm, is not entitled to subrogation against a non-motorist joint tortfeasor. They argue that the statute should be narrowly construed to allow subrogation only when motorist tortfeasors and their insurers are involved, relying on American States Ins. Co. v. Roark, 583 So.2d 570, 572-73 (La.App. 3d Cir.), writ denied, 586 So.2d 560 (1991). In Roark, the UM insurer brought suit against the insured to recover its payment from proceeds the insured had received from a non-motorist sourcе (a third party homeowner‘s policy) in settlement. The third circuit reasoned that the proceeds which the insured received from the homeowner‘s policy had no connexity with the payments made by the UM insurer. The court of appeal held that
Orona and Assurance argue that the reasoning of Roark should apply in this case. There is, however, an important distinction between this case and Roark. In Roark, the UM insurer brought suit against the insured. Although there was no judicial determination of the measure of damages which would have made the insured whole, because the plaintiff-insured received these funds in settlement, a judgment allowing reimbursement for the UM insurer would have reduced the recovery of the insured by $26,000. This result is not сonsistent with the objective of the UM statute, which seeks full recovery for insureds.7
The appellate court in the instant case also refused to read the language of the UM statute narrowly. In affirming the trial court‘s judgment, the First Circuit held that the statute did not limit the UM insurer‘s subrogation rights to the uninsured motorist tortfeasor or to the underinsured motorist tortfeasor and his insurer, but instead granted that right whenever the insured exercised his rights against any person or organization responsible for his injuries. Egros, 588 So.2d at 1142.
The unambiguous language of the UM statute provides that whenever a UM insurer makes payment to an insured for bodily injuries, the insurer is entitled to recover against “any person or organization legally responsible for the bodily injury for which such payment is made.”
b. Effects of Solidary Liability
The trial court cast Orona, its insurer, Assurance, and State Farm liable in solido for the plaintiffs’ damages. Thus, they are obliged to do the same thing, that is, to facilitate the recovery of the insured victim. Hoefly, 418 So.2d at 578. Although the obligations of the tortfeasor and UM insurer arise from different sources, the obligation may be in solido as to the insured. Fertitta v. Allstate Ins. Co., 462 So.2d 159, 163 (La.1985); Hoefly, 418 So.2d at 579; Johnson, 425 So.2d at 227-28;
These different consequences surface in the context of State Farm‘s cross-claim against Orona and Assurance. While it is true that State Farm has a right to reimbursement through subrogation for recovery from the tortfeasor, Orona, it will have no further rights against Orona‘s insurer, Assurance, once Assurance pays its policy limits to the plaintiffs, since the plaintiffs were granted a preference over their insurer to recover the full amount of their damages. In other words, Orona is a solidary obligor with Assurance for Assurance‘s policy limits of $500,000. Carona, 458 So.2d at 1279 (asterisk fn.);
In its сross-claim, State Farm is exercising through subrogation the rights the plaintiffs would have against the remaining tortfeasor, Orona.9 The plaintiffs could have sought recovery for the entire debt from Orona.10 Fertitta, 462 So.2d at 163;
Orona and Assurance argue that the trial court erred in awarding State Farm the full amount of what it paid, asserting that the award constitutes impermissible indemnification since State Farm‘s insured, Egros, was found to be 15% at fault. Alternatively, they argue that principles of contribution should operate to reduce State Farm‘s recovery. As found by the court of appeal, reliance on either of these concepts is misplaced. Egros, 588 So.2d at 1141. “Indemnity shifts the entire loss from a tortfeasor only technically or constructively at fault to one primarily responsiblе for the act or cause of the damage,” while “[c]ontribution apportions the loss among joint tortfeasors and requires each to pay his virile share of the damages that result from the wrong.” Green v. TACA International Airlines, 304 So.2d 357, 359 (La.1974). State Farm‘s right to reimbursement does not arise from indemnification, but from the conventional subrogation provided in
Orona and Assurance also claim that the amount of State Farm‘s recovery should be reduced either by an amount proportionate to the insured‘s fault or by an amount proportionate to the fault of the motorist tortfeasor. The record shows the judgment was already reduced to reflect the fault of the insured and the motorist tortfeasor. To again take their fault into account would constitute an improper double-counting.
CONCLUSION
For the foregoing reasons, we conclude that the court of appeal‘s judgment in favor of a UM insurer‘s right of subrogation against a non-motorist joint tortfeasor is correct and should be affirmed. Further, we hold that in this case the UM insurer may recover in subrogation payments made to its insured up to the amount it has paid.
AFFIRMED.