PACIFIC INSURANCE COMPANY, LIMITED v. CHAMPION STEEL, LLC, ET AL.
SC 19402, SC 19403
Supreme Court of Connecticut
September 27, 2016
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Rogers, C. J., and Palmer, Zarella, Eveleigh, McDonald, Espinosa and Robinson, Js.*
Argued April 4—officially released September 27, 2016
Jonathan M. Freiman, with whom, on the brief, was Jenny R. Chou, for the appellant in Docket No. SC 19402 (named plaintiff).
Jenny R. Chou, with whom, on the brief, was Jonathan M. Freiman, for the appellant in Docket No. SC 19403 (proposed intervenor Connecticut Reliable Welding, LLC).
Sylvia Marisa Ho, with whom were Kelly B. Gaertner, and, on the brief, Kevin C. Hines, Bryan J. Hass and Paul Erickson, for the appellees in Docket Nos. SC 19402 and SC 19403 (defendants).
Opinion
The facts and procedural history giving rise to this appeal can be succinctly stated. On May 17, 2011, James Doughty,
In May, 2013, Pacific brought the present action against the defendants, Champion Steel, LLC, Shepard Steel Company, Inc., and Dimeo Construction Company (collectively, defendants), seeking to recover the benefits it had paid to Doughty.1 In its complaint, Pacific essentially alleged that the defendants were negligent in their failure to provide an adequate fall arrest system at the work site, which negligence, Pacific avers, caused Doughty‘s injuries. The defendants filed separate motions to dismiss the complaint, claiming that the trial court lacked subject matter jurisdiction because Pacific did not have standing to bring an action under either
Pacific makes four arguments in its appeal, Docket No. SC 19402. Specifically, Pacific claims that the trial court improperly: (1) considered the legal sufficiency of its equitable subrogation claim, the standard applicable to reviewing a motion to strike, when addressing the defendants’ motions to dismiss, and, therefore, incorrectly concluded that Pacific did not have standing to bring, and the court did not have subject matter jurisdiction to consider, an equitable subrogation claim against the defendants; (2) concluded that workers’ compensation insurers cannot bring equitable subrogation claims against third-party tortfeasors; and (3) denied Pacific‘s motion to substitute Reliable as the party plaintiff. In addition, Pacific contends that it has a statutory claim for subrogation under
In its separate appeal, Docket No. SC 19403, Reliable claims that the trial court improperly: (1) concluded that Reliable did not have standing; (2) denied Pacific‘s motion to substitute Reliable as the plaintiff; and (3) concluded that Reliable‘s motion to intervene was rendered moot. At oral argument, counsel for both Reliable and the defendants agreed that if we concluded in SC 19402 that Pacific properly asserted an equitable subrogation claim, we would not need to reach the issues in SC 19403. Accordingly, we do not address Reliable‘s claims on appeal. Moreover, because we do not reach Reliable‘s claims, we need not consider the defendants’ argument that Reliable did not have standing to invoke this court‘s jurisdiction.
Our review of a trial court‘s ruling on a motion to dismiss is de novo and we indulge every presumption favoring jurisdiction. Cuozzo v. Orange, 315 Conn. 606, 614, 109 A.3d 903 (2015). In addition, because the issue of whether a workers’ compensation insurer may assert an equitable subrogation claim is a question of law, our review of that issue, accordingly, is also de novo.
I
We first address the jurisdictional issue. In their memoranda of law in support of their motions to dismiss, the defendants argued that Pacific did not have standing to bring this action because Pacific had not cited any authority recognizing a workers’ compensation insur-er‘s right to bring an equitable subrogation claim and, traditionally, employers and their insurers did not have a right to assert such a claim against third parties who had caused harm to an employee.3 The trial court agreed and dismissed Pacific‘s complaint, reasoning that Pacific had not cited any controlling authority that had expanded equitable subrogation to the workers’ compensation context. It further reasoned that the act deviated from the common law by creating a right for the employer to pursue an action against a third party and, therefore, the act must be strictly construed. The trial court further reasoned that the act is a “‘complex and comprehensive statutory scheme,‘” and, consequently, it is for the legislature, not the courts, to carve out exceptions. (Emphasis in original.)
In its appeal to this court, Pacific argues that the trial court improperly considered the legal sufficiency of its equitable subrogation claim, which is the standard applicable to reviewing a motion to strike, rather than Pacific‘s standing to assert such a claim. In essence, its claim is that whether a common-law claim exists is not jurisdictional and the proper procedural tool for testing whether such a claim exists is a motion to strike. We need not decide whether the trial court improperly considered the legal sufficiency of Pacific‘s claims in addressing the defendants’ motions to dismiss, or whether the proper procedural vehicle for testing whether a claim exists is a motion to dismiss or a motion to strike,
II
We next consider whether a workers’ compensation carrier can maintain a claim for equitable subrogation against a third-party tortfeasor whose negligence caused harm to an employee. Subrogation is a doctrine of equity that allows one party, such as an insurer (known as the subrogee), to assert the legal rights or claims of another person, such as an insured (known as the subrogor), against a third party, for example, a tortfeasor, when the subrogee has indemnified the subrogor for a loss caused by the third-party tortfeasor. See Fireman‘s Fund Ins. Co. v. TD Banknorth Ins. Agency, Inc., 309 Conn. 449, 455, 72 A.3d 36 (2013) (“In its simplest form, subrogation allows a party who has paid a debt to step into the shoes of another [usually the debtee] to assume his or her legal rights against a third party to prevent that party‘s unjust enrichment. . . . The common-law doctrine of . . . equitable subrogation therefore enables an insurance company that has made a payment to its insured to substitute itself for the insured and to proceed against the responsible third party.” [Citation omitted; internal quotation marks omitted.]). Subrogation, which evolved from the civil law, is intended to do justice ” ‘without regard to form or mere technicality.’ ” Home Owners’ Loan Corp. v. Sears, Roebuck & Co., 123 Conn. 232, 238, 193 A. 769 (1937). “The object of [equitable] subrogation is the prevention of injustice. It is designed to promote and to accomplish justice, and is the mode which equity adopts to compel the ultimate payment of a debt by one who, in justice, equity, and good conscience, should pay it.” (Internal quotation marks omitted.) Westchester Fire Ins. Co. v. Allstate Ins. Co., 236 Conn. 362, 371, 672 A.2d 939 (1996). Thus, equitable subrogation works to prevent a tortfeasor from being unjustly enriched by the fortuitous circumstance that the victim‘s loss is covered by an insurer. See Wasko v. Manella, 269 Conn. 527, 548-49, 849 A.2d 777 (2004); id., 549 (“we see no logical reason for the defendant to be unjustly enriched merely because he burned down the home of a party that had the foresight to purchase fire insurance“). The doctrine also serves equity by avoiding double recovery in cases where the insured may recover from both the tortfeasor and insurer. See Fireman‘s Fund Ins. Co. v. TD Banknorth Ins. Agency, Inc., supra, 456. “As now applied, the doctrine of equitable subrogation is broad enough to include every instance in which one person, not acting as a mere volunteer or intruder, pays a debt for which another is primarily liable, and which in equity and good conscience should have been discharged by the latter.” (Internal quotation marks omitted.) Westchester Fire Ins. Co. v. Allstate Ins. Co., supra, 371.
Pacific argues that this court has recognized an insurer‘s broad, common-law right to bring a subrogation action when it has paid an insured for a loss caused by a
We agree. In our view, it is beyond dispute that equitable subrogation has long existed at common law, and that the doctrine has long been available to an insurer seeking reimbursement for a loss it indemnifies when a third party is liable for such loss. See, e.g., Regan v. New York & New England Railroad Co., 60 Conn. 124, 131, 22 A. 503 (1891) (“[i]t has hitherto been established by a line of decisions reaching backward more than a century and substantially unbroken by dissent . . . that where the insurer has indemnified the owner of the goods lost, he is entitled to be subrogated to all the means of indemnity which the owner held against the party causing the loss and primarily liable therefor“); Connecticut Mutual Life Ins. Co. v. New York & New Haven Railroad Co., 25 Conn. 265, 277 (1856) (“[b]y virtue of this doctrine, there is no doubt of the right of an insurer, who has paid a loss, to use the name of the insured, in order to obtain redress from the author of the wrong“);4 Orvis v. Newell, 17 Conn. 97, 101 (1845) (“[the] right of substitution or subrogation rests upon the basis of mere equity and benevolence” [internal quotation marks omitted]); see also Wasko v. Manella, supra, 269 Conn. 538 n.9 (citing Orvis v. Newell, supra, 97, for proposition that insurers had subrogation rights at common law). In fact, in Regan v. New York & New England Railroad Co., supra, 124, decided in March, 1891, this court noted that an insurer‘s right of subrogation had existed, at that time, for more than one century; id., 131; and that the decisions of the Supreme Court of the United States and the high courts of many of our sister states were in accord. Id., 131–33. It is fundamental that if the legislature wishes to abrogate the common law, it must do so expressly. See Caciopoli v. Lebowitz, 309 Conn. 62, 70, 68 A.3d 1150 (2013) (“[w]e recognize only those alterations of the common law that are clearly expressed in the language of the statute” [internal quotation marks omitted]); Chadha v. Charlotte Hungerford Hospital, 272 Conn. 776, 789, 865 A.2d 1163 (2005) (“[a]lthough the legislature may eliminate a [common-law] right by statute, the presumption that the legislature does not have such a purpose can be overcome only if the legislative intent is clearly and plainly expressed” [internal quotation marks omitted]). We have not found any provision in the act, and the defendants have not pointed to any, that abrogates this long-standing doctrine in the context of workers’ compensation. In other areas of workers’ compensation, however, the legislature has expressly abrogated the common law. For example, at common law an employee was permitted to bring an action against his employer for injuries he sustained due to the employer‘s negligence. See Swain v. O‘Loughlin, 80 Conn. 200, 204-205, 67 A. 480 (1907) (sustaining negligence action brought by injured employee against employer); see also Perille v. Raybestos-Manhattan-Europe, Inc., 196 Conn. 529, 536-40, 494 A.2d 555 (1985) (reviewing history of employer‘s common-law duties to employees). The act expressly abrogated this common-law cause of action against the employer. See
Our conclusion that a workers’ compensation insurer may maintain a common-law equitable subrogation action against a third-party tortfeasor who is liable for injuries sustained by an employee is also supported by public policy. First,
The defendants argue that Pacific cannot assert equitable subrogation against them because, at common law, personal injury claims could not be assigned. Moreover, the defendants assert, the act created a right in the employer that had never before existed—namely, the right to bring a direct action against a tortfeasor to recoup workers’ compensation benefits it paid to an employee for injuries the tortfeasor is legally liable for—and, in so doing, deviated from the common law. As a result, the defendants conclude that the employer‘s right must be strictly construed. Because the act allows an employer to pursue a claim against the tortfeasor, the defendants aver, it would be inconsistent with the legislative intent to allow workers’ compensation insurers to assert equitable subrogation claims, presumably because the statute is silent in regard to insurers’ subrogation rights. The defendants, in part, are correct. The common law prohibited assignment of personal injury claims and the act created a new right for employers. See Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 382-83, 698 A.2d 859 (1997). This line of reasoning, however, confuses the issue. First, as this court explained in Westchester Fire Ins. Co., there is a discernible difference between assignment and equitable subrogation, at least in the context of indemnity insurance. Westchester Fire Ins. Co. v. Allstate Ins. Co., supra, 236 Conn. 370, 372–73. In indemnity insurance, the insurer does not act as a “mere volunteer,” and its obligation to pay the insured‘s loss predates the loss. Id., 372. Conversely, in an assignment, the assignee volunteers to pay the assignor for its loss only after the loss has occurred, and, consequently, the assignee does not have any preexisting obligation to the assignor. Id., 369-70, quoting Aetna Casualty & Surety Co. v. Associates Transports, Inc., 512 P.2d 137, 141 (Okla. 1973). Due to this difference, this court stated that the public policy reasons supporting the common-law prohibition against the assignment of personal injury claims did not apply to an indemnity insurer‘s right to equitable subrogation. Westchester Fire Ins. Co. v. Allstate Ins. Co., supra, 373. In such a case, “we need not be concerned about unscrupulous interlopers and litigious persons [who are] to be discouraged from purchasing claims for pain and suffering and prosecuting them in court as assignees.” (Internal quotation marks omitted.) Id. Thus, a claim brought under the doctrine of equitable subrogation, such as Pacific‘s claim in the present case, is not an assignment,
The defendants argue that the enactment of No. 97-58 of the 1997 Public Acts (P.A. 97-58), which abolished uninsured motorist insurance carriers’ subrogation rights, effectively abrogating our holding in Westchester Fire Ins. Co., is an affirmation by the legislature that personal injury actions cannot be assigned. Insofar as the defendants intend to assert, by making this argument, that P.A. 97-58 abrogated our conclusion in Westchester Fire Ins. Co. that assignments and equitable subrogation are distinct, we do not agree. We read the relevant part of the public act as merely abrogating the common-law subrogation rights of uninsured motorist insurance carriers.5 Additionally, even if the enactment of P.A. 97-58 is a legislative affirmation of the common-law prohibition against the assignment of personal injury claims generally, the legislature has specifically abrogated this rule in the context of workers’ compensation, as subsequently explained in this opinion. See
Second, an insurer‘s right of equitable subrogation is distinct from an employer‘s right to bring an action against a third-party tortfeasor who harmed an employee. The employer‘s right is statutory and was created by the act.7 See Dodd v. Middlesex Mutual Assurance Co., supra, 242 Conn. 381. Prior to the enactment of the act, however, and pursuant to the common-law prohibition against the assignment of personal injury claims, the employer had no such right. Id., 382. Thus, the statute had to expressly provide for the employer‘s right to bring such an action. See Caciopoli v. Lebowitz, supra, 309 Conn. 70 (legislature‘s abrogation of common law must be express). On the other hand, an insurer‘s right of equitable
Third, we agree with the defendants that the act, and specifically
The defendants also contend that allowing Pacific, and similarly situated workers’ compensation insurers, to bring equitable subrogation claims is contrary to the expectations of the parties. The defendants claim that the act, specifically
In sum, we conclude that, under the common law, an insurer that has indemnified the loss of an insured under circumstances in which a third party is legally liable for such loss, has the right to be subrogated to the insured‘s rights against the liable third party. Moreover, we have uncovered nothing in the act that abrogates such rights. Accordingly, we conclude that Pacific can assert an equitable subrogation claim against the defendants, and, therefore, that the trial court improperly granted the defendants’ motions to dismiss. We have not decided, however, that subrogation should be ordered. Said differently, we express no opinion as to whether Pacific has established its right to recover from the defendants. “[O]rdering subrogation depends on the equities and attending facts and circumstances of each case. . . . The determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court.” (Citation omitted; internal quotation marks omitted.) Allstate Ins. Co. v. Palumbo, supra, 296 Conn. 260. “[A]n insurer may not be allowed to recover from any party whose equities are equal or superior to [its own equities].” (Emphasis omitted; internal quotation marks omitted.) Id., 282 (Zarella, J., dissenting). Thus, the present case must be remanded to the trial court for consideration of the competing equities of Pacific and the defendants. In balancing the equities, the trial court should consider, among other things, if subrogation is denied, whether either Doughty or the defendants will be unjustly enriched, the impact on our public policies of containing the cost of the workers’ compensation system and disfavoring economic waste, and the expectations of the parties.
Moreover, because Pacific has stepped into the shoes of its insured, Reliable, the defendants may assert any defense they would be able to assert against Reliable or Doughty. In addition, we note that Pacific, as subrogee of Reliable, is subject to the same statutory obligations as Reliable would have been if it had brought this action. For example, Pacific must comply with the notice and apportionment provisions of
In this opinion the other justices concurred.
* This case originally was scheduled to be argued before a panel of this court consisting of Chief Justice Rogers and Justices Palmer, Zarella, Eveleigh, McDonald, Espinosa and Robinson. Although Justices Palmer, Eveleigh and Espinosa were not present when the case was argued before the court, they have read the briefs and appendices, and listened to a recording of the oral argument prior to participating in this decision.
Insofar as the defendants claim that