Easom v. Farmers Ins. Co., Inc.

• Decision Date: 22 January 1977
• Docket Number: No. 48394,48394
• Citation: 221 Kan. 415,560 P.2d 117
• Parties: Paula D. EASOM, Appellant, v. FARMERS INSURANCE COMPANY, INC., Appellee.
• Court: Kansas Supreme Court

Page 117

560 P.2d 117

221 Kan. 415

Paula D. EASOM, Appellant, v.FARMERS INSURANCE COMPANY, INC., Appellee.

No. 48394.

Supreme Court of Kansas.

Jan. 22, 1977.

Syllabus by the Court

1.A basic purpose of the Kansas automobile injury reparations act (K.S.A.1975 Supp. 40-3101, et seq.), commonly referred to as the no-fault insurance law, is to make personal injury protection (PIP) insurance mandatory by requiring every owner of a motor vehicle to obtain first party coverage of PIP benefits payable by his own insurance company regardless of fault.

2.The fundamental rule of statutory construction, to which all others are subordinate, is that the purpose and intent of the legislature governs when that intent can be ascertained from the statute.

3.In construing a statute, legislative intent is to be determined by consideration of the entire act.The several provisions of an act, in pari materia, must be construed together with a view of reconciling and bringing them into workable harmony and giving effect to the entire statute if it is reasonably possible to do so.

4.The reimbursement of a PIP insurer for PIP benefits 'received' or 'payable' under K.S.A.1975 Supp. 40-3113(a) is limited to those damages covered by an injured insured which are duplicative of damages included in such PIP benefits.

5.In determining the right to reimbursement of a PIP insurer under the provisions of K.S.A.1975 Supp. 40-3113(a), pecuniary loss, represented by PIP benefits, is presumed to be included in a recovery effected by an injured insured either by settlement or judgment in the absence of proof to the contrary and the burden of supplying such proof is upon the insured.

6.The provisions of K.S.A.1975 Supp. 40-3113(a), relating to reimbursement of PIP benefits do not operate to effect an equitable distribution of the recovery effected by an injured insured.

7.A PIP insurer's rights of reimbursement from a recovery made by PIP insured, under K.S.A.1975 Supp. 40-3113(a), are the same whether PIP benefits are payable and unpaid or have been received by the PIP insured.

8. K.S.A.1975 Supp. 40-3113(a) is designed to limit a PIP insurer's right to reimbursement to an amount which shall, in no event, exceed the amount of recovery effected by an injured insured after the deduction of reasonable attorney's fees and expenses necessary in securing such recovery.The phrases 'reasonable attorney's fees' and other 'reasonable expenses,' are employed in the first and second sentences of the statute to fix such limitation upon the reimbursement rights of a PIP insurer and as used, in the context of the statute, operate to give priority to reasonable attorney's fees and expenses incurred by the injured insured in obtaining recovery over the reimbursement rights of the PIP insurer where the recovery is less than the sum of PIP benefits, reasonable attorney's fees and expenses all as more fully set forth in the opinion.

9.This court does not decide nor weigh beneficial results flowing from any particular legislative policy.

10.In an action, wherein an injured PIP insured recovered damages against a tort-feasor, which were in excess of the PIP benefits received, plus reasonable attorney's fees and expenses, the record is examined and it is held: The trial court did not err in finding the intervenor PIP insurer was entitled to full reimbursement of PIP benefits by repayment out of the recovery made by PIP insured.

Eugene C. Riling of Riling, Burkhead & Rhudy, Chartered, Lawrence, argued the cause and was on the brief for appellant.

J. H. Eschmann of Ascough, Bausch & Eschmann, Topeka, argued the cause and was on the brief for appellee.

L. M. Cornish of Glenn, Cornish & Leuenberger, and Mark L. Bennett, Sr., of Davis & Bennett, Topeka, were on the brief for The Kan. Ass'n of Property and Cas. Ins. Companies, Inc.; American Mut. Ins. Alliance; Nat. Ass'n of Independent Insurers; Nat. Ass'n of Mut. Ins. Companies; and American Ins. Ass'n, as amici curiae.

James Yates, Kansas City, and Carol Duffy McDowell, Topeka, were on the brief for The Kan. Trial Lawyers Ass'n, as amici curiae.

Robert L. Howard and William Sampson of Foulston, Siefkin, Powers & Eberhardt, Wichita, were on the brief for Kan. Ass'n of Defense Counsel, as amici curiae.Aubrey G. Linville of Clark, Mize & Linville, Salina; Roger D. Stanton of Weeks, Thomas, Lysaught, Bingham & Mustain, Chtd., Kansas City; and H. E. Jones of Hershberger, Patterson, Jones & Roth, Wichita, of counsel.

Michael S. Mullen, Sp. Asst. Atty. Gen., and Jody R. Olberding, Topeka, were on the brief for Fletcher Bell, Com'r of Ins. of the State of Kan., as amici curiae.

KAUL, Justice:

This appeal is from a judgment of the trial court construing certain provisions of the Kansas automobile injury reparations act, commonly referred to as the no-fault insurance law.(K.S.A.1975 Supp. 40-3101, et seq.)In this opinion the law will be referred to as the K.A.I.R.A. or the no-fault act.The primary question presented is whether defendant-appellee, Farmers Insurance Company, Inc., insurer of plaintiff-appellant, is entitled to reimbursement, pursuant to K.S.A.1975 Supp. 40-3113(a), in the full amount of personal injury protection (PIP) benefits previously paid to plaintiff without a deduction for attorney fees and costs of litigation.

Pertinent facts are not in dispute and may be summarized.Plaintiff Easom sustained personal injuries in a collision between her automobile and one driven by Gary A. Hill.Defendant promptly paid plaintiff $4,731.31 in PIP benefits.Subsequently, plaintiff filed an action against Hill and his employer Harris claiming $20,000.00 in damages for injuries sustained.Plaintiff retained her attorneys on a contingent fee contract of one-third of the amount recovered from Hill and Harris or their insurer.Hill and Harris denied liability and also challenged the extent of plaintiff's injuries.In discovery proceedings, depositions of plaintiff and Hill were taken.While the case was pending, and before trial, plaintiff settled with Hill and Harris for $9,500.00 and judgment was entered by the trial court in that amount on November 3, 1975.On the next day, Farmers filed its petition to intervene in said action, claiming a lien and requesting full reimbursement of all PIP benefits paid to plaintiff.Prior to filing its petition to intervene, Farmers had taken no part in the action although it had been notified of the filing of the suit by plaintiff's attorneys and that they were claiming an attorneys' lien for one-third of all moneys collected by plaintiff.There was no agreement for representation between Farmers and plaintiff's attorneys nor was there any contract between plaintiff or her attorneys with Farmers relative to plaintiff's interest in the recovery.

The record discloses that an 'Inter-Company Reimbursement Notification' was served by Farmers on Patrons Insurance Company, the insurer of defendant Harris.The notification informed Patrons that investigation of the accident by Farmers indicated that liability rested with Patrons' insurer and that Farmers was requesting reimbursement under K.A.I.R.A. for PIP benefits paid.Notification by Farmers was acknowledged by attorneys for Patrons, who informed Farmers that its claim for reimbursement would be honored in connection with any final disposition of the claim.

Plaintiff and her attorneys resisted Farmers' claim for reimbursement in full of PIP benefits paid to plaintiff.Plaintiff contended that the judgment entered on November 3 was res judicata as to Farmers' petition to intervene and that Farmers was collaterally estopped from asserting its claim for reimbursement after judgment had been entered.

The trial court permitted Farmers to intervene and, after receiving briefs and hearing arguments, ruled that Farmers was entitled to reimbursement for the full amount of PIP benefits paid to plaintiff; namely, the sum of $4,731.31.This appeal followed.

While plaintiff reasserts res judicata and collateral estoppel her principal argument on appeal goes to the question whether an insurer is to be charged with a reasonable attorney fee and a share of the costs of litigation under K.S.A.1975 Supp. 40-3113(a) where an insured has secured a judgment against or a settlement with a negligent third party sufficient to recoup the entire amount of PIP benefits.

Oral arguments were first heard by this court on September 23, 1976.After considering the arguments, briefs of the parties and briefs of amici curiae, the court determined that resolution of the issue presented required an interpretation of 40-3113(a) in its entirety and that further briefing and arguments would benefit the court in disposing of the appeal.We also were informed that two other appeals, Jaremko v. Jones, 221 Kan. 444, 560 P.2d 136, andDavis v. Western Insurance Companies, 221 Kan. 441, 560 P.2d 133, both decided this day, involved the same principal issue, although differing somewhat as to facts and with reference to the positions taken by the respective parties.We directed reargument in the instant appeal and scheduled arguments in the other two appeals for the December 1976 docket.As a part of our order we requested briefs and arguments on two related points in connection with an interpretation of the statute which were not fully treated by the parties in their original briefs.Arguments in all three appeals were heard on December 10, 1976, and we have received comprehensive and helpful briefs from all parties and amici curiae.

We have examined the K.A.I.R.A. in two previous appeals (Manzanares v. Bell, 214 Kan. 589, 522 P.2d 1291;andFarm & City Ins. Co. v. American Standard Ins. Co., 220 Kan. 325, 552 P.2d[221 Kan. 419] 1363.)In Manzanares we were confronted with constitutional challenges to the original act (Substitute for House BillNo. 1129, Laws 1973, Chapter 198) and the present act which is a revised version of the 1973 act.The...