City of New York Ins. Co. v. Tice, 36176.

CourtUnited States State Supreme Court of Kansas
Writing for the CourtHOCH, Justice.
Citation159 Kan. 176,152 P.2d 836
PartiesCITY OF NEW YORK INS. CO. v. TICE et al.
Docket Number36176.
Decision Date04 November 1944

152 P.2d 836

159 Kan. 176

CITY OF NEW YORK INS. CO.
v.
TICE et al.

No. 36176.

Supreme Court of Kansas

November 4, 1944


[152 P.2d 837]

Syllabus by the Court.

Allegations of petition must be accepted as true upon demurrer.

The rule against nonassignability of rights of action in tort did not apply to insurer's action to recover from tort-feasor the amount paid by insurer under automobile collision policy which contained a subrogation clause. Gen.St.1935, 60-401.

"Subrogation" is a substitution of persons by which another person succeeds to rights of a creditor or similar claimant in relation to the debt or claim.

"Legal subrogation" is grounded in equity and arises by operation of law, which gives to a third person who has been compelled to pay a remedy as against one who, in justice, ought to pay.

Conventional subrogation is founded upon contract express or implied.

The doctrine of subrogation applies to indemnity contracts.

Subrogation is a normal incident of indemnity insurance, and clearly applies where policy contains the ordinary subrogation clause.

An insured's release of wrongdoer from liability cannot defeat insurer's rights against wrongdoer when such release is given without insurer's knowledge, and when wrongdoer has knowledge as to insurer's right of subrogation under the contract.

Where insurer paid insured part of loss sustained, under automobile collision policy containing a clause whereby insurer was subrogated to extent of its discharged liability to all of insured's rights of action, and thereafter insured was paid balance of loss by the wrongdoer and released wrongdoer from all liability without insurer's knowledge, insurer could in its own name, sue as a "real party in interest" to recover from wrongdoer the amount paid to insured.

Insured who under automobile collision policy had been paid part of loss sustained in collision, and who released wrongdoer from all liability upon his payment of balance of the loss, was properly made a defendant in insurer's action to recover from wrongdoer the amount paid to insured, under right of subrogation provided for in the policy. Gen.St.1935, 60-411.

Where insurer under indemnity policy is subrogated to extent of its discharged liability to all of insured's rights of action, loss has not been fully covered by insurance payment and insured asserts a claim against wrongdoer, insured and insurer are real parties in interest, but action should be brought by insured who will hold as trustee for insurer the amount which insurer has been compelled to pay, and if insured refuses to bring action, insurer may do so.

Where insurer under indemnity policy is subrogated to extent of its discharged liability to all of insured's rights of action, insured's loss has been fully satisfied, or insured has fully released the wrongdoer, action against wrongdoer must be brought by insurer in its own name, or by insured for use and benefit of insurer.

1. The rule that rights of action in tort are not assignable is not applicable to an action by an insurer to recover from the tort-feasor the amount which it has been required to pay to a property owner under a subrogation clause in a policy indemnifying such owner against property damage by collision or accident.

2. Subrogation is a normal incident of indemnity insurance and the doctrine is clearly applicable where the policy contains the ordinary subrogation clause.

3. The rights of the insurer, under such a subrogation agreement in the policy, cannot be defeated by a settlement made without his knowledge and consent between the insured and a wrongdoer who has full knowledge of the insurer's right of subrogation.

4. Actions against a tort-feasor to recover damages to property covered by an indemnity insurance policy containing the ordinary subrogation clause are properly brought as follows:

A. When the owner's loss has been fully satisfied or he has fully released the wrongdoer, action must be either (a) by the insurer in its own name; or (b) by the insured "for the use and benefit" of the insurer.

B. When the owner's loss has been only partially satisfied and he has not released the wrongdoer as to the deficiency (a) action should be by the owner, in which case he holds as trustee for the insurer in respect to such part of the amount recovered as the insurer has been required to pay under the policy; (b) in case such owner refuses to bring action the insurer is entitled to protect its own interest by action against the wrongdoer.

5. Record examined in an action to recover damages for injury to an automobile, and held: (a) the action was properly brought by the insurance company against the tort-feasor under an indemnity policy containing a subrogation clause; (b) the insured car owner was properly joined as a party defendant.

Appeal from District Court, Shawnee County, Division No. 3; Dean McElhenny, Judge.

Action by the City of New York Insurance Company against Clarence A. Tice, doing business as the Standard Drive it Yourself System, and another to recover the amount which plaintiff had paid on an automobile collision policy. A demurrer to the petition was sustained, and the plaintiff appeals.

Reversed.

HARVEY, J., dissenting.

Harry K. Allen, of Topeka (L. M. Ascough, of Topeka, on briefs), for appellant.

Allen Meyers, of Topeka (G. Clay Baker, Hubert Else, and Herbert A. Marshall, all of Topeka, on briefs), for appellee.

HOCH, Justice.

An insurance company brought action to recover from a third party, an alleged tort-feasor, the amount which it had paid to a policy holder under an automobile policy indemnifying against loss by collision or accident. The policy holder was also joined as a party defendant. A demurrer to the petition was sustained and the plaintiff appeals. The principal question here is whether the insurance company could maintain the action in its own name.

The essential facts, as alleged, may be briefly summarized: Mrs. Downs, a resident of Wichita, delivered her car in Topeka to an employee of Tice, operator of a concern which rented and stored automobiles, to be taken to the garage for storage. Enroute to the garage the car was involved in a collision and damaged to the extent of $312.62. Mrs. Downs held a policy issued by the City of New York Insurance Company covering the loss except as to $50 excluded under a "$50.00 deductible clause." The insurance company paid $262.62 to Mrs. Downs, being the full amount of its liability. Subsequent thereto Tice, the garage operator, paid $50 to Mrs. Downs, her loss being thus fully paid. She gave him a receipt which purported to release him fully from any further liability. Tice had been informed by an agent of the insurance company that the company had paid or had agreed to pay the car owner the sum of $262.62 and "would be subrogated to all of the rights of defendant Downs against the defendant Tice and his employee."

The policy contained the following clause:

"9 Subrogation. In the event of any payment under this policy the company shall be subrogated to all the insured's rights of recovery therefor 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." [152 P.2d 838] The release executed by the car owner was without the knowledge or consent of the insurance company.

It was further alleged in the petition:

"Plaintiff states that on May 18, 1943, L. M. Ascough, counsel for plaintiff, by letter duly deposited in the U.S. mail, wrote to the defendant Elizabeth Lee Downs asking her cooperation in collecting the sum paid under the policy in settlement for damages by reason of the collision, from the wrongdoer, and asking if she would be present at the trial; that said defendant in reply to said letter stated she would not be present at the trial; that a copy of said letter and the reply of the defendant Downs thereto is hereto attached, marked exhibit "B" and made a part of this petition.
"Plaintiff states that upon the refusal of Elizabeth Lee Downs to cooperate with plaintiff in this action against the defendant Tice and to the end that the rights of all parties concerned might be litigated in one action, and to protect all parties against further litigation, said Elizabeth Lee Downs has been joined as party defendant in this action."

Exhibit "B" is not set out in full in the abstract but from the trial court's memorandum opinion when sustaining the demurrer it appears that the attorney's letter to Mrs. Downs contained this request: "As I have been requested to file suit for this amount, will you please cooperate by advising me if you will be available for the trial?" To which she replied: "I do not quite understand this letter. I will not be present at the trial. If you want further information please write--"

The plaintiff asked judgment against Tice for $262.62 but no relief was asked as against Mrs. Downs.

The trial court sustained a demurrer to the petition upon the grounds that it was not alleged that Mrs. Downs had refused to permit the action to be brought in her name and that in the absence of such a refusal the action could not be brought by the insurance company in its own name. In a memorandum opinion the court said in part: "The case of [Grain Dealers' Nat. Mut. Fire] Insurance Company v. Railway Company, 98 Kan. 344 [157 P. 1187], lays down the general rule that where a loss on an insurance policy exceeds the amount of the insurance, an action against the wrongdoer for the recovery of the part paid by the insurer must be brought in the name of the insured, but that under certain circumstances there are exceptions to that general rule. One of the exceptions is where the insured, after settling with the wrongdoer out...

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