Federal Kemper Ins. Co. v. Arnold, 19250

• Decision Date: 17 May 1990
• Docket Number: No. 19250,19250
• Citation: 183 W.Va. 31,393 S.E.2d 669
• Court: West Virginia Supreme Court
• Parties: FEDERAL KEMPER INSURANCE COMPANY v. Carol R. ARNOLD, Administratrix of the Estate of William E. Arnold, Deceased.

Page 669

393 S.E.2d 669

183 W.Va. 31

FEDERAL KEMPER INSURANCE COMPANY v. Carol R. ARNOLD, Administratrix of the Estate of William E Arnold, Deceased.

No. 19250.

Supreme Court of Appeals of West Virginia.

May 17, 1990.

[183 W.Va. 32] Syllabus by the Court

1. "A provision in an insurance policy providing for the subrogation of the insurer to the rights of the insured to the extent that medical payments are advanced to such insured by the insurer is distinct from an assignment of a tort claim and is not invalid as against the public policy of this State." Syllabus Point, The Travelers Indemnity Co. v. Rader, 152 W.Va. 699, 166 S.E.2d 157 (1969).

2. A valid subrogation clause in an automobile insurance contract is enforceable within its terms against any covered person who receives benefits under the policy, even if other than the named insured.

3. When an automobile insurer is reimbursed, under a subrogation clause in the insurance contract, for benefits paid to a covered person that such person has then successfully recovered from a third party, the reimbursement should be reduced by the insurer's pro rata share of the cost to the covered person of obtaining the recovery against the third party.

Peggy L. Collins, Larry G. Kopelman, L.C., Charleston, for Carol R. Arnold.

Robert J. Louderback, Louderback & Louderback, Charleston, for Federal Kemper Ins. Co.

NEELY, Chief Justice:

The defendant below in this subrogation action appeals entry of summary judgment against her in the Circuit Court of Kanawha County.

Defendant's decedent, William E. Arnold, was killed in an automobile accident on 11 August 1987, which also involved a truck driven by Cecil H. Rice IV. Mr. Arnold and his wife, Carol, were operating with permission an automobile owned by Barbara F. White and insured by the Federal Kemper Insurance Company. The policy issued by Kemper to Mrs. White included a medical payments clause for up to $5000 of medical or funeral expenses incurred by a covered person and a subrogation clause.

The subrogation clause in Mrs. White's contract with Kemper provides, in pertinent part:

OUR RIGHT TO RECOVER PAYMENT

A. If we make a payment under this policy and the person to or for whom payment was made has a right to recover damages from another, we shall be subrogated to that right. That person shall do:

1. Whatever is necessary to enable us to exercise our rights; and

2. Nothing after loss to prejudice them.

. . . . .

B. If we make a payment under this policy and the person to or for whom payment is made recovers damages from another, that person shall:

1. Hold in trust for us the proceeds of the recovery; and

2. Reimburse us to the extent of our payment.

Mr. and Mrs. Arnold were covered persons under the policy. Covered expenses were incurred by the Arnolds for at least $5000, and a demand for reimbursement was made on Kemper. Kemper paid the $5000 claim, reserving in writing its subrogation rights.

Mrs. Arnold, as administratrix of her husband's estate, then filed a wrongful death action against Mr. Rice, without giving notice to Kemper. The action was settled for $215,000, which was paid in full by Mr. Rice's insurance company. One-third of the recovery, or $71,667, went to Mrs. Arnold's lawyer, leaving a net recovery of $144,333.

After entry of the judgment against Mr. Rice, Kemper brought this action in the Circuit Court of Kanawha County to recover from Mr. Arnold's estate, under the subrogation clause in the insurance contract with Mrs. White, the $5000 it had paid Mr. Arnold's estate as reimbursement for medical or funeral expenses. On review of the undisputed facts in the case, the insurance contract, and the law, the circuit court granted Kemper's motion for summary judgment for the full amount of $5000.

Mrs. Arnold appeals the judgment to this Court, claiming (1) the subrogation clause in the Kemper-White insurance contract is void as against public policy and (2) in the...