Community Ins. Co. v. Ohio Dept. of Transp.

• Decision Date: 25 July 2001
• Docket Number: No. 00-771.,00-771.
• Parties: COMMUNITY INSURANCE COMPANY, APPELLANT, v. OHIO DEPARTMENT OF TRANSPORTATION, APPELLEE.
• Court: Ohio Supreme Court

92 Ohio St.3d 376

750 NE 2d 573

COMMUNITY INSURANCE COMPANY, APPELLANT, v. OHIO DEPARTMENT OF TRANSPORTATION, APPELLEE.

No. 00-771.

Supreme Court of Ohio.

Submitted January 30, 2001.

Decided July 25, 2001.

Kreiner & Peters Co., L.P.A. and Gilbert E. Blomgren, for appellant.

Betty D. Montgomery, Attorney General, William C. Becker and Susan M. Sullivan, Assistant Attorneys General, for appellee.

MOYER, C.J.

Rachelle Dronebarger suffered catastrophic and permanent injuries in a one-vehicle automobile accident when her motor vehicle collided with a pole on Interstate 77 in northeast Ohio. She suffered spinal cord and other injuries resulting in partial quadriplegia and partial amputation of the right leg. After the accident, Community Mutual Insurance Company ("Community")¹ paid medical and hospital expenses of over $245,000 pursuant to an employee health plan under which Dronebarger was insured.

In 1994, Community filed a complaint, as Dronebarger's subrogee, in the Court of Claims, seeking judgment against appellee, Ohio Department of Transportation ("ODOT"), for the same amount it had paid on Dronebarger's claim. Community asserted that ODOT had been negligent in placing and maintaining the unguarded fixed-based pole with which Dronebarger collided rather than placing a breakaway or frangible-base pole, in violation of ODOT's own rules and regulations, and that Dronebarger's medical expenses were the direct and proximate result of that negligence.

Dronebarger filed a separate lawsuit against ODOT, also alleging negligence, and also seeking damages. The court there found that Dronebarger's damages, representing future medical expenses, lost wages, and loss of enjoyment of life, including pain and suffering, totaled $8.3 million. It entered judgment in her favor in the amount of sixty percent of that total, for an actual award to Dronebarger of nearly $5 million.

Similarly, in the subrogation case at bar, the court tried the issues of liability and damages separately, and determined that Dronebarger's negligence had combined with the negligence of ODOT to produce her injuries. It allocated forty percent of the fault to Dronebarger and sixty percent to ODOT.

Community argued that it was entitled to recover sixty percent of its paid claims from ODOT, or just over $147,000. The trial court agreed, and entered judgment against ODOT and in favor of Community in that amount.

In a split decision, the court of appeals overruled its prior holding in Lumbermens Mut. Cas. Co. v. Ohio Dept. of Transp. (1976), 2 O.O.3d 27. Accordingly, the court of appeals reversed the judgment of the Court of Claims, and remanded the cause with instructions that judgment be rendered in favor of ODOT, thereby rejecting Community's subrogation claim. The cause is now before this court upon the allowance of a discretionary appeal.

The parties disagree as to the proper construction of R.C. 2743.02, which provides:

"(D) Recoveries against the state shall be reduced by the aggregate of insurance proceeds, disability award, or other collateral recovery received by the claimant."

Community argues that R.C. 2743.02(D) does not mandate a reduction in its subrogation claim against the state in that it, Community, has not received collateral benefits from any collateral source. It argues that Dronebarger's receipt of over $245,000 as a collateral recovery from Community is irrelevant in Community's subrogation suit against the state, even though Dronebarger clearly received "insurance proceeds, disability award, or other collateral recovery" in that amount.

Implicit in Community's argument is the premise that it is a "claimant" as that term appears in R.C. 2743.02(D), separate and apart from Dronebarger. However, Community's argument contradicts the basic principles underlying the legal concept of subrogation. Community is not a claimant separate and apart from its subrogor. Rather, Community stands in the place of Dronebarger in seeking recovery from the state, and has no greater right to recovery than would Dronebarger herself. See Chemtrol Adhesives, Inc. v. Am. Mfrs. Mut. Ins. Co. (1989), 42 Ohio St.3d 40, 537 N.E.2d 624, paragraph one of the syllabus. Community's recognition that its recovery should be reduced by the forty percent of fault allocated to Dronebarger is consistent with this principle.

R.C. 2743.02(D) mandates that medical benefits Dronebarger received from Community must be deducted from the amount due her from the state. She could not transfer to Community, by way of subrogation, a right to recover damages representing incurred medical expenses that she herself did not possess pursuant to R.C. 2743.02(D).

Community contends that the state should bear the medical costs incurred by an injured person as between it (a medical insurer) and the state (here adjudicated to be a tortfeasor). It bases this contention on its belief that the purpose of R.C. 2743.02(D) is to preclude injured persons from receiving double recovery, rather than to simply reduce the state's ultimate liability. However, we find no ambiguity in the language of the statute. The case at bar involves only one claimant, Rachelle Dronebarger, even though she contractually agreed to subrogate a portion of her claim against the state to Community.

We have previously recognized that the state's purpose in waiving political subdivision immunity was twofold: to compensate uninsured victims while also preserving public resources. The "state can make the rational determination to permit recovery by an unprotected victim but deny subrogation to insurance carriers who can make actuarial computations and adjust premiums to compensate for payments to policyholders who suffer damage at the hands of a political subdivision." Menefee v. Queen City Metro (1990), 49 Ohio St.3d 27, 29, 550 N.E.2d 181, 183.

Even if it were appropriate in this case to inquire into legislative intent to resolve a statutory ambiguity, we find no support for concluding that the General Assembly intended that subrogation claims against the state should be treated differently from subrogation claims against political subdivisions. Nor do we believe that R.C. 2743.02(D) was intended to operate in such a way as to shift financial risk to the state and away from insurers, such as Community.

We therefore hold that an insurer who has been granted a right of subrogation by a person on whose behalf the insurer has paid medical expenses incurred as the result of tortious conduct of the state is subject to R.C. 2743.02(D), which mandates reduction in recoveries against the state by the "aggregate of insurance proceeds, disability award, or other collateral recovery received by the claimant."

The judgment of the court of appeals is therefore affirmed.

Judgment affirmed.

COOK and LUNDBERG STRATTON, JJ., concur.

RESNICK, J., concurs in judgment only.

DOUGLAS, F.E. SWEENEY and PFEIFER, JJ., dissent.

DOUGLAS, J., dissenting.

I must respectfully dissent. The majority concludes that R.C. 2743.02(D) bars subrogation actions brought by insurers against the state. The majority holds that an insurer cannot have an independent claim, based upon a subrogation agreement with their insured, for damages against the state. I disagree.

I

The majority states that it finds "no support for concluding that the General Assembly intended that subrogation claims against the state should be treated differently from subrogation claims against political subdivisions." (Emphasis added.) However, today's decision ignores the state's waiver of immunity in R.C. 2743.02(A)(1), which provides "The state hereby waives its immunity from liability and consents to be sued, and have its liability determined, in the court of claims created in this chapter in accordance with the same rules of law applicable to suits between private parties, except that the determination of liability is subject to the limitations set forth in this chapter * * *."² (Emphasis added.)

Thus, it is difficult to understand why the majority would draw a parallel between suits against the state to those against political subdivisions, when we are clearly directed by R.C. 2743.02(A)(1) to follow the law that applies to suits between private parties. In other words the majority should have viewed the state as a private party, not as a governmental entity. Hence, the only question that should be before this court is whether Community could sue a private party on the same basis that it now sues the state. I would answer in the affirmative.

As set forth in the majority opinion, R.C. 2743.02(D) provides that all recoveries against the state shall be reduced by the aggregate of insurance proceeds recovered by the claimant. Community argues that it is the sole claimant with regard to the past medical expenses paid on Dronebarger's behalf. Community contends that R.C. 2743.02(D) has no application to its claim, since, as a claimant, it has not received any collateral benefits. Community supports its argument by relying on the now overruled court of appeals opinion in Lumbermens Mut. Cas. Co. v. Ohio Dept. of Transp. (1976), 2 O.O.3d 27, which held that R.C. 2743.02(D) does not bar an insurer's subrogation claim against the state. I agree with Community, and I would find that Lumbermens was properly decided.

In order to bring a cause of action, a claimant (Community in the case now before us) must satisfy Civ.R. 17(A), which provides, "Every action shall be prosecuted in the name of the real party in interest." A real party in interest is "`one who has a real interest in the subject matter of the litigation, and not merely an interest in the action itself, i.e., one who is directly benefitted or injured by the outcome of the case.'" (Emphasis sic.) Shealy v. Campbell (1985), 20 Ohio St.3d 23, 24, 20 OBR 210, 211, 485 N.E.2d 701, 702,

quoting W. Clermont Edn. Assn. v. W. Clermont Bd. of Edn. (1980), 67 Ohio App.2d 160, 162, 21 O.O.3d 457, 458, 426 N.E.2d...