Fetch v. Quam

• Decision Date: 13 April 1995
• Docket Number: No. 940257,940257
• Citation: Fetch v. Quam, 530 N.W.2d 337 (N.D. 1995)
• Parties: Greg FETCH, Personal Representative of the Estate of Waylin Fetch, Plaintiff and Appellee, v. Kelly M. QUAM, Defendant, v. AMERICAN HARDWARE MUTUAL INSURANCE COMPANY, Intervenor and Appellant. Civ.
• Court: North Dakota Supreme Court

Page 337

530 N.W.2d 337

Greg FETCH, Personal Representative of the Estate of Waylin

Fetch, Plaintiff and Appellee, v. Kelly M. QUAM, Defendant, v. AMERICAN HARDWARE MUTUAL INSURANCE COMPANY, Intervenor and Appellant.

Civ. No. 940257.

Supreme Court of North Dakota.

April 13, 1995.

Carpenter Offices, Bismarck, for plaintiff and appellee; argued by Deborah J. Carpenter. Appearance by Kathleen J. Hall.

Pearce & Durick, Bismarck, for intervenor and appellant; argued by David E. Reich.

MESCHKE, Justice.

American Hardware Mutual Insurance Company (American) appealed from a judgment for Waylin S. Fetch for damages from injuries in a collision with an uninsured motor vehicle, an order denying its motion to reconsider and to reduce costs, and interlocutory orders holding the uninsured driver in default and limiting American's participation in the action. We reverse and remand for a new trial.

In May 1988, Fetch was injured in a collision between his motorcycle and a pickup driven by Kelly M. Quam. Fetch was eastbound on East Main Street in Mandan. Quam had been westbound on East Main Street, but abruptly turned left to head south at an intersection in front of Fetch. Fetch sued Quam on November 21, 1990. Quam did not respond to the complaint or otherwise appear. Quam was uninsured.

Fetch had uninsured motorist coverage through American's insurance policy with Fetch's father, and American moved to intervene in Fetch's action against Quam on December 20, 1990. On January 7, 1991, Fetch moved for a default judgment against Quam. On August 28, 1991, the trial court held Quam in default. On September 11, 1991, the trial court ruled on the scope of American's intervention:

In this state contributory negligence is an affirmative defense. If not raised by answer, it is waived. See Rule 8(c), N.D.R.Civ.P. Since the defendant is in default, questions of contributory negligence are not in issue.

* * * * * *

I will allow, therefore, the insurance company to question, in a hearing convened under Rule 55(a)(2), N.D.R.Civ.P., whether there was negligence on the part of the defendant in default and the extent and the amount of damages sustained by the plaintiff as a proximate result of the accident. Contributory negligence will not be an issue.

After the restricted default hearing, the trial court found that Fetch had established special damages for medical costs of $10,697.44 and damages of $125,000 for Fetch's "injuries and pain and suffering." Judgment was entered for Fetch against American for $135,697.44 in damages, plus costs. American appealed.

The trial court allowed American to intervene in the action to contest whether there was fault by Quam, but would not allow American to show comparative fault by Fetch. American contends that the trial court erred in so limiting the extent of its participation. We agree.

At the time of the accident, NDCC 26.1-40-14(1) directed:

No motor vehicle liability insurance policy ... may be delivered ... in this state with respect to any motor vehicle registered or principally garaged in this state unless coverage is provided ... for bodily injury or death for the protection of insureds who are legally entitled to recover damages from owners or operators of uninsured motor vehicles....

American's insurance policy to Fetch promised: "We will pay damages which an 'insured' is legally entitled to recover from the owner or operator of an 'uninsured motor vehicle' because of 'bodily injury.' "

An insurer with uninsured motorist coverage will often want to intervene in a suit by the insured against an uninsured motorist in order to defend against the insured's claim, thereby reducing or refuting its liability to its insured. There are differing views among the various jurisdictions on whether or not intervention should be permitted, and, if permitted, the extent of the intervention allowed. Francis M. Dougherty, Annotation, Right of Insurer Issuing "Uninsured Motorist" Coverage to Intervene in Action by Insured Against Uninsured Motorist, 35 A.L.R.4th 757 (1985). We have not ruled on the question before this case.

"The overwhelming majority of courts have allowed an uninsured motorist insurance carrier to intervene in a tort action between its insured and an uninsured tortfeasor." Lima v. Chambers, 657 P.2d 279, 281 (Utah 1982). Generally, courts favor intervention and joinder of all parties in one action as a convenient method of settling all related controversies on the same subject. Keel v. MFA Ins. Co., 553 P.2d 153 (Okla.1976). Heisner v. Jones, 184 Neb. 602, 169 N.W.2d 606, 611-12 (1969), describes the reasons for allowing unrestricted intervention:

We therefore hold that an uninsured motorist's carrier may intervene in an action between its insured and the uninsured tort-feasor in order to protect itself on the issues of liability and damages arising under the uninsured motorist's provisions of its insurance policy.... The carrier would not be bound unless given full notice and adequate opportunity to intervene and defend when the insured litigates the issues of liability and damages with the uninsured motorist tort-feasor. To give the uninsured motorist's carrier the right to intervene is to give assurance that it may litigate the issues and at the same time avoid the multiplicity of suits and the harassment of the insured by the necessity to litigate his rights twice.

Several other reasons have been given by other courts and commentators. "[T]he cumulative effect of the spirit of the Indiana Trial Rules, the interests of justice, the avoidance of multiple litigation and the conservation of judicial time compels our conclusion to allow intervention by the insurer." Vernon Fire & Cas. Ins. Co. v. Matney, 170 Ind. App. 45, 351 N.E.2d 60, 64 (1976). "[I]ntervention logically leads to the prevention of conflicting results in the outcome of two actions to decide the identical questions." Id. 351 N.E.2d at 64. To effectively contest the amount an insured is "legally entitled" to recover from an uninsured motorist, an intervening insurer must be able to defend in the same ways that a defendant could have; otherwise, the intervenor is merely being allowed to "sit in court and watch plaintiff take a default from the vantage point of counsel table instead of from the back benches." Beard v. Jackson, 502 S.W.2d 416, 419 (Mo.App.1973). The reasons for unrestricted intervention are persuasive.

The purpose of mandatory uninsured-motorist insurance is "protection equal to that which would be afforded if the offending motorist carried liability insurance." 8C John A. Appleman & Jean Appleman, Insurance Law & Practice § 5086, p. 307 (1981). "[T]he insurer stands in the shoes of the uninsured motorist, and must pay if he would be required to pay." Id. at 309-10. With uninsured motorist coverage, a "victim ... collects under her own policy the compensation that the liability carrier would have paid if the uninsured motorist had been insured." McIntosh v. State Farm Mut. Auto. Ins. Co., 488 N.W.2d 476, 479 (Minn.1992). In effect, the insurer stands behind the uninsured motorist for the benefit of its insured.

For some courts, the conflict of interest implicit in an insurer contesting its own insured's claim prevents the insurer from complete intervention in a suit by its insured against an uninsured motorist. As the court said in Allstate Ins. Co. v. Hunt, 450 S.W.2d 668, 671 (Tex.Civ.App.1970): "Serious ethical problems arise when an insurance company seeks to participate in the defense of an uninsured motorist." The court explained:

Interestingly, in any situation where the insurance company is permitted to undertake a dual representation the most favorable result for the company is for both its insured and the uninsured motorist to be found contributorily negligent. Such a determination would preclude the insurance company's liability. To contend for this most favorable result, however, makes for a conflict of interest between the insurance company and both the insured and the uninsured motorist.

Id. at 672. The court did not "believe that an insurance company should be permitted to voluntarily place itself in a position under an ancillary policy provision where it cannot ethically fulfill its basic contractual obligation to defend its insured." Id. at 673. However, contributory negligence is no longer a complete bar in North Dakota. See Wentz v. Deseth, 221 N.W.2d 101 (N.D.1974). Today, comparative negligence affects the amount of recovery more than liability. See NDCC 32-03.2-02. Therefore, we are skeptical of reasoning that prohibits intervention.

Our procedural rules authorize an intervention of right to protect an interest in the subject of an action. NDRCivP 24(a) directs:

Upon timely application anyone must be permitted to intervene in an action if: ... the applicant claims an interest relating to the property or transaction that is the subject of the action and ... disposition of the action may as a practical matter impair or impede the applicant's ability to protect that interest, unless the applicant's interest is adequately represented by existing parties.

No question has been raised in this case about the timeliness of American's request to intervene of right.

Because American was an intervenor of right under NDRCivP 24(a), rather than a permissive intervenor under NDRCivP 24(b), it is doubtful the trial court could impose any substantive restrictions upon American's intervention. Commentators on FRCivP 24, the forerunner of our rule, have distinguished interventions of right from permissive interventions. Professors Moore and Kennedy write: "There seems to be no doubt that an intervenor with a right to intervene" may question the sufficiency of a complaint, contest a claimant's right to recover a certain amount of damages, or press a claim of its own to reduce the value of other claims. 3B James W. Moore & John E. Kennedy, Moore's Federal Practice p 24.16 (2d ed....