Aetna Cas. & Sur. Co. v. Associates Transports, Inc.

• Decision Date: 12 June 1973
• Docket Number: No. 44014,44014
• Citation: 512 P.2d 137,1973 OK 62
• Parties: AETNA CASUALTY & SURETY COMPANY, a corporation, Appellant, v. ASSOCIATES TRANSPORTS, INC., a corporation and Transit Casualty Insurance Company, a corporation, Appellees.
• Court: Oklahoma Supreme Court

Page 137

512 P.2d 137

AETNA CASUALTY & SURETY COMPANY, a corporation, Appellant, v. ASSOCIATES TRANSPORTS, INC., a corporation and Transit Casualty Insurance Company, a corporation, Appellees.

No. 44014.

Supreme Court of Oklahoma.

June 12, 1973.

Syllabus by the Court

Settlement with assured alone by tort-feasor who has knowledge of insurer's subrogation rights will be construed as settlement of uninsured portion of damages; neither rule against splitting cause of action nor 12 O.S.1971, § 221, which prohibits assignment of cause of action arising from pure tort, prevent insurer from maintaining action in its own name against tortfeasor where loss of assured has been satisfied in part by payment by tortfeasor and in part by payment by insurer. Overruling Hardware Dealers Mutual Fire Ins. Co. v. Krueger, Okl., 486 P.2d 737, insofar as the same is in conflict herewith.

Certiorari to the Court of Appeals, Division No. 1.

Application for certiorari to the Court of Appeals, Division No. 1, for review of a decision of that court reversing judgment of the District Court of Oklahoma County; Ben LaFon, Judge, wherein trial court held insurer-subrogee was not entitled to recover from tort-feasor amount paid to insured pursuant to automobile collision insurance policy. Certiorari granted for purposes of modifying opinion of Court of Appeals; judgment of trial court reversed with instructions.

Ross, Holtzendorff & Bond by William W. Wiles, Jr., Oklahoma City, for appellant.

Watts, Looney, Nichols & Johnson by R. D. Looney, Oklahoma City, for appellees.

BERRY, Justice:

This case was tried to a judge alone on stipulated facts.

Plaintiff's assured sustained personal injury and property damage when Associates Transports, Inc.'s truck collided with her automobile. Damage to her automobile amounted to $653.49. The insurance policy provided $100 deductible collision coverage and contained a subrogation clause. Plaintiff paid $553.49 to the assured, and, on January 14, 1966, notified Associates it had paid the loss and was claiming subrogation rights. Plaintiff thereafter negotiated with Schwab, Associates' adjuster.

On March 31, 1966, the assured sued Associates for personal injuries and all property damage arising out of the accident. Schwab wrote plaintiff stating he assumed assured's attorney represented plaintiff's interest because the petition included all physical damage to the car.

Plaintiff then wrote assured's attorney that he need not file suit for the subrogated amount because plaintiff would submit its claim for arbitration pursuant to an arbitration agreement. Schwab received a copy of this letter before May 20, 1966. The assured's attorney was not employed by plaintiff.

On June 20, 1966, the assured settled her claim and executed a general release. Pursuant to her motion the court dismissed her action with prejudice. The settlement was made without notice to plaintiff, and without obtaining a release from plaintiff.

Plaintiff then filed this action against Associates and its insurer, Transit Casualty Insurance Company, to recover the $553.49 it had paid to its assured. By answer defendants pleaded the prior suit involving identical property damage, the settlement and the general release executed by the assured. In its reply plaintiff alleged that prior to June 20, 1966, it had given notice to Schwab of its subrogated interest.

The trial court entered judgment for defendants. The Court of Appeals reversed and directed the trial court to enter judgment for plaintiff in the amount of $553.49 and costs. We grant certiorari.

Defendants contend plaintiff's rights against Associates were extinguished by the release and dismissal order because plaintiff, as subrogee, stands in the shoes of its assured; that if plaintiff desired to protect its rights it should have intervened in the assured's action; and the present suit should not be allowed because it seeks to recover the same damages paid in the prior suit and because the rule against splitting a cause of action prohibits a second suit on the same cause of action. They contend plaintiff's remedy is against its assured.

For reasons hereinafter discussed we hold plaintiff, upon paying the loss, became subrogated, to the extent of the amount paid, to the assured's right of action against the tortfeasor; plaintiff is entitled to maintain this action in its own name; the release executed by the assured did not defeat plaintiff's subrogation rights; and the rule against splitting a cause of action does not prevent plaintiff from maintaining this action.

Plaintiff's policy contained the following clause:

'In the event of any payment under this policy, the Company shall be subrogated to all the Insured's rights of recovery therefore against any person or organization and the Insured shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights. The insured shall do nothing after loss to prejudice such rights.'

It has been held an automobile collision insurance policy is a contract of indemnity. City of New York Ins. Co. v. Tice, 159 Kan. 176, 152 P.2d 836 (disapproved on other grounds, Ellis Canning Co. v. International Harvester Co., 174 Kan. 357, 255 P.2d 658). In Harrington v. Central States Fire Ins. Co., 169 Okl. 255, 36 P.2d 738, we stated with reference to contracts of indemnity:

'The policy of insurance issued by the plaintiff on the property destroyed was a contract of indemnity, and the plaintiff, upon paying the loss, became, without any formal assignment or any express stipulation to that effect in the policy, subrogated, to the extent of the amount paid, to the assured's right of action against the defendant to recover such loss.

'This was the rule of the common law, but a suit to enforce such right could only be brought by the assured, and could not be brought by the insurance company paying the loss.'

We have found no cases wherein we held that an insurer, who makes payment pursuant to a property indemnity insurance policy, does not become subrogated, to the extent of the amount paid, to the assured's right of action against the tortfeasor.

Therefore we conclude that plaintiff, upon paying the loss, became subrogated, to the extent of the loss paid, to the assured's right of recovery against Associates.

However, Harrington v. Central States Fire Ins. Co., supra, indicates that at common law the insurer was not entitled to maintain an action in its own name.

12 O.S.1971 § 221, provides:

'Every action must be prosecuted in the name of the real party in interest, except as otherwise provided in this article; But this section shall not be deemed to authorize the assignment of a thing in action, not arising out of contract.' (emphasis added)

The real party in interest is the party legally entitled to the proceeds of a claim in litigation. C & C Tile Co. v. Independent School D. No. 7 of Tulsa County, Okl., 503 P.2d 554. In the case before us the assured has been fully compensated for her loss. Only plaintiff is entitled to any proceeds recovered and therefore plaintiff is the real party in interest. Therefore, plaintiff should be allowed to maintain this action in its own name unless allowing plaintiff to do so would constitute 'the assignment of a thing in action not arising out of contract.'

We have held the emphasized portion of § 221 prohibits assignment of a cause of action arising out of a pure tort. Kansas City, M. & O.R. Co. v. Shutt, 24 Okl. 96, 104 P. 51. Plaintiff's action is based upon the negligence of Associates in operation of its truck and does arise out of a pure tort. Hardware Dealers Mutual Fire Ins. Co. v. Krueger, Okl., 486 P.2d 737. However, plaintiff's subrogation rights came into existence pursuant to the contract of insurance which existed prior to the time the assured's cause of action arose, rather than pursuant to an assignment made after the cause of action arose. Therefore, the question arises whether § 221 prohibits the transfer of a cause of action by subrogation as well as by assignment. Our prior cases on this point are in conflict.

In cases involving fire insurance we have stated a subrogee could not maintain an action in his own name at common law, and that § 221 carried forward the principle that a cause of action arising from a pure tort is not assignable. Harrington v. Central States Fire Ins. Co., supra. These cases then state that the standard fire insurance policy set out in the statutes permits assignment of a cause of action for wrongful destruction of personalty by fire where the insurer has paid the loss and the insurer-subrogee may maintain an action in its own name where the loss of the insured has been fully satisfied by payment by the insurer.

Therefore, these cases support an argument that § 221 prohibits the transfer of a cause of action by subrogation in cases not involving fire insurance.

Furthermore, in Hardware Dealers Mutual Fire Ins. Co. v. Krueger, supra, we considered a factual situation distinguishable from the present situation only on the ground it involved medical expenses paid to the assured pursuant to an automobile insurance policy. There we stated there is no distinction between the effect of subrogation and assignment, in that both attempt to change by transfer the person entitled to enforce a personal injury claim, and reasons of policy which make certain causes of action non-assignable operate as forcefully against the transfer of such causes of action by subrogation. We then held that § 221 prohibited the insurer from maintaining the action in its own name, whether as subrogee or assignee. W...