Porter v. MFA Mut. Ins. Co., 54408
| Decision Date | 16 February 1982 |
| Docket Number | No. 54408,54408 |
| Citation | 643 P.2d 302,1982 OK 23 |
| Parties | Phillip E. PORTER, Appellant, v. MFA MUTUAL INSURANCE COMPANY, a Foreign Insurance Corporation, Appellee. |
| Court | Oklahoma Supreme Court |
Appeal from the District Court of Oklahoma County; Carmon C. Harris, Trial Judge.
From order of the trial court sustaining Defendant's motion for summary judgment, Plaintiff appeals.
AFFIRMED.
Barry R. Davis, Of the Firm, Wheeler, Parsons, Wheeler & Davis, Oklahoma City, for appellant.
Melvin F. Pierce, Pierce, Couch, Hendrickson, Johnson & Baysinger, Oklahoma City, for appellee.
The Appellant, Phillip Porter, was injured in an automobile-motorcycle accident in Oklahoma City during April, 1978. The accident was caused by the negligence of the automobile driver, James Sheltman. At the time of the accident, Porter held four uninsured motorist policies issued by the Appellee, MFA Mutual Insurance Company (MFA).
Porter made demand upon Sheltman for compensation for his property and medical damages. At that point it was discovered that Sheltman's bodily injury liability policy contained limits of $5,000.00 for each person and $10,000.00 for each accident. Porter then informed MFA of a possible uninsured motorist or underinsured motorist claim, 1 as his demand for settlement exceeded Sheltman's coverage. This notice also informed MFA that Porter would expect payment under his policies with MFA if Sheltman's carrier paid only policy limits.
Sheltman's carrier offered the policy limits in settlement of Porter's claims. Porter accepted that offer and gave Sheltman and his insurance carrier a general release of all claims. Shortly thereafter, Porter demanded that MFA pay the remaining claim under the uninsured motorist policies. The demand was refused and Porter filed suit on September 7, 1978.
Porter and MFA filed a joint stipulation of facts and agreed that the trial court should decide the liability issue on motions for judgment by each party. The trial court sustained MFA's motion for judgment on the grounds that Porter destroyed MFA's right of subrogation and that the "consent to settle" claims of the policies did not involve a question of public policy. Porter makes this appeal from the trial court's judgment.
The central question in this controversy is whether Porter's settlement prejudiced the rights of MFA.
The material provisions are found in Section Five of the policies which initially outlines the "Uninsured Motorists" coverage. 2 Section Five, subpart Three, states that this coverage (Uninsured Motorists) does not apply if the insured makes a settlement with the tort-feasor without the written consent of the insurer. 3 Section Five, subpart Six, indicates that in the event of payment by the insurer, the company becomes entitled to any proceeds of a settlement or judgment against the tort-feasor and that the insured shall hold in trust for the company any rights of recovery that he might have against the tort-feasor. 4
We initially address the validity of the "consent to settle" clause. Porter challenges this provision on the grounds that it is contrary to public policy. This clause does interfere with the policy objective of promoting settlements without resort to the judicial arena. We have previously held that consent to sue, no action, and arbitration clauses are void as against public policy and contrary to 15 O.S.1971, § 216. 5
We have held such clauses void on the rationale that said clauses attempt to place the requirement of the insurer's permission as a condition precedent and thus limits and conditions the character of coverage mandated by the statute, and is therefore void and of no effect. 6 Other jurisdictions have concluded that such a consent-to-settle clause is void or unenforceable on the rationale that the insured should not be restricted or prevented, in any manner, from employing legal counsel or instituting legal proceedings. 7
However, as will be discussed in more detail later, the insurer is also protected by the trust agreement provision in the policy if insured gives a general release pursuant to such settlement which cuts off insurer's rights in any way. 8 If the insured gives such a general release pursuant to settlement, the trust agreement provision would give insurer an adequate defense in any action by the insured against the insurer after settlement and general release by the insured with the uninsured motorist. Since MFA is protected both by the uninsured motorist statute and the trust agreement, the consent-to-settle clause is superfluous and does nothing more than to chill settlements and otherwise dilute the mandatory uninsured motorist statute and the protection for injured innocent victims against loss. We therefore hold that the consent-to-settle clause is void and of no force and effect as being against public policy and that said policy exclusion is not a valid policy defense under the facts of this case.
The question then becomes: Does MFA have a valid policy defense under the trust agreement and the uninsured motorist statute, in that Porter violated such trust agreement by settling and giving a general release to Sheltman, thereby destroying MFA's right of subrogation under the uninsured motorist statute? There is case authority that the type of subrogation claimed by MFA in this case is prohibited, in that such subrogation is the insurer's indirect attempt to become the assignee of a tort cause of action, something the insurer cannot do directly, and thus is a violation of the real party in interest limitation of 12 O.S.1971, § 221. 9
In State Farm Fire & Casualty Insurance Co. v. Farmers Insurance Exchange, 489 P.2d 480 (1971), we ruled that an insurance carrier could not sue the tort-feasor for recovery of payments made to its insured. The case of Hardware Dealers Mutual Fire Insurance Co. v. Krueger, 486 P.2d 737 (1971), also supports this proposition. However, in Aetna Casualty & Surety Co. v. Associated Transports, 512 P.2d 137 (1973), we overruled the holding in the above cases and held that Section 221 does not prevent the transfer of a cause of action by subrogation.
MFA contends that the statute requiring uninsured motorist coverage, 36 O.S. § 3636(E), specifically allows for subrogation rights. 10 We agree with MFA's contention that said statute specifically recognizes the rights of MFA as the uninsured motorist insurer to recoupment of its loss from the third party tortfeasor. 11 The "terms and conditions of such coverage" afforded by the policies which are the subject of this action clearly include a "trust agreement provision" for a relationship of trust for the use and benefit of the insurer. 12
Having decided that the insurer, under the uninsured motorist statute and the trust agreement, has rights of subrogation, were said subrogation rights destroyed by Porter when he settled with and gave a general release to Sheltman, and, if so, was such action on the part of Porter a valid policy defense to MFA in the case at bar?
It seems to be a well-recognized rule that if an insured settles with and releases a wrongdoer from liability for a loss before payment of the loss has been made by the insurer, the insurer's right of subrogation against the wrongdoer is thereby destroyed. 13 Also as a general rule an insured who deprives insurer, by settlement and release, of its right of subrogation against the wrongdoer thereby provides insurer with a complete defense to an action on the policy. 14 Porter, by voluntarily and knowingly making settlement with and giving a general release to Sheltman, barred MFA from exercising its lawful right of recourse against the responsible party, and Porter was thereby precluded from bringing action on the uninsured motorist policies. What Porter should have done was make settlement with Sheltman's insurance carrier by means of a partial release, conditioned on the reservation of whatever rights and interests the uninsured motorist insurance company, MFA, might have or claim thereafter against the tort-feasor.
The judgment of the trial court sustaining MFA's motion for judgment on the grounds that Porter destroyed MFA's right of subrogation and indemnity is therefore affirmed.
AFFIRMED.
Because, in my view, the provisions of 36 O.S.Supp.1976 § 3636(E) control over any conflicting terms in 36 O.S.1971 § 6092, the insurer who extends uninsured or underinsured motorist coverage is subrogated, upon payment, to the rights of the insured against the tortfeasor. In...
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