Commercial Union Fire Ins. Co. v. Kelly
| Decision Date | 18 February 1964 |
| Docket Number | No. 40305,40305 |
| Citation | 389 P.2d 641 |
| Parties | COMMERCIAL UNION FIRE INSURANCE CO., a corporation, Plaintiff in Error, v. Roy O. KELLY, Defendant in Error. |
| Court | Oklahoma Supreme Court |
Syllabus by the Court
1. Subrogation is an equitable principle which compels the ultimate discharge of an obligation by him who in good consicence should pay it; and the principle applies to actions based on contractual obligations as fully as it does to actions based on tort liability.
2. An action in subrogation exists in favor of an insurance company against a third party, based on the contractual obligations of the third party to the insurance company's insured, where the insurance company has paid the claim of its insured for loss under the terms of a fire insurance policy; but the insurance company's rights are derived from the rights which the insured has and is limited to those rights, and there can be no subrogation where insured had no claim against the third party.
Appeal from the District Court of Custer County; W. P. Keen, Judge.
Action in subrogation by an insurance company against a third person to recover the sum the insurance company paid to its insured under the terms of a fire insurance policy. The trial court sustained a demurrer to the insurance company's amended petition. Insurance company appeals from the order overruling its motion for a new trial. Reversed and remanded with directions.
Hanson & Peterson, Oklahoma City, for plaintiff in error.
Eph Monroe, Clinton, for defendant in error.
Commercial Union Fire Insurance Co., a corporation, hereinafter referred to as insurer, brought an action in subrogation against Roy O. Kelly, referred to as defendant, to recover the sum of $2500.00 it had paid to its insured for loss sustained under the terms of a fire insurance policy. The trial court sustained defendant's demurrer to insurer's amended petition and on insurer's election to stand on its amended petition, the trial court dismissed the action. Insurer perfected the appeal under consideration.
Insurer alleged that defendant had leased from Mrs. L. G. Dean a certain filling station; that while the lease was in force, insurer had in effect with Mrs. Dean, a policy of fire insurance, insuring her against loss by fire to said property in the amount of $2500.00; that defendant, who was also a consignee of gasoline '* * * was delivering a load of gasoline to said filling station from a tank truck; that in the course of such operation * * * gasoline was permitted to spray out and become ignited, resulting in total loss of said building. * * *.' Insurer further alleged the value of the building was at least $4279.00, and that it had paid the insured, Mrs. Dean, '* * * the sum of $2500.00, and in law and in equity, became subrogated to all her contract rights against defendant * * * as expressed in the lease contract.' It was also alleged that Mrs. Dean and defendant had made a settlement and compromise concerning her loss in excess of the $2500.00.
Attached to the petition and made a part thereof was the lease contract between Mrs. Dean and defendant which contained, inter alia, the following provision:
'It is further agreed that Second Party (defendant) will deliver possession of said real estate to First Party (Mrs. Dean, the insured) upon the expiration of this lease in as good state of repair as said building is in at the present time, except for the usual wear and tear.'
The defendant filed a demurrer which was sustained by the trial court on the grounds the amended petition failed to state a cause of action.
In examining the pleadings we find the liability of defendant, if any, must be based upon insurer's right to be subrogated to the contractual obligations of defendant to Mrs. Dean, the insured, by virtue of it having paid to the insured the loss sustained under the terms of the fire insurance policy.
Therefore, the first issue to be resolved is whether an action in subrogation exists in favor of an insurance company against a third party, based on the contractual obligation of the third party to the insurance company's insured, where the insurance company has paid the claim of its insured for loss under the terms of fire insurance policy.
Title 36 O.S.1961 § 4803, sets forth a printed form of a policy of fire insurance to be used in Oklahoma. This printed form contains the following provision:
The above provision specifically recognizes the right of subrogation when an insurance company has paid its insured under the terms of the fire insurance policy. The case of Harrington v. Central States Fire Ins. Co. of Wichita, Kan., 169 Okl. 255, 36 P.2d 738, 96 A.L.R. 859, recognizes the right of subrogation involving actionably negligence of a third party. Defendant relies upon this case to sustain his theory that the amended petition did not state a cause of action. Although the Harrington case recognizes the right of subrogation where an insurance company has paid a loss to its insured under the terms of the policy, the law set forth in that case is not controlling under the allegations in the case at bar. In that case the alleged liability of the third party was based upon tort liability; whereas, in the instant action, the alleged liability of the third party is based upon contractual obligations. Therefore, the necessary pleadings as set forth in that case, which involved actionable negligence, are not controlling in the case at bar which involves contractual obligations.
The principle of subrogation is set forth in Boyd v. McKenney, 118 Okl. 8, 246 P. 406, wherein we held:
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