Hill v. State Farm Mut. Auto. Ins. Co., s. 20335

• Court: Supreme Court of Utah
• Citation: 765 P.2d 864
• Docket Number: Nos. 20335,20391,s. 20335
• Parties: Robert Kent HILL, individually and as Personal Representative of the heirs of Tamara Elaine Hill, deceased, and Lorin Dean Caldwell, individually and as personal representative of the heirs of Troy Neil Caldwell, deceased, Plaintiffs and Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant, Third-Party Plaintiff-Appellee and Cross-Appellant, v. Kenneth Paul BRYAN, Third-Party Defendant and Cross-Appellee.
• Decision Date: 01 November 1988

Page 864

765 P.2d 864 Robert Kent HILL, individually and as Personal
Representative of the heirs of Tamara Elaine Hill, deceased,
and Lorin Dean Caldwell, individually and as personal
representative of the heirs of Troy Neil Caldwell, deceased,
Plaintiffs and Appellants,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant,
Third-Party Plaintiff-Appellee and Cross-Appellant,
v.
Kenneth Paul BRYAN, Third-Party Defendant and Cross-Appellee. Nos. 20335, 20391. Supreme Court of Utah. Nov. 1, 1988.

Page 865

Wallace R. Lauchnor, Salt Lake City, for Robert Kent Hill and Lorin Dean Caldwell.

Glenn C. Hanni, R. Scott Williams, Salt Lake City, for State Farm Mut. Auto. Ins. Co.

J. Anthony Eyre, Heinz J. Mahler, Salt Lake City, for Kenneth Paul Bryan.

DURHAM, Justice:

Plaintiffs appeal the trial court's grant of summary judgment in favor of defendant, arguing that numerous triable issues of fact exist and claiming bad faith. State Farm appeals from a judgment in favor of third-party defendant Bryan. We reverse the judgment against plaintiffs and affirm the judgment against State Farm.

On June 6, 1982, an automobile owned and driven by Kenneth Paul Bryan, who was legally intoxicated, ran a red light and struck a vehicle owned by plaintiff Lorin Caldwell and driven by Caldwell's son. Plaintiff Robert Hill's daughter was an occupant in Caldwell's vehicle. The force of the impact was fatal to both Caldwell's son and Hill's daughter. At the time of the accident, Caldwell's vehicle was insured by State Farm; Bryan's vehicle was insured by Cumis Insurance International. State Farm paid $5,510 to Caldwell for property damage to his vehicle. Shortly thereafter, Cumis offered to tender the policy limits of $50,000 on Bryan's policy to plaintiffs in an attempt to satisfy plaintiffs' claims. State Farm thereupon notified Cumis of its subrogation claim for the amount it had paid Caldwell for property damage.

Both plaintiffs contacted attorneys, who filed separate suits against Bryan and independently investigated the extent of his financial holdings. These investigations revealed that, aside from the Cumis policy, Bryan was insolvent. After this discovery, Caldwell and Hill withdrew their suits against Bryan and made a claim with Cumis for the policy proceeds, which were to be divided evenly between them. Cumis refused to simply deliver one-half to each plaintiff because of State Farm's subrogation claim. Plaintiffs therefore sought a waiver of claim from State Farm, arguing that the value of their wrongful death actions far exceeded Bryan's policy limits. State Farm refused to waive its subrogation claim and apparently urged plaintiffs to litigate their suits against Bryan so that the amount of their damages could be judicially ascertained. Plaintiffs determined the cost of acquiring such a judicial determination to be prohibitive.

Plaintiffs signed separate releases of claims in favor of Bryan, Cumis, and other possible defendants. In return, Cumis tendered $22,245 to Hill and $27,755 to Caldwell. ¹

Because Cumis refused to proffer policy proceeds unless State Farm's subrogation interest was accounted for, its tender to Caldwell consisted of a check for $22,245 made to Caldwell alone and a check for $5,510 made jointly to Caldwell and State Farm. The latter draft corresponded to the amount of property damage incurred by Caldwell and accounted for State Farm's subrogation claim. The release signed by Caldwell recognized the dispute surrounding the $5,510 by stating:

[A] controversy exists between State Farm Mutual Insurance Company and Lorin D. Caldwell as to who is entitled to the said amount, and that the matter will be resolved between the two or by payment

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into court or by judicial determination.

Plaintiffs and State Farm failed to reach an accord for more than one year after the release was signed. Plaintiffs filed suit against State Farm, seeking payment of $5,510 and alleging bad faith on behalf of State Farm for its refusal to waive the subrogation claim. In turn, State Farm filed a third-party claim against Bryan for subrogation and indemnity. State Farm also counterclaimed against plaintiffs for $5,510.

State Farm filed a motion for summary judgment on both plaintiffs' complaints and on its own counterclaim. The trial court granted the motion, awarding State Farm $5,510, interest, and attorney fees. The court also decreed that State Farm had no cause of action against Bryan.

In reviewing a grant of a motion for summary judgment, all doubts or uncertainties concerning issues of fact are viewed in the light most favorable to the party opposing summary judgment. Mountain States Tel. & Tel. Co. v. Atkin, Wright & Miles, 681 P.2d 1258, 1261 (Utah 1984). Where a triable issue of fact exists, the cause will be remanded for determination of that issue.

Defendant State Farm asserts that it is subrogated to the rights of plaintiffs and that State Farm should thereby recover the amount it paid for property damage from the amount plaintiffs recovered from the third-party tort-feasor. Plaintiffs argue that State Farm's subrogation rights do not arise until plaintiffs have been made whole.

Subrogation is an equitable doctrine and is governed by equitable principles. This doctrine can be modified by contract, but in the absence of express terms to the contrary, the insured must be made whole before the insurer is entitled to be reimbursed from a recovery from the third-party tort-feasor. Lyon v. Hartford Accident & Indem. Co., 25 Utah 2d 311, 318, 480 P.2d 739, 744 (1971). Noncontractual subrogation rights will only be enforced on behalf of a party maintaining a superior equitable position, and the insurer's equitable position cannot be superior to the insured's unless the insured has been completely compensated. Transamerica Ins. Co. v. Barnes, 29 Utah 2d 101, 505 P.2d 783 (1972); see also Culver v. Insurance Co. of N. Am., 221 N.J. Super. 493, 535 A.2d 15 (1987); Westendorf v. Stasson, 330 N.W.2d 699 (Minn.1983).

When the amount of damages incurred by the insured has been judicially ascertained, the extent of the subrogation right of the insurer is usually undisputed. The insured is not entitled to double...