Ferrell v. Nationwide Mut. Ins. Co.

• Decision Date: 08 July 2005
• Docket Number: No. 32050.,32050.
• Citation: 617 S.E.2d 790
• Court: West Virginia Supreme Court
• Parties: Brenton L. FERRELL and Kathleen D. Ferrell, Plaintiffs Below, Appellees, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Defendant Below, Appellant.

617 S.E.2d 790

Brenton L. FERRELL and Kathleen D. Ferrell, Plaintiffs Below, Appellees, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Defendant Below, Appellant.

No. 32050.

Supreme Court of Appeals of West Virginia.

Submitted: March 22, 2005.

Filed: July 8, 2005.

Janet C. Williamson, Esq., Shott, Gurganus, Williamson & Magann, Bluefield, for Appellees.

Barbara J. Keefer, Esq., Maria Marino Potter, Esq., MacCorkle, Lavender, Casey & Sweeney, PLLC, Charleston, for Appellant.

Justice STARCHER delivered the Opinion of the Court.

STARCHER, J.

In this declaratory judgment action between an insurance company and its insureds from the Circuit Court of Mercer County, the circuit court certifies a question concerning the validity of certain insurance policy language. The language permits the insurance company to seek "reimbursement" of medical payments, made to an insured, from the insured when the insured has recovered damages for the same medical expenses from a negligent third party. The circuit court's question asks whether such language is enforceable when both the insured and the negligent third party are insured by the same insurance company.

As set forth below, when both the insured and the negligent third party are insured by the same insurance company, we find that the insurance company may recoup medical expense payments from the insured's recovery against the negligent third party, when the policy allows the insurance company to seek "reimbursement" and the insured's recovery clearly duplicates the medical expense payments.

I. Facts & Background

On January 19, 2002, a Dodge Neon driven by the plaintiff-below, Kathleen D. Ferrell,¹ was struck by another vehicle driven by Kermit D. Davis. Both vehicles were insured by the defendant below, Nationwide Mutual Insurance Company ("Nationwide").

Mrs. Ferrell and her husband, plaintiff-below Brenton L. Ferrell, were injured in the collision. The plaintiffs initially sought coverage for their medical bills from the Nationwide policy that covered the Dodge Neon. The policy contained "Family Compensation Coverage" that provided for the payment of any medical expenses that resulted from any accidental bodily injury sustained by any person while occupying the vehicle, regardless of fault. Nationwide paid Mrs. Ferrell $2,982.61 for her medical expenses, and paid Mr. Ferrell $1,884.76.

Thereafter, the Ferrells presented a claim for damages against Mr. Davis's Nationwide liability insurance policy. As part of their claim, the Ferrells submitted the same medical expenses for which they had previously received payment from Nationwide under their "Family Compensation Coverage." Nationwide offered to settle Mrs. Ferrell's claim against the tortfeasor for $10,000.00, and to settle Mr. Ferrell's claim for $6,000.00.

The plaintiffs accepted the offers of settlement on the condition that Nationwide would waive any right to repayment or "subrogation" of its medical payments to the plaintiffs under their "Family Compensation Coverage." Nationwide, citing to language contained in the policy covering the Dodge Neon, refused to waive its right to repayment, claiming that the policy permits Nationwide to demand "reimbursement" from its insured for any medical payments made.

Nationwide acknowledged the existence of a dispute regarding the policy language. So on June 10, 2003, Nationwide issued four separate checks to the plaintiffs: two of the checks were payable both to the plaintiffs and to Nationwide, and were essentially for the amounts paid to the plaintiffs under the "Family Compensation Coverage;" and the other two checks were for the balance, payable exclusively to the plaintiffs.²

The plaintiffs thereafter filed the instant declaratory judgment action to determine whether Nationwide was entitled, under the language of its policy, to pursue "subrogation" or "reimbursement" of medical payments made under the policy from the plaintiffs' settlement against the tortfeasor.

II. Certified Question

The circuit court's certified question centers upon policy language which is contained within "amendatory Endorsement 2256C" to the Nationwide "Century II Auto Policy" which covered the Dodge Neon. The pertinent portion of the policy states:

5. SUBROGATION

We have the right of subrogation under the:

. . .

c) Medical Payments;

d) Family Compensation;

. . .

coverages in this policy. This means that after paying loss to you or others under this policy, we will have the insured's right to sue for or otherwise recover such loss from anyone else who may be liable. Also, if the insured receives a recovery from any liable party, including another Nationwide insured, we may require the insured to reimburse us when the proceeds of recovery duplicate our payment. These provisions will be applied in accordance with state law. Any insured will sign such papers, and do whatever else is necessary, to transfer these rights to us and will do nothing to prejudice them.

The circuit court examined the language used by Nationwide in the policy and found it to be ambiguous. However, before formally ruling on whether or not Nationwide was entitled to "subrogation" or "reimbursement" of the medical payments it made to the plaintiffs, the circuit court chose to certify the following question to this Court:

Whether the policy provisions of the Century II Auto Policy as amended by Endorsement 2256C provide clear and unambiguous language which creates a contractual right to reimbursement of medical expense payments where an insured received a recovery from another Nationwide insured and the proceeds of that recovery duplicate the insurer's previous payment.

The circuit court answered the certified question "No."

III. Discussion

This Court employs a plenary standard of review when we answer certified questions. "The appellate standard of review of questions of law answered and certified by a circuit court is de novo." Syllabus Point 1, Gallapoo v. Wal-Mart Stores, Inc., 197 W.Va. 172, 475 S.E.2d 172 (1996). However, when a certified question is framed so that this Court is not able to fully address the law which is involved in the question, then this Court retains the power to reformulate the questions certified to it. Syllabus Point 3, Kincaid v. Mangum, 189 W.Va. 404, 432 S.E.2d 74 (1993).

This case centers on policy language permitting an insurance company to seek "reimbursement" of medical payments from an insured, and whether that language is enforceable when the insurance company insures both the insured and the tortfeasor who caused injury to the insured. We believe that the certified question from the circuit court, by asking the Court to rule on whether or not Nationwide's policy is ambiguous and whether the proceeds of the plaintiffs' recovery duplicate Nationwide's previous payment to the plaintiffs, is too fact-specific and detracts from the central issue of law that is involved in the question. We therefore reformulate the question as this:

May an insurance company seek reimbursement of medical expense payments made to an insured, where (a) the insurance policy allows the insurance company to seek "reimbursement" of those medical expense payments from the insured out of any recovery obtained by the insured from a third party; (b) the proceeds of the recovery from the third party duplicate the insurance company's medical expense payments to the insured; and (c) the insurance company is the liability insurer of the third party?

Generally speaking, West Virginia's public policy permits insurance companies to pursue "subrogation" of medical payments from their own insureds. See Syllabus, Travelers Indemnity Co. v. Rader, 152 W.Va. 699, 166 S.E.2d 157 (1969).³ However, while an insurance company may pursue subrogation against any insured who receives benefits under the policy if the insured successfully recovers from a tortfeasor, the insurance company must reimburse the insured its share of the attorneys' fees and costs of obtaining the recovery from the tortfeasor. See Syllabus Points 2 and 3, Federal Kemper Ins. Co. v. Arnold, 183 W.Va. 31, 393 S.E.2d 669 (1990).⁴

A different result occurs, however, when an insurance company seeks "subrogation" of medical expense payments from a plaintiff-insured when both the plaintiff-insured and the tortfeasor are insured by the same insurance company.

In Richards v. Allstate Ins. Co., 193 W.Va. 244, 455 S.E.2d 803 (1995), we concluded that when the insurance company insures both the injured plaintiff and the negligent defendant, and the plaintiff recovers from the defendant, the insurer cannot seek from the plaintiff "subrogation" of medical payments made to the plaintiff. In Richards, the plaintiffs were injured in an automobile accident with a third-party tortfeasor. The plaintiffs' insurance company, Allstate, paid the plaintiffs $4,000.00 pursuant to medical payments insurance coverage purchased by the plaintiffs. The plaintiffs later recovered $59,000.00 in a settlement from the tortfeasor — who, coincidentally, was also insured by Allstate. Allstate then sought to recover the $4,000.00 in medical payments from the plaintiffs by exercising its contractual right to "subrogation."

In concluding that the insurance company could not pursue "subrogation" from the plaintiff-insured, the Court in Richards analyzed the case in two steps. In the first step, the Court concluded that Allstate had no right to subrogation against the tortfeasor, because Allstate was also the tortfeasor's liability insurer. "In essence, it creates a situation where an insurance carrier is claiming a right of subrogation against itself." Richards, 193 W.Va. at 246, 455 S.E.2d at 805. The Court reasoned that:

To permit the insurer to sue its own insured for a liability covered by the insurance policy would violate these basic equity principles, as well as violate sound public policy. Such action, if permitted, would (1) allow the insurer to expend premiums collected...