Republic-Franklin Ins. Co. v. Bosse

• Decision Date: 04 June 1996
• Docket Number: REPUBLIC-FRANKLIN,No. 95-3401,95-3401
• Citation: 89 F.3d 835
• Parties: NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit. INSURANCE CO., Plaintiff-Appellant, v. Peter T. BOSSE, Administrator of the Estate of Jason Bosse, Defendant-DN
• Court: U.S. Court of Appeals — Sixth Circuit

Page 835

89 F.3d 835

NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit.

REPUBLIC-FRANKLIN INSURANCE CO., Plaintiff-Appellant, v. Peter T. BOSSE, Administrator of the Estate of Jason Bosse Defendant-DNNo. 95-3401.

United States Court of Appeals, Sixth Circuit.

June 4, 1996.

Before: GUY, NELSON, and BATCHELDER, Circuit Judges.

PER CURIAM.

This is a diversity action involving an insurer's denial of a claim for underinsured motorist benefits. The plaintiff-insurer sought a declaratory judgment affirming its denial based upon the insured not taking the necessary steps to preserve the insurer's subrogation rights. The insured claimed that the insurer was estopped from denying the claim.

The district court held that, based on the insurer's knowledge of a potential claim for underinsured motorist benefits, the insurer had a duty to act to preserve its subrogation rights, and the insurer should have advised the insured of the need to sue or otherwise make claims against the tortfeasor. The court therefore found for the insured. We conclude that the district court erred and we reverse.

I.

On November 9, 1990, Jason Bosse was a passenger in a vehicle that was operated by Daniel Floyd. Bosse was a resident of Maine. The two young men, who were members of the United States Armed Forces, were traveling on an interstate highway in Illinois when a vehicle operated by John O. Sowers crossed the median and hit the Floyd vehicle head on. Floyd was seriously injured and Bosse and Sowers were killed. ¹

At the time of the collision, Floyd was insured under a personal automotive insurance policy issued to his father by Republic-Franklin Insurance Company (RFI). RFI is a division of Utica National Insurance Group and its principal place of business is in Columbus, Ohio. Sowers was insured by State Farm Mutual Automobile Insurance Company and had bodily injury liability limits of $100,000 per person. Bosse was insured under two policies, as a family member under his father's automotive insurance policy issued by Maine Bonding Company and as a passenger in the Floyd vehicle under the RFI policy.

Both the Maine Bonding Company and the RFI policies had identical language regarding underinsured motorist coverage. Part C of the policies provides for underinsured motorist coverage. These policies provide in pertinent part as follows:

A. We will pay compensatory damages which an "insured" is legally entitled to recover from the owner or operator of an "uninsured motor vehicle" because of "bodily injury:"

....

B. "Insured" as used in this Part means:

1. You or any "family member."

2. Any other person "occupying" "your covered auto." ...

(App. at 59 and 80.) The term "uninsured motor vehicle" is broadly defined to include underinsured motor vehicles, as well. Id.

Both also contained identical language protecting the insurer's subrogation rights. Part F, the general provisions section of the policies, contains the following language:

OUR RIGHT TO RECOVER PAYMENT

A. If we make a payment under this policy and the person to or for whom payment was made has a right to recover damages from another we shall be subrogated to that right. That person shall do:

1. Whatever is necessary to enable us to exercise our rights; and

2. Nothing after loss to prejudice them.

....

B. If we make a payment under this policy and the person to or for whom payment is made recovers damages from another, that person shall:

1. Hold in trust for us the proceeds of the recovery; and

2. Reimburse us to the extent of our payment.

(App. at 64 and 85.)

Bosse's estate is administered by his father, Peter T. Bosse. Peter Bosse first learned of the RFI policy within days of the accident during a conversation he had with Floyd's family members. During that same time period, RFI was notified by its insurance agent of the accident. In response to notification, RFI established an accounting reserve in the amount of $50,000 in anticipation of an underinsured motorist claim by the Bosse estate. In addition, shortly thereafter, on November 19, 1990, Gary Conklin, an adjuster who had been hired by RFI to investigate the case, contacted the Bosses. Notes taken by Conklin at the time indicate that he informed the Bosses that Jason Bosse's emergency room expenses and funeral expenses were covered by the medical payments coverage of the RFI policy. There is no indication in the record, however, that the Bosses were ever informed by Conklin or any other representative of RFI about underinsured motorist coverage. ²

Approximately two weeks after the accident, Peter Bosse consulted with the law firm of Gross, Minsky, Mogul & Singal, P.A. in connection with his son's death. In that meeting he told them that Floyd was insured by RFI. Despite these events, neither the Bosses nor their legal counsel ever contacted RFI to request a copy of the Floyd policy.

On January 11, 1991, a petition for probate of Sowers' will was filed in Illinois state court. The petition stated that the approximate value of the Sowers estate was $150,000 in personal property and $15,000 in real property.

Within weeks of the filing of the petition, on February 26, 1991, the attorney for the Sowers estate wrote to the Bosse estate through its attorney indicating that the probate proceeding had been commenced. The letter of notification included the claim notice that had been published, which expressly stated that claims against the estate "may be filed ... within 6 months from the date of issuance of letters and any claim not filed within that period is barred." (App. at 104.) Despite this notice, the Bosse estate let the six months run without filing a claim.

On October 22, 1991, after the claim filing deadline had expired and almost a year after the accident occurred, the Bosse estate first contacted RFI. It indicated that it was seeking underinsured motorist benefits under Floyd's policy. Within a week, on October 28, 1991, it again contacted RFI indicating that it had negotiated a proposed settlement for $100,000 under Sowers' insurance policy with State Farm and asked RFI to consent to the release of its subrogation rights against the Sowers estate and State Farm.

In preparing a response to this request, RFI attempted to determine the extent of its subrogation rights. It repeatedly inquired whether the Bosse estate had filed suit or otherwise made a claim against the Sowers estate. On November 18, 1991, the law firm for the Bosse estate informed RFI that it had not. Meanwhile, on October 29, 1991, notwithstanding its pending request to RFI for consent, the Bosse estate executed a release of all claims against the Sowers estate and State Farm, only one day after requesting such consent and only seven days after notifying RFI that it was filing a claim for benefits. Because the Bosse estate, by ignoring the limitations period controlling the filing of claims against the Sowers estate and by executing a release as to any claims it might have, made it impossible for RFI to pursue its subrogation rights, the request for benefits was denied.

RFI then filed this declaratory action seeking a determination that it did not owe the Bosse estate underinsured motorist benefits under the policy based on the estate's failure to preserve RFI's subrogation rights. Peter Bosse, as administrator for the Bosse estate, counterclaimed for a declaration that RFI was estopped from enforcing the contract's subrogation clause. In his counterclaim he indicated that he had never seen a copy of the RFI policy and that RFI "never advised [Peter Bosse] of the terms of the applicable policy or of [Peter Bosse's] alleged obligation to file a claim" against the tortfeasor's estate.

The district court entered declaratory judgment for Peter Bosse and RFI now appeals.

II.

An insurer's right of subrogation has been long recognized. McDonald v. Republic-Franklin Ins. Co., 543 N.E.2d 456, 459 (Ohio 1989) (citing Newcomb v. Cincinnati Ins. Co., 22 Ohio St. 382 (1872)). The Ohio General Assembly specifically codified this common law right as it pertains to providers of uninsured and underinsured motorist coverage by enacting Ohio Rev.Code Ann. § 3937.18(E) (Anderson 1989). The Ohio Supreme Court has repeatedly recognized the reasonableness of subrogation clauses in contracts providing underinsured motorist insurance. See, e.g., McDonald, 543 N.E.2d at 459 (a subrogation clause is " 'both a valid and enforceable precondition to the duty to provide underinsured motorist coverage' ") (quoting Bogan v. Progressive Casualty Ins. Co., 521 N.E.2d 447, 455 (Ohio 1988)). At issue in this case, however, is to what extent must an insurer aid an insured in preservation of this right.

On appeal, RFI contends that the district court erred in its conclusion that because RFI was aware of the potential claim for underinsured motorist benefits by the Bosse estate, RFI had a duty to aid the estate in preserving RFI's subrogation rights prior to the October 22, 1991, notification by the estate of its claim for underinsured motorist benefits. In support of its decision, the district court relied on McDonald v. Republic-Franklin Ins. Co., 543 N.E.2d 456 (Ohio 1989). In that case, the Ohio Supreme Court held that upon notification to an insurer by an insured of a settlement offer from the tortfeasor, an insurer had a duty to aid an insured in preserving the insurer's subrogation rights. Id. at 460. In McDonald, the insured had received a settlement offer of $50,000, the limits of the tortfeasor's insurance policy. In exchange, the insured was requested to execute a release of her claims, including any subrogation rights available to her insurer. McDonald promptly notified her insurer of the proposed offer and sought consent. The insurer, RFI, who is...