Republic Underwriters Ins. Co. v. Fire Ins. Exchange

• Decision Date: 18 May 1982
• Docket Number: No. 54392,54392
• Parties: REPUBLIC UNDERWRITERS INSURANCE COMPANY, a corporation, Appellee, v. FIRE INSURANCE EXCHANGE, a reciprocal insurer, Appellant.
• Court: Oklahoma Supreme Court

Page 544

655 P.2d 544

1982 OK 67

REPUBLIC UNDERWRITERS INSURANCE COMPANY, a corporation, Appellee, v. FIRE INSURANCE EXCHANGE, a reciprocal insurer, Appellant.

No. 54392.

Supreme Court of Oklahoma.

May 18, 1982.

Rehearing Denied Jan. 12, 1983.

Certiorari to Oklahoma Court of Appeals, Division 1.

Action was brought to enforce an equitable subrogation upon one of two companies insuring against a single loss, where the plaintiff insurer had paid the total amount of the loss. On a writ of certiorari, it is determined that the cause of action for equitable subrogation brought by one insurer having paid a total loss against another insurer covering the loss is not the class of action to which the special limitation of 36 O.S.1971 § 4803 applies, vacating the opinion of the Court of Appeals and affirming the Trial Court.

OPINION OF COURT OF APPEALS VACATED; TRIAL COURT AFFIRMED.

Green, James & Williams by Kenneth W. Elliott, Oklahoma City, for appellant.

Donald Church, Church & Roberts, Tulsa, for appellee.

HARGRAVE, Justice.

This action was tried without a jury to the court upon stipulated facts. Republic Underwriters Insurance Company pled a cause of action for equitable subrogation. The defendant, Fire Insurance Exchange, demurred on the basis that the applicable statute of limitation barred the bringing of the action. The trial court overruled that demurrer and after an adverse judgment defendant appealed. The cause was assigned to the Court of Appeals and its decision reversed the trial court, stating the provisions of a special statute of limitations governed the bringing of the action, being 36 O.S.1981 § 4803. That statute was determined to bar the cause from prosecution. A Writ of Certiorari has previously issued and the cause appears before this Court for decision.

The insured parties, Robert and Fawn Sloan, moved from a Tulsa rental residence to Inola, Oklahoma. Within three weeks that residence was destroyed by fire. At the time of loss, the unscheduled personal property of insureds was covered by two policies. Republic Underwriters' insurance policy had a property coverage limit of $10,000 and a living expense limit of $4,000. Fire Insurance Exchange had issued a policy with limits of $15,000 unscheduled property and a living expense limit of $3,000.

Notice of loss was received by plaintiff on August 21, 1973; the cause and loss were verified by plaintiff's agent. Payment was made by plaintiff to insureds in the sum of $10,000 for unscheduled personal property, and $701.85 for additional living expense. The payments were necessary and reasonable, resulting from perils insured against in the contracts of both insurors. After proof of loss was furnished by insureds, defendant denied liability and made no payment as a result of the loss. In this action, plaintiff makes demand on defendant for a pro-rata reimbursement; previous demand was refused.

The Court of Appeals determined the trial court erred in failing to apply 36 O.S.1981 § 4803, which requires all fire insurance policies to contain the following provision:

"No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy have been complied with, and unless commenced within twelve (12) months next after the inception of the loss." (Emphasis added.)

The Court of Appeals determined that any right of equitable subrogation against defendant would be based upon the contractual obligation of the defendant to the plaintiff's insured, and plaintiff's rights under that contract cannot rise any higher than those of the insured, and thus the last cited statute was a proper defense to plaintiff's claim.

Plaintiff sought equitable subrogation of its loss from defendant. Title 36 O.S.1981 § 4803 does not apply to this cause of action. Section 4803 limits the bringing of an action "on this policy" of fire insurance. This statute speaks only to an action on the contract of insurance, and does not restrict the general equity power of the courts to the doctrine of subrogation which results (not from contract) from the natural justice of placing the ultimate burden where it ought to rest and does not flow from a fixed rule of law but rather from principles of justice, equity and benevolence producing a purely equitable result depending on the circumstances of the cause. Smith v. Minter, 200 Okl. 208, 191 P.2d 929 (1948). This Court has recently noted that subrogation in one of its forms, denominated legal or equitable, is an equity action which does not depend on contract but rather on the equity of the parties, generally arising through operation of law. General Creditors of Est. of Harris v. Cornett, 416 P.2d 398 (Okl.1966). Several recent cases from this jurisdiction confirm our commitment to the point that legal or equitable subrogation, as distinguished from conventional subrogation, is not an action arising out of contract but from general equity principles. Lawyers' Title Guaranty Fund v. Sanders, 571 P.2d 454 (Okl.1977). Mid-Continent Casualty Co. v. First National Bank & Trust of Chickasha, 531 P.2d 1370 (1975). See also Thurston National Ins. Co. v. Zurich Ins. Co., 296 F.Supp. 619 (D.C.Okl.1969), and Jorski Mill &...