Ortiz v. Great Southern Fire and Cas. Ins. Co.
| Decision Date | 19 March 1980 |
| Docket Number | No. B-8981,B-8981 |
| Citation | 597 S.W.2d 342 |
| Parties | Mike ORTIZ et ux., Petitioners, v. GREAT SOUTHERN FIRE AND CASUALTY INSURANCE COMPANY, Respondent. |
| Court | Texas Supreme Court |
Brown & Brown, Sam Brown and Carlton McLarty, Lubbock, for petitioners.
Bill Davis, Lubbock, for respondent.
The question presented is whether an insurer is entitled to complete reimbursement out of a third-party tortfeasor's settlement payment which only partially compensates the insureds' loss. The trial court rendered summary judgment allowing the insurer subrogation in an amount equal to its payment to the insureds, and the court of civil appeals affirmed. 587 S.W.2d 818. We reverse and remand.
Mike and Olivia Ortiz obtained a fire insurance policy on their home from Great Southern Fire and Casualty Insurance Company. The Ortizes did not insure the contents of the house. On December 10, 1976 a fire did considerable damage to the Ortiz home and its contents. The Ortizes filed suit against Stacy-Mason, Inc. and its employee, Ernest A. Ekberg, alleging that the fire was caused by the negligent placement of carpet padding over a floor furnace. The petition alleged damages to the Ortizes' real property of at least $4,000 and damages to their personal property of at least $11,614.
Pursuant to the insurance policy, Great Southern had paid the Ortizes $4,000 for repairs on the insured dwelling. Thereafter, Great Southern intervened in the Ortizes' suit against Stacy-Mason, claiming a right to subrogation in the amount of $4,000. The Ortizes filed an answer denying Great Southern's right to subrogation.
Subsequently, all parties to the suit entered into a settlement agreement whereby all claims against Stacy-Mason were released. The settlement agreement provided:
WHEREAS, the Plaintiff has alleged Four Thousand and No/100 ($4,000.00) Dollars in damage to Plaintiff's real property, and Eleven Thousand Six Hundred Fourteen and No/100 ($11,614.00) Dollars in damage to Plaintiff's personal property, which amount could well have been proved by the Plaintiff. . . .
That for and in consideration of the sum of Ten Thousand and No/100 ($10,000.00) Dollars, paid into the hands of the District Clerk of Hockley County by the insurers of Defendants, Ernest A. Ekberg and Stacy-Mason, Inc., the receipt of which is hereby acknowledged, the Plaintiff and Intervenor do hereby release Defendants, Ernest A. Ekberg and Stacy-Mason, Inc., . . . of and from any and all actions, causes of action, claims, demands, damages, expenses, loss of compensation, and liability of any nature . . . growing out of the above described occurrence, . . . and further agree that said cause shall be dismissed with prejudice at cost of each said Defendant.
Stacy-Mason deposited the $10,000 in the registry of the court. The trial court granted Great Southern's motion for summary judgment on its claim for subrogation in the amount of $4,000 and denied the Ortizes' motion for summary judgment claiming the entire $10,000 settlement fund. The court of civil appeals affirmed the trial court's judgment, holding that Great Southern was entitled to equitable subrogation to the full extent of its payments to the Ortizes. We disagree.
One reason that the right of equitable subrogation is granted to an insurer is to prevent the insured from receiving a double recovery. In the present case, however, there is no indication that the Ortizes have to any extent received a double recovery. The parties have stipulated that the Ortizes' damages were in excess of $15,000; yet, the Ortizes have received compensation of only $14,000.
An insurer is not entitled to subrogation if the insured's loss is in excess of the amounts recovered from the insurer and the third party causing the loss. Propeck v. Farmers' Mut. Ins. Ass'n, 65 S.W.2d 390, 390 (Tex.Civ.App. Dallas 1933, no writ); Camden Fire Ins. Ass'n v. Missouri, K. & T. Ry., 175 S.W. 816, 821 (Tex.Civ.App. Dallas 1915, no writ). In Camden, supra, at 821 the court said:
(An insured) should not be required to account for more than the surplus which remained in his hands after satisfying his own excess of loss in full and his reasonable expenses incurred in its recovery.
Most courts in other jurisdictions also have held that the insurer can recover only the excess collected from the wrongdoer after the insured is fully compensated for his loss, including the costs and expenses of collection. E. g., Washtenaw Mut. Fire Ins. Co. v. Budd, 208 Mich. 483, 175 N.W. 231, 232 (1919); St. Paul Fire & Marine Ins. Co. v. W. P. Rose Supply Co., 19 N.C.App. 302, 198 S.E.2d 482, 484 (1973); Garrity v. Rural Mut. Ins. Co., 77 Wis.2d 537, 253 N.W.2d...
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