Monte de Oca v. State Farm Fire & Cas. Co.

• Decision Date: 22 December 2004
• Docket Number: No. 3D03-1468., No. 3D03-661
• Citation: 897 So.2d 471
• Parties: Ifrain MONTE DE OCA, Appellant, v. STATE FARM FIRE & CASUALTY COMPANY, Appellee. Richard Snell, Appellant, v. Allstate Indemnity Company and Allstate Insurance Company, Appellees.
• Court: Florida District Court of Appeals

897 So.2d 471

Ifrain MONTE DE OCA, Appellant, v. STATE FARM FIRE & CASUALTY COMPANY, Appellee.

Richard Snell, Appellant, v. Allstate Indemnity Company and Allstate Insurance Company, Appellees.

Nos. 3D03-661, 3D03-1468.

District Court of Appeal of Florida, Third District.

December 22, 2004.

# 3D03-661: Diane H. Tutt (Davie) and Sharon C. Degan, for appellant Monte de Oca.

# 3D03-661: Akerman Senterfitt and Marcy Levine Aldrich and Nancy A. Cooperthwaite and Jason Kellogg, for appellee State Farm.

# 3D03-1468: Boies, Schiller & Flexner and H. Stephen Rash and Steven W. Davis and Orion G. Callison, III, for appellant Snell.

# 3D03-1468: Akerman Senterfitt and Marcy Levine Aldrich and Jason Kellogg and Nancy A. Copperthwaite, for appellees Allstate.

Before SCHWARTZ, C.J. and COPE, LEVY, GERSTEN, GODERICH, GREEN, FLETCHER, RAMIREZ, WELLS, and SHEPHERD, JJ.

FLETCHER, Judge.

In these cases, consolidated for rehearing en banc, Ifrain Monte de Oca and Richard Snell appeal from trial court orders dismissing with prejudice their class action complaints against, respectively, State Farm Fire and Casualty Company, and Allstate Indemnity Company and Allstate Insurance Company.

Monte de Oca¹ [the Insured] had an automobile insurance policy with State Farm. In February, 2001 the Insured's auto was involved in an accident with another vehicle. In accordance with the insurance policy's collision coverage provisions State Farm paid the Insured the full amount of his property damage, minus the $500 deductible set out in the policy.

State Farm pursued a subrogation² claim on Monte de Oca's behalf. The subrogation claim was resolved on the basis that both drivers were 50% negligent, consequently each insurer recovered only half of its subrogation demand. State Farm reimbursed the Insured half ($250) of his $500 deductible.³

The Insured filed this action against State Farm, seeking the balance ($250) of his deductible. The Insured sought to bring this suit on behalf of himself and all other State Farm insureds, nationwide, for whom State Farm had provided collision coverage, who were paid by State Farm after their vehicle was damaged in an accident with another automobile, and who did not receive back 100% of their deductible from the subrogation claim money that State Farm received from either the other driver or that driver's insurance carrier.

On State Farm's motion the trial court entered final judgment dismissing the complaint with prejudice on the bases that the Insured's complaint failed to state a cause of action and that the case could not be maintained as a class action. The Insured argues here that his complaint does state a cause of action under the common law "made whole"⁴ doctrine and is appropriate for a class action. We conclude that the complaint does not state a cause of action,⁵ thus it is not necessary to deal with the class action issue.

The purposes of subrogation are (1) to prevent over compensation to an insured, and (2) to assure that a wrongdoer who is legally responsible for the harm will not receive the windfall of being absolved from liability merely because the insured has obtained and paid for insurance for his or her own benefit. 3 Conn. Ins. L.J. 105, 107-08. The Wisconsin Supreme Court, in Sorge v. National Car Rental Sys., 182 Wis.2d 52, 512 N.W.2d 505 (1994), made it quite clear: The purpose of subrogation is to prevent a double recovery by the insured, who is to be made whole, but not more than whole.

In Insurance Co. of North America v. Lexow, 602 So.2d 528, 529-30 (Fla.1992), the Florida Supreme Court acknowledged the application of the made whole rule in Florida:

"Using the common law subrogation principle, endorsed by Florida courts, the district court reasoned that the insured was entitled to be made whole before the subrogated insurer could participate in the recovery from a tortfeasor."

The rule was discussed by the First District Court of Appeal in Florida Farm Bureau Ins. Co. v. Martin, 377 So.2d 827 (Fla. 1st DCA 1979). The court quoted 16 Couch, Cyclopedia of Insurance Law, § 61:18 (2nd ed.1964):

"[A] wrongdoer who is legally responsible for the harm should not receive the windfall of being absolved from liability because the insured had had the foresight to obtain, and had paid the expense of procuring, insurance for his protection; since the insured has already been paid for his harm, the liability of the third person should now inure for the benefit of the insurer." [e.s.]

The Insured is demanding the second $250 of the deductible based on his contention that without his receiving it he has not been made whole. However, it is to be recalled that the Insured is a "wrongdoer" — actually one of the two wrongdoers — as the Insured and the other driver were both 50% comparatively negligent. As we previously observed, Florida Farm Bureau v. Martin, supra, a wrongdoer legally responsible for harm should not receive a windfall of being absolved from liability.

The Insured, as a wrongdoer legally responsible for 50% of the harm, is not entitled to be totally absolved from liability and must not receive a windfall. His liability as a 50% comparative wrongdoer is for half of the deductible. Under this formula Monte de Oca, and Snell under his facts, have been made whole and thus have no cause of action. We affirm the orders in both cases.

Affirmed.

SCHWARTZ, C.J., and LEVY, GERSTEN, and GREEN, JJ., concur.

SHEPHERD, J. (specially concurring).

I concur with the majority opinion, and add only the following caution. We must remain mindful that the good people of Florida — the one unrepresented group here already overburdened with unconscionable insurance premiums — will be the real losers if courts advance rules that make it more difficult or diminish the market incentive for an insurance company to recover from a wrongdoer by slavishly requiring them to apply the "insured-first" version of the "made-whole" rule. See dissent at 474.⁶ A blanket application of the dissent's proposed "insured-first" regime will guarantee that insurance companies will simply re-adjust their premiums to pass on the added cost to consumers. Because of the widespread confusion regarding the doctrine of subrogation and the propriety of when to apply the "made-whole" rule, courts should take great care to not further complicate an already overregulated segment of our private economic lives. See generally Jeffrey A. Greenblatt, Insurance and Subrogation: When the Pie Isn't Big Enough, Who Eats Last?, 64 U. Chi. L.Rev. 1337, 1355 (1997)("[d]eciding what law should apply without understanding the economics of insurance is the equivalent of determining chess moves by rolling dice"). The free market serves consumers best when laws are clear, concise, and stable. Likewise, consumers pay when the law remains murky. For that reason, the majority's pro rata, fault-based reimbursement engine works best, unless the parties have contracted to do otherwise.

WELLS, Judge. (dissenting).

I respectfully dissent. I agree with the majority's observation that the "made-whole" rule applies in Florida. I do not, however, agree with the majority's conclusion that an insured's comparative negligence should be considered in determining when an insured has been "made whole." I would, therefore, reverse for class certification against State Farm and Allstate for return of 100% of their insureds' deductibles based on the insurers' violation of the "made-whole" rule.

Generally, a subrogation claim does not exist until the subrogor's entire demand has been satisfied:

No claim by subrogation ... to ... the remedies enjoyed by a creditor for the collection of his demand, can be enforced, until the whole demand of the creditor has been satisfied....

Whyel v. Smith, 101 Fla. 971, 134 So. 552, 554 (1931)(quoting Sheldon on Subrogation (2d Ed.) at 373). Thus, "where the insurer has paid the full amount required by the insurance contract, but the insured's actual loss exceeds the total amount recovered from the insurer and the tort-feasor, the insurer's subrogation rights cannot be enforced because the insured has not been made whole." Collins v. Wilcott, 578 So.2d 742, 744 (Fla. 5th DCA 1991); Rubio v. Rubio, 452 So.2d 130, 132 (Fla. 2d DCA 1984)(finding that "the insurer has no right as against the insured where the compensation received by the insured [from both the insurer and the wrongdoer] is less than his loss")(quoting 16 G. Couch, Cyclopedia of Insurance Law 2d § 61:64 (rev. ed.1983)).

As these authorities confirm, the focus of the "made whole" rule is not on what an insured may legally recover from the tortfeasor and the tortfeasor's insurer, but on the total damages or loss sustained by the insured. See also Magsipoc v. Larsen, 639 So.2d 1038, 1042 (Fla. 5th DCA 1994)(stating that "no common law right of subrogation exists for an indemnitor who has fully paid its required sums under an insurance contract to its insured, where the insured has not recovered the total amount of damages, and cannot be said to have been `made whole'"). Thus, in Florida Farm Bureau Ins. Co. v. Martin, 377 So.2d 827, 828 (Fla. 1st DCA 1979), one of the cases on which the majority chiefly relies, subrogation was denied because "the loss sustained exceeded the total recovery from all parties."⁷

The majority disregards this long-standing precedent to focus on what the insured may legally recover after considering the insured's fault (comparative negligence), rather than on the insured's loss. I cannot agree with this new formulation of the law.

First, it ignores the undisputed fact that an insurer's obligation to pay under the terms of an insurance policy does not hinge on an insured's "wrongdoing," or the lack thereof, but on the insurer's contractual obligation to pay covered losses irrespective of fault. That is precisely what the insured contracts and pays premiums for. Thus, it makes no sense to say that when an insured party is...