*1 269 SWANSON, ELINOR HARLAN and Plaintiffs, v.
HARTFORD COMPANY INSURANCE MIDWEST,
OF THE Defendant. No. 01-198. Heard November 2001 6, 2001.
Submitted November
April 30,
Decided
2002.
MT
81.
For Amicus: S. Missoula of the Court. Opinion JUSTICE COTTER delivered the this Court Questions presented were following 1 The Certified ¶ Montana, Division, Missoula the U.S. District Court for the District 19, 2001, March 2001: accepted March on on payments to recover medical 1. Is the insurer tortfeasor, insured, paid by later void to its advanced against public policy? in as Montana in that an insured must be public policy Montana 2. Is costs, including totally for all losses as well reimbursed losses recovering in those before attorney involved any right subrogation, regardless insurer can exercise contrary? language contract Colorado, in policy in an insurance issued provision Does a 3. governs law the insurer’s stating that Colorado benefits, PIP violate injury protection] rights [personal law allows if Colorado public policy, Montana’s has been made whole of whether the insured regardless attorney fees and costs? including fully compensated, in the affirmative. We Questions #2 and #3 answer Certified ¶2 We Question #1. do not answer
FACTUAL BACKGROUND their two Harlan Swanson divide their time between Elinor and Plains, Montana, residences, year in per at least six months spending in Colorado remaining traveling time or in their home and the since the They have owned their Montana home Springs, Colorado. from the U.S. Forest early 1960s but lease the land on which it is built their home since 1981. They Service. have owned Colorado 4, 1998, driving their Montana-licensed August On while Ravalli, Montana, Plains, through Chevrolet Suburban motor vehicle accident with a Swansons were involved USF/Reddaway (Reddaway) Mr. and Mrs. tractor-trailer. Both over injured subsequently Swanson were in the accident and incurred $50,000.00 in medical of which was incurred expenses, most Montana. through insured the Hartford Insurance Swansons were (Hartford). They had their
Company purchased of the Midwest years automobile insurance in Colorado several policy policy. accident and had all under premiums required provisions Included were several that are relevant *3 They determining questions. the answers to the certified are: 1. provision coverage, Colorado-statutorily a for “PIP” a
required of no-fault also known type “personal insurance injury protection.” etseq. Colo. Rev. Stat. Under §§10-4-701 PIP coverage, required pay types Hartford is certain of expenses, including expenses, wages losses and medical lost and expenses; rehabilitation granting
2. clause Hartford the to recover any payments coverage to an PIP pays insured under damages party the insured recovers from the the event responsible bodily injury; any concerning provision stating dispute
3. a choice of law subrogation rights PIP will delay the denial or of benefits or by Colorado governed law. accident, the Swansons made claims under their After the ¶6 others. coverage. for PIP Hartford some of the claims but denied Reddaway’s Constitution subsequently Hartford learned that (Constitution), Company payments State Service intended to make 1998, 7, “subrogation the Swansons. On October Hartford wrote Constitution, Constitution of its intent notifying claim” letter to it had on behalf of pursue subrogation to recover monies Swansons. 20,1998, on behalf of issued a check On November Constitution Hartford, $25,962.60, to Elinor Swanson and
Reddaway payable it was for “advance indicating on the face of the check that expenses.” mid-December, 1998, the check and Mrs. Swanson endorsed attorney requesting Hartford with a letter from her forwarded it to did it to her. Hartford that Hartford endorse the check and return time, 23,2000, had filed on March after the Swansons do so at that but check, Hartford, returned it against Hartford endorsed an action rights. and waived its to Mrs. Swanson injury 11,1999, personal settled their the Swansons OnNovember not exceed the Reddaway. This settlement did against claims any compensation and did not include Swanson’s actual incurred the Swansons to obtain attorney fees or costs the Swansons for insurance Reddaway, nor did it reimburse automobile origination since the of their paid to Hartford premiums Reddaway’s liability limits of policy. undisputed it is the Swansons the settlement reached between exceeded the amount of Reddaway. 23, 2000, March the Swansons unspecified prior At some date Judicial District Court filed an action the Fourth Montana, asserting that Hartford had breached County, Missoula the Unfair Claims Settlement the insurance contract and had violated Act, 33-18-201, had the case seq., et MCA. Hartford Practices District Court for the District to the United States removed Montana, Division, summary for partial and filed a motion Missoula determine that Colorado requesting that the District Court judgment, the Swansons’ subrogation rights vis-a-vis governed law Hartford’s Reddaway. parties fully briefed issues with settlement participated argument. in oral B. Erickson 19, 2001, Magistrate Judge Leif On March Federal the above three Order to this Court with
submitted a Certification on March accepted This Court the certification questions. certified 2001. 6, 2001, parties present this Court ordered September On 1, 2001. en banc on November arguments oral to the Court briefs and granted argument, we participating oral parties In addition to the *4 (MTLA) appear as leave Lawyers Trial Association the Montana amicus curiae.
DISCUSSION Question # 2. Certified We shall first address ¶13 an in Montana that Question public policy # 2: Is it the Certified costs, as as for all losses well totally reimbursed insured must be fees, losses before the recovering those including attorney involved regardless of contract any right subrogation, of insurer can exercise contrary? language affirmatively. question answer this
We 1977, “made doctrine to In Court established the whole” this subrogation required cases. The doctrine in insurance could assert its whole” an insurer an insured be “made before that, only must the insured rights, which meant well, as recovery all costs of such recover all of her losses but also words, borrowing In attorney litigation. and costs of other fees Question 2, “totally # the insured must be language of Certified costs, See including attorney losses as well as fees.” reimbursed for all 521, 565 Tel.Co. 172 Mont. Skauge v. Mountain States Tel. and P.2d 628. personal possessions lost all their when Skauge, Skauges insured exploded Skauges
their rented home
and burned. The
were
limits
through
Unigard
Group,
personal property
Insurance
with
$4,000.00
living expense
of
incidental
allowance.
$400.00
with
Company
also contained a
clause that read: “This
policy
may
assignment
rights
from the insured an
of all
require
extent
therefore is made
against any party
for loss to the
523,
Skauge,
had no
of the minds”
$4,328.98,
which
Unigard
subrogation up
therefore
was entitled to
at
565 P.2d at
Skauge,
it had
paid.
was the amount
held, “that when the
Skauges
and this Court
appealed
629-30. The
by a loss in excess of the reimbursement
insured has sustained
for his entire loss and
the insured is entitled to be made whole
the insurer can
recovery, including attorneys
any costs of
tort
the insured or the
leghl subrogation
assert its
528,
total
go
by
loss
be
the
is a
unpaid,
extent
the
should
borne
insurer
that
(Emphasis
original.)
risk the insured has
it to assume.”
in
528,
Skauge, 172
at
P.2d at 632.
Mont.
565
in
in
Skauge
This Court reaffirmed
1994
DeTienne Assoc. v.
Ins.,
184,
DeTienne,
Farmers Union Mut.
266 Mont.
by
subrogation beyond
[did]
own
extend
the
equitable
Skauge.
[the
set out in
The clause
principles
permits
subrogate-it
upon
insurer] to
does not dictate
what terms that
shall occur. The terms of
are not
contract, here,
by
by
are
provided
parties’
provided
the
but
the
in
equitable principles
Skauge ruling.
inherent
DeTienne,
190,
Thus,
§ specifically requirement and declined to include a “made whole” Swansons, statute, this Court “cannot add what has been omitted.” hand, Legislature must that the argue presume on the other that we (cid:127) common law doctrine fully equitable was aware of the well-established Montana, easily excluded some adopted and that could have doctrine, agree if it chose. We with Swansons. Gaustad portion ofthat (‘We (1994), 379, 877 City presume v. Columbus P.2d 470
275 law, including our existing is aware of legislature that if the presume individual statutes.... We interpreting decisions ..., it would have interpretation our disagreed with legislature so.”); It did not do In re Wilson’s accordingly. amended the statute (“In 178, 194, 56 the enactment (1936), Mont. P.2d Estate in mind the having legislature presumed proceed any law the law....”). 33-23-203(2), MCA Therefore, we conclude existing subrogation clauses Legislature, approved revised the same element of loss duplicate payments for “designed prevent casualty policy” under another liability policy vehicle or under a motor law, duplicate established common and that under Montana’s has made whole for all not occur until the insured payments do *6 losses, recovery. costs of as well as our and current jurisprudence underlying past The consistent in established them are not
“made whole” cases and the Rather, the common law and the with the revised statute. conflict subrogation-an rules of insured should jointly statute establish two loss, the for the same element of and duplicate payments not receive until insured has been may subrogation rights insurer not assert the including attorney fees and costs. fully compensated damages, for his dissent, the “made whole” In his Justice Rice concludes that not to risks that the insurer has possibly doctrine "... cannot in of the fact surprising light This assertion is paid to assume.” McMillan, opinion authored our wherein that Justice Rice to the State response Court reaffirmed the “made whole” doctrine third- against a claim McMillan’s attempt Fund’s assert could recovery. concluded in McMillan that State Fund party tort We had recovered “the subrogation interest until McMillan not assert its recovery ...” plus of his entire loss of million costs of $4.7 amount not McMillan, goes saying It that the State Fund did without ¶15. that, losses, sought he and begin to all of McMillan’s when cover tortfeasor, was awarded was million for the McMillan $4.7 awarded or had a in excess of those the State Fund either damages far Nonetheless, relying on the duty squarely to assume. contractual absolutely State Fund doctrine, precluded “made whole” this Court any amounts awarded to asserting interest a him McMillan, those amounts awarded making no distinction between for Fund, amounts awarded by State and those for losses covered dissent’s Fund. The of those covered State damages in excess would the “made whole” doctrine application proper conclusion insurer losses before the to recover unrelated permit not the insured assume, it was subrogate particular losses is entitled to holding in unequivocal our fly in the face of appears therefore McMillan. concurring In his and dissenting opinion, Leaphart Justice broad, our holding
maintains that is too and that an insurer should be whole, subrogation rights allowed its once the insured has been made including attorney costs and as to that element of purchased Theoretically, logic which she insurance. of his argument appealing. plaintiff If a recovered a discrete amount from loss, her particular insurer element of and then recovered the party, plus attorney identical amount from a third her costs and fees recovery, and associated with that the amounts of each were specifically separately by agreement determined either or in a then, judgment, theory, In proceed. should alternative, suggests, as Justice Rice subrogating insurer could simply recover its less payment, that amount attributable to the costs recovery. However, and fees associated with the there is a practical analysis. fundamental flaw in either perfect symmetry Seldom to never do we find such in an award or (or here, Typically, judgment settlement. amount) the ultimate settlement amount, is for a gross particular without allocation for each Thus, element of loss. speculate we would be left to as to whether the insured did recover identical amount of the loss for which the subrogation. insurer seeks Perhaps jury plaintiff assumed the had payments coverage, medical and did award the full amount of the typical pervasive Even more bills. is the situation where settling knowing plaintiff full well that had medical payments takes this coverage, into account its settlement offer and instance, reduces its offer accordingly. either there is not a However, if duplicate payment. accept Leaphart’s we were to Justice *7 solution, proposed engage and Justice Rice’s have in the we would presumption compensated that the insured was for the loss and regardless presence reimburse the of the of these factors. Quite plainly, question go this would resolve the of who should uncompensated in favor of the insurer who has collected a for premium services, against injured very who could end plaintiff well sacrificing a of her up portion uncompensated recovery benefit of the insurer. that, Twenty-five years ago, Skauge we in if one must to some said go uncompensated,
extent
it should be the insurer rather than the
528,
injured party. Skauge,
only
an insured must reimbursed for all losses as well be recovering losses before the in those including attorney involved any regardless of subrogation, any insurer can exercise that contrary. We also conclude to the language providing contract (1997). 33-23-203(2), MCA is not in conflict with policy this policy in insurance an Question provision #3-: Does Certified governs the insurer’s Colorado, that Colorado law stating in issued benefits, PIP violate injury [personal protection] subrogation rights subrogation regardless if Colorado law allows public policy, Montana’s fully compensated, made whole the insured has been of whether and costs? including attorney fees contrary language runs policy that the Hartford Having concluded doctrine, must determine whether “made we
to Montana’s whole” governs law Hartford’s that Colorado policy provision providing rights applicable. for PIP is benefits brief, IV, F of the in its Section Part points Hartford out As following sentence policy Hartford concludes with Swanson’s granting rights subrogation: Hartford [right A Paragraphs under
[Hartford] shall be entitled to [right B tortfeasor] a third subrogate directly against party third insured who recovers subrogate against [sic] full only person has been party tortfeasor] after damages by party. another compensated in with interpreted is to accordance argues clause be and, law, “an insured is deemed that under Colorado Colorado law coverage exceeds the tortfeasor’s insurance fully compensated when be injured by the person compensation paid the reasonable tortfeasor’s insurer.” Youngblood. very similar situation We addressed provision of law Youngblood contained a choice policy
insurance
resulted
Oregon law would have
favoring Oregon
Applying
law.
under Montana
subrogation,
precluded
was
payment
which
decision in Allstate Ins.
reaffirmed our earlier
Youngblood,
law.
we
667,
(1981),
351,
we held
192 Mont.
628 P.2d
which
Co. v. Reitler
was
in Montana
of medical
benefits
void
that, “if a
has
held
previously
While this Court
against public policy.
will
language
the contract
unambiguous,
terms are clear and
contract’s
(citing
395,
at 205
enforced,”
it is dispute facts and of this case to scope Question Therefore, address the broad of Certified #1. we decline to answer it. TRIEWEILER,
JUSTICES NELSON REGNIER concur. concurring JUSTICE LEAPHART in part dissenting part. I concur with the Court’s resolution as to issue number three. For reasons, I following dissent as to issue number two. majority opinion holds that “an totally insured must be costs, all including attorney reimbursed for losses as well as fees ... any right subrogation.” before the insurer can exercise IWhile agree that an insured should be made whole before an insurer can exercise its I subrogation right, disagree with the Court’s broad interpretation majority of when an insured is made whole. The only concludes that an insured is made whole he has when been losses, for all compensated apparently including may losses that by that, I purposes have been covered the insurer. would hold for of an subrogation right, insurer’s an insured is made whole when she has fully compensated, including attorney costs damage element of purchased for which she insurance. When an (or insurer) party amount recovered from a third can be broken claim, down and of a separate through attributed elements either trial, settlement or through special interrogatories documents at subrogation is reasonable. Subrogation equity. theory is a device of “The behind is that insurer insured
principle
repayment
absent
would be
unjustly
enriched
virtue of
the insurer and the
both
insured,
wrongdoer,
recovery by
or in
of such
absence
double
third
free
party
go
despite
legal obligation
would
his
connection with
524-25,
Skauge,
[the] loss.”
approximately $4300. $11,000 damages. We held alleging over total parties, third *9 right assert its until Skauges’ that the insurer could not any and costs of Skauges [their] had “made whole for entire loss been attorney’s Skauge, at recovery, including fees.” P.2d at 632. the paid In the insurer had to assume risk of Skauge, been
¶40 damage Skauges’ personal Skauges fully Until had been property. to they loss had not been compensated personal property, for their of “made whole.” case, to the risk paid the Hartford was assume present lack expenses.
Swansons incur medical Because of the of a would case, do not the were record we know whether Swansons “made as medical and do expenses whole” to their we not know what other damage were in their elements of included settlement paid expenses, All know is that Hartford “some” medical tortfeasor. we Constitution, paid that the check company, tortfeasor’s one towards $25,962 medicals and total in the amount of Swansons’ medical $50,000. expenses knowing exceeded Without the total medical them, expenses how much cannot paid Hartford toward we tell whether were made as to that loss. If Swansons Swansons whole have expenses, not been made whole as their medical then there is no right hand, as it subrogation, would be unreasonable. On the other if Swansons have received medical of their payments excess actual 33-23-203, policy, pursuant medical Montana expenses, public § MCA, reasonable subrogation. allows for To deny Hartford’s unless Swansons recover damage other making
for elements of have the effect of would expenses. an insurer those as well medical uninsured losses however, Swansons, beyond for their protection have not (Iowa Ludwig v. Co. expenses. See Farm Bureau Mutual Insurance 1986), 393 143. N.W.2d By through that Jim insurance way hypothetical, of a assume has $20,000. Company
Acme at While painting Insurance on a valued home, transporting painting his Jim is involved destroyed, painting The his car is totaled and automobile accident. $20,000 injured. pays painting. Jim is Acme for the other Jim $35,000 company property damage: driver’s pays insurance Jim $20,000 $15,000 company for his vehicle. The also painting However, his medical $25,000 personal injuries. Jim for his pays $30,000.. expenses were I has majority though As even Jim received opinion, read (the
duplicate payments for the same painting), element of loss Acme would not subrogate be allowed to since Jim fully has not been is, compensated $30,000 for all his losses-that he suffered in medical . expenses only $25,000. and has The “made whole” doctrine has to be risk which was against. example, insured In the risk assumed Acme was that painting would damaged. Acme did not assume the risk that personal Jim would suffer injury. It did not insure Jim against “all losses.” If Jim has been made whole as to the risk for which he paid premiums insured, and for which Acme then Acme must be allowed subrogate. “Made whole” means that Jim has recovered all his costs attorney fees incurred in collecting duplicate payment from the tortfeasor. statute, 33-23-203(2), MCA, Montana’s allows reasonable
subrogation clauses “that are designed prevent duplicate payments for the same element liability loss under the motor vehicle policy or casualty policy under another provides coverage (emphasis ....” added). The Court’s interpretation of the “made whole” doctrine is premised assumption here, on the that “typically, as the ultimate *10 (or amount) judgment amount, settlement gross is for a without allocation particular for each element of loss.”1 In thus that assuming typical allocated, Court, effect, settlements cannot be the in writes the “same language element of loss” out of conveniently the statute and neglects requirement to factor that into analysis. its “made whole” The however, statutory language, requires by a case case determination of whether an allocation as to the “same element of loss” is practical. give If we are to effect to both the of concept “reasonable subrogation” and language the “same element of loss” in 33-23- § 203(2), MCA, we must interpret allowing subrogation the statute as by injured party’s the insurer once the insured has a duplicate received payment party from a third insurer for the “same element of loss.” words, 33-23-203(2), MCA, other under the provisions of § the prerequisite subrogation for reasonable is not whether the insured as been indemnified for “all losses”-but whether he or she has been indemnified party third for the “same element of loss” as that which was insured.
CHIEF joins foregoing concurring JUSTICE GRAY in the dissenting opinion of JUSTICE LEAPHART.
JUSTICE in concurring part dissenting RICE in part. 1 Contrary assumption “gross to the Court’s that the settlement here was a amount without allocation,” stipulated payment facts indicate that it was allocated “advance of medical expenses.” two. question answer to the Court’s I dissent from of an insurer subrogation by public policy, of As a matter payment to a medical pursuant the insured made to payments insured is forced coverage. The of insurance tenets violates the basic reimbursing the paid, he has for which to return the benefits assume, while it was risk of loss which thus avoids the who are no Premiums it has received. keeping premiums nonetheless scheme, and of this orchestration anticipated premised upon doubt encouraged. by the insurer wrongdoer pursuit of consumer, this on the insurance subrogation of recognizing the effect of clauses are violative Court held that Reitler. Insurance v. in Allstate public policy States, in even Youngblood v.American reaffirmed Reitler was was authorized the insurer’s assertion the face of subrogation was authorized 33-23-203, Although under MCA. § contexts, it was not the Court noted that insurance statute in other MCA, of 33-23-203, and refused to read referenced the statute. subrogation into by enacting Chapter Youngblood Legislature responded The Establishing “An Act entitled Laws of Montana Policies; Amending Liability
Subrogation Rights in Motor Vehicle amended to read as follows: This section was thus Section 33-23-203.” (2) for other liability policy may provide also A motor vehicle limitations, exclusions, coverage, of or reductions reasonable duplicate designed prevent that are subrogation clauses under the motor vehicle same element loss payments casualty policy provides or under another liability policy damages or benefit injury that necessitates coverage for an [Emphasis added.] payments. by this policy declared public thus revised the Legislature clauses which and validated “reasonable”
Court Reitler for the same element duplicate payments designed prevent are subrogation” may “reasonable oxymoronic the term loss. However subrogation on the light of the effects appear above-noted may policies now consumer, it is that motor vehicle insurance clear *11 such clauses. properly include here, paid at issue terms of the Pursuant to the then Constitution by incurred Swansons. When medical costs
certain costs, Hartford medical for the same payment made to Swansons Because payment. Constitution’s subrogate sought for the same “duplicate payment was Constitution’s policy, its pursuant loss,” attempt, element of Hartford’s was expense payment medical against Constitution’s subrogate 282 33-23-203,
permissible under the 1997 amendment MCA. As the 22, acknowledges legislation Court the specifically authorizes ¶ subrogation in this circumstance. responds legislation by holding the Court to the that a for
duplicate payment
expenses
really
duplicate
is not
payment until the insured has
recovered all other
related to
the accident. The Court reasons in 22 that because
Legislature
the
¶
amendment,
did not address the made whole doctrine within the
it
intact, and,
intended the doctrine to remain
consequently, the doctrine
fully
forestalls
until
the insured has
recovered all
elements of loss.
the Court’s reluctance to yield
While
our anti-
subrogation policy
legislative
understandable,
enactment
erroneously applies the made
doing
whole doctrine to avoid
so.
premised upon
Our cases establish that
the doctrine is
the
that
principle
premium
the insurer has received a
to take the risk that
damaged,
the insured will be
and that the insured must be made whole
before the insurer can exercise its
interest:
adopt
[W]e
the view that when the insured has sustained a loss in
by
excess
the reimbursement
the
the insured is entitled
any
to be made whole for his
recovery,
entire loss
costs of
including attorney’s
the insurer can assert
legal subrogation against the insured or the tort-feasor.
added).
Skauge,
528,
(emphasis
provided Hartford’s doctrine, prior made whole to they Eire entitled to be the doctrine here Proper application of payments. of those attorney fees by Hartford for their requires Swansons to be reimbursed recovery damages of medical costs associated with their of the costs of Constitution, that Hartford bears the burden so that require the doctrine does damages. of those by losses not insured Hartford’s Swansons recover paid it was subrogate particular to for the losses Hartford is entitled assume. dissent and our inconsistency sees between this The Court McMillan was awarded in McMillan. It states that decision assume, duty contractual of those the State Fund had a excess did not the made whole doctrine there application and that our by the for losses covered distinguish between the amounts awarded Court is correct by those not covered the Fund. The State Fund Eind McMillan; not at such distinction in it was stating that we made no McMillan, request the State Fund’s In we addressed issue there. paid it had to assume. obligations contractual been released from obligations. Here, released from its Hartford does not seek to be obligation and Rather, its contractual completely Hartford has fulfilled Further, entirely paid to assume. undertaken all of the risks was governs different statute here. McMillan, pursuant petitioned, the State Fund 39-71-414, of the Workers’ MCA
subrogation provisions obligation Act, continuing its contractual to terminate Compensation it could arguing compensation payments, pay workers’ party third partial McMillan’s obligation against subrogate subrogation statute that the correctly determined recovery. This Court pay obligation contractual relieve the Fund of its at issue did not for his made whole time as McMillan had been until such benefits of the assumption Fund’s on State holding premised Our was injuries. contractual entirety of its to fulfill the it would have risk obligation: “the insurer has assumption of the McMillan, Thus, liability for the claim.” McMillan addressed the ¶16. Here, obligation of an insurer for risks it had assumed. the Court is improperly applying the doctrine to risks the insurer did not assume. The made whole provides doctrine that when a claimant’s third claimant, party recovery is less than the losses sustained claimant, for which the insurer has then the insurer must bear the deficit:
[T]he basic conclusion is that when the amount recovered *13 loss, claimant is less than the total claimant’s with a result that either the claimant or the insurer must to some extent go unpaid, equitable then it is [sic] the loss be born the insurer which had been premium insurance of its assumption liability.
McMillan, Co., quoting supra. Zacher v. American Ins. A proper ¶ understanding the doctrine illustrates that it equitably distributes unrecovered loss the contractual relationship between insurer and premised upon insured. It is the insurer’s assumption of a risk for which it has been premium, places any thus deficit in the recovery Thus, McMillan, of those losses on the insurer. stated in it go unpaid,” is the insurer which “must to some extent and must bear recovery. the claimant’s cost of applies the Court here the doctrine to acceptance premium
unrelated to the insurer’s and the accompanying Application risk. of the doctrine in such manner principles upon divorces from the which this Court founded it in Skauge, and it in all subsequent cases. The Court now uses the doctrine as an untethered bludgeon prevent statutorily which the insurer is entitled. the extent I require To that would a Colorado insurance I public policy,
conform to Montana concur with the Court’s answer question three.