Jones v. Aetna Cas. & Sur. Co.

• Decision Date: 23 July 1973
• Docket Number: No. 25823,25823
• Citation: 497 S.W.2d 809
• Court: Missouri Court of Appeals
• Parties: Stella JONES, Respondent, v. The AETNA CASUALTY & SURETY COMPANY, Appellant.

Page 809

497 S.W.2d 809

Stella JONES, Respondent, v. The AETNA CASUALTY & SURETY COMPANY, Appellant.

No. 25823.

Missouri Court of Appeals, Kansas City District.

July 23, 1973.

John R. Gibson and John W. Cowden, Kansas City, for appellant; Morrison, Hecker, Cozad, Morrison & Curtis, Kansas City, of counsel.

George T. O'Laughlin and William E. Simmons, Kansas City, for respondent. Miller & O'Laughlin, Kansas City, of counsel.

Before DIXON, C.J., and SHANGLER, PRITCHARD, SWOFFORD, WASSERSTROM and SOMERVILLE, JJ.

PRITCHARD, Judge.

The principal issue on this appeal is whether respondent may settle with a tort feasor for a claim for personal injuries and reserve a claim for medical expense reimbursement against appellant Aetna in the face of a 'Reimbursement and Trust Agreement' clause in the policy of automobile insurance. The trial court granted judgment for respondent for her medical expenses, $2,842.45, plus interest at 6% per annum from November 20, 1968, and $284.25 25 damages for vexatious refusal to pay her medical expenses, together with $900.00 attorney fees.

On June 24, 1968, Aetna issued its 'Automobile Policy (Auto-Rite)' to respondent's son, Kenneth K. Jones, by which it agreed to pay all reasonable medical expense incurred by the named insured or a relative while occupying a non-owned automobile. When injured in a collision, respondent was occupying a non-owned automobile owned and driven by Rosalie Edgeman on September 22, 1968.

Thereafter, respondent made a timely claim against Aetna for payment of her medical expenses. Aetna then presented to respondent an 'Auto-Rite Medical Expense Statement and Agreement' which respondent refused to sign. The pertinent portions of the proffered agreement are these:

'To the extent that The Aetna Casualty and Surety Company, in accordance with the terms of the Medical Expense Coverage provided by the Auto-Rite Policy issued to the above named policy-holder, has made or shall hereafter make payment to or for the benefit of the Undersigned on account of medical expense incurred by the Undersigned because of bodily injury to the above named person as the result of the above described accident, the Undersigned

(c) agrees to reimburse Aetna Casualty & Surety Company to the extent of such payment immediately upon collection of damages whether by action at law, settlement or otherwise and the undersigned hereby authorizes and directs his attorney to reimburse Aetna Casualty the amount of any such payment which may be made from any amount due the undersigned as his share of any recovery for his bodily injury in the event of a settlement or recovery against any person or organization legally responsible for the bodily injury because of which such payment is or shall be made;

(d) affirms the right of Aetna Casualty and Surety Company in accordance with all of the terms of the Reimbursement and Trust Agreement of the policy to have lien to the extent of such payment notice of which may be given to the person or organization causing such bodily injury, his agent, his insurer or a court having jurisdiction on the matter.'

Auto-Rite SP--25 endorsement, 'Amendment of Medical Expense Coverage', attached to the policy, provides:

'It is agreed that the following Condition is substituted for the second paragraph of the Subrogation Condition--REIMBURSEMENT AND TRUST AGREEMENT. In the event of payment to any person under the Medical Expense Coverage:

(a) the Company shall be entitled to the extent of such payment to the proceeds of any settlement or judgment that may result from the exercise of any rights of recovery of such person against any person or organization legally responsible for the bodily injury because of which such payment is made; and the Company shall have a lien to the extent of such payment, notice of which may be given to the person or organization causing such bodily injury, his agent, his insurer or a court having jurisdiction in the matter;

(b) such person shall hold in trust for the benefit of the Company all rights of recovery which he shall have against such other person or organization because of such bodily injury;

(c) such person shall do whatever is proper to secure and shall do nothing after loss to prejudice such rights;

(d) such person shall execute and deliver to the Company such instruments and papers as may be appropriate to secure the rights and obligations of such person and the Company established by this provision.'

The Reimbursement and Trust Agreement, above, is the substitute for the second paragraph of the Subrogation Paragraph 14 of the policy which is: 'In the event of any payment under the Medical Expense Coverage of this policy, Aetna Casualty shall be subrogated to all the rights of recovery therefor which the injured person or anyone receiving such payment may have against any person or organization and such person shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights. Such person shall do nothing after loss to prejudice such rights.'

On November 4, 1968, respondent filed her petition for damages for personal injuries in the Platte County Circuit Court against the tort feasor, Rosalie Mae Edgemen. Respondent alleged that she received multiple injuries as a result of Rosalie's negligence, and that she had been confined to hospitals and had been under the care of physicians. The prayer for damages was for $25,000.00. On May 15, 1969, respondent signed a release to Rosalie in consideration of $11,750.00. The release provided:

'It is agreed notwithstanding any language to the contrary herein that medical expenses are not included in nor paid by such payment. The undersigned is seeking payment of such expenses under a policy of the Aetna Casualty and Surety Company and agrees to look solely to that source for payment of such expenses.'

Kroeker v. State Farm Mutual Automobile Ins. Co., 466 S.W.2d 105 (Mo.App.1971), is relied upon by Aetna to give validity to its Reimbursement and Trust Agreement as not amounting to an assignment of a cause of action for personal injuries. The court there extensively reviewed the traditional differences between legal meanings and legal effect of the terms 'assignment' and 'subrogation.' It is argued that the Reimbursement and Trust Agreement in Kroeker very similar in language to the one here, was in effect held to be effective to secure the subrogation right, and that the language here in the policy should not be construed to be an assignment or transfer of title of a cause of action, where in Kroeker it did not do so. This argument overlooks the important fact that the distinction made in Kroeker between assignment and subrogation was not because one was permissable and the other not, but rather because an assignment would have given the insurer a direct cause of action in its own name, while subrogation does not. That ruling in no way disturbed the established Missouri rule that an insurer may not acquire part of the insured's rights against a tort feasor (other than an uninsured motorist) by reason of payment of medical expense, either by assignment or by subrogation.

It was held in Travelers Indemnity Company v. Chumbley, 394 S.W.2d 418, 424 (Mo.App.1965), 'Since our Missouri courts consistently have followed the common law rule prohibiting the assignment of a cause of action for personal injury (see cases cited marginally in note 12), we come to the same conclusion as that reached in Peller, supra.' (Peller v. Liberty Mutual Fire Ins. Co., 220 Cal.App.2d 610, 34 Cal. Rptr. 41, 1963). Both the Chumbley and Peller cases involved the validity of subrogation clauses in favor of insurers upon payment of medical expense coverage in automobile policies in the form, supra, that Aetna formerly had as a part of its policy. Other cases following Chumbley likewise holding that clauses for reimbursement for medical expense payments are invalid because they amount to an assignment of a cause of action for personal injuries which is nonassignable and because they are against public policy, are: Forsthove v. Hardware Dealers Mutual Fire Ins. Co., 416 S.W.2d 208 (Mo.App.1967) (reimbursement asserted under the equitable theory of restitution); and Chuning v. Calvert, 452 S.W.2d 580 (Mo.App.1970) (reimbursement sought on the theory that an ordinance had created a right of subrogation or indemnity).

In paragraph (a) of the Trust Agreement it is provided that the Company shall be entitled to the extent of (medical expense) payment to the proceeds of any settlement or judgment that may result from the exercise of any rights of recovery of such person against any person or organization legally responsible for the bodily injury because of which such payment is made. Paragraph (b) provides 'such person shall hold in trust for the benefit of the Company all rights of recovery which he shall have against such other person or organization because of such bodily injury.' (Italics added.) In addition to the foregoing italicized words, it is most significant that the Trust Agreement goes on: '* * * (A)nd the Company shall have a lien to the extent of such payment, notice of which may be given to the person or organization causing such bodily injury, his agent, his insurer or a court having jurisdiction in the matter; * * * (c) such person shall do whatever is proper to secure and shall do nothing after loss to prejudice such rights; (d) such person shall execute and deliver to the Company such instruments and papers as may be appropriate to secure the rights and obligations of such person and the company established by this provision.'

Under paragrah (b), the insured (respondent) agrees to hold in trust for the benefit of the company all rights of recovery (against the tort feasor). What is attempted to be transferred 'in trust' is the insured's right of action for a portion of his claim for personal injuries--a right of recovery. This is in itself a violation...