Sentry Ins. Co. v. Stuart

• Decision Date: 21 April 1969
• Docket Number: No. 5--4877,5--4877
• Citation: 246 Ark. 680,439 S.W.2d 797
• Parties: SENTRY INSURANCE COMPANY, Appellant, v. Betty Dean STUART et al.
• Court: Arkansas Supreme Court

Page 797

439 S.W.2d 797

246 Ark. 680

SENTRY INSURANCE COMPANY, Appellant, v. Betty Dean STUART et al.

No. 5--4877.

Supreme Court of Arkansas.

April 21, 1969.

Bethell, Stocks, Callaway & King, Ft. Smith, for appellant.

Putman, Davis & Bassett, Fayetteville, for appellees.

HARRIS, Chief Justice.

This appeal questions the correctness of the ruling of the Washington County Circuit Court in sustaining a demurrer to the complaint of appellant, Sentry Insurance Company, which had filed a suit against Betty Dean Stuart, appellee herein, and Anita D. Peterson, the company's insured, under a subrogation agreement. Mrs. Peterson held a policy of automobile insurance with appellant company which provided, inter alia, payment to her for any medical expenses incurred as a result of a motor vehicle collision up to the sum of $1,000.00. Both Mrs. Peterson and Betty Dean Stuart were residents of Fayetteville in Washington County at the time of the events hereinafter set out.

On May 17, 1966, in the state of Oklahoma, appellee was driving an automobile in which Mrs. Peterson was riding as a passenger. According to the allegations of the present complaint filed by appellant, Mrs. Stuart, driving into a service station, struck two men, and ran her automobile into a building, resulting in injuries to Mrs. Peterson, who was hospitalized as a result of such injuries, and underwent surgery. The complaint further sets out that Oklahoma has no guest statute, and it is asserted that, under the laws of that state, Mrs. Peterson had a cause of action against Mrs. Stuart for ordinary negligence. Acts on the part of Mrs. Stuart constituting negligence which were the proximate cause of the injuries and medical expenses to Mrs. Peterson, are then set forth with the allegation that appellant's insured sustained medical and hospital expenses in the sum of approximately $2,713.13.

Pursuant to the provisions of the policy heretofore mentioned, Sentry Insurance Company paid to its insured, Mrs. Peterson, the sum of $1,000.00. Under the policy, Sentry is subrogated to the rights of Mrs. Peterson as to her cause of action for recovery against any person who might be liable for the medical expenses; further, the policy provides that the insured should do nothing after loss to prejudice subrogation rights.

It is further asserted in the complaint that Mrs. Stuart and her insurance carrier, Safeco Insurance Company, were notified by Sentry of its subrogation rights by letter, dated April 6, 1967; thereafter, on August 8, 1967, Mrs. Peterson entered into a settlement with Safeco, and, as a part of such settlement, Mrs. Peterson executed a general release to Mrs. Stuart. The settlement was effectuated without the entry of a court judgment or the filing of a suit. Sentry prayed that it have judgment against Mrs. Stuart in the sum of $1,000.00, together with costs; in the alternative, the company sought judgment against Mrs. Peterson in the event that it should be determined that any action on her part destroyed appellant's right of subrogation against Mrs. Stuart. After filing a separate motion to quash the summons, which was denied by the court, appellee filed her separate demurrer, asserting:

'(1) That the complaint of the plaintiff does not state facts sufficient to state a cause of action against this separate defendant.

(2) That there is a defect in the parties plaintiff and parties defendant.

(3) That this Court had no jurisdiction over this separate defendant.'

Subsequently, the court entered its order, sustaining the demurrer, finding:

'* * * that the Oklahoma law applies in this case as reflected in the case of Lowder versus Oklahoma Farm Bureau Insurance Company, decided December 12th, 1967.'

Appellant was given 15 days to plead further, but elected to stand upon the complaint, and the court entered its judgment dismissing appellant's complaint. From the judgment so entered, Sentry Insurance Company brings this appeal.

Appellant asserts that the court erred in its determination of Oklahoma law, and also contends that the present litigation is governed by Arkansas law, rather than Oklahoma law. As to the law in our sister state, appellee concedes that the Oklahoma courts have not yet squarely decided the question of whether, under Oklahoma law, an insurance company can bring a subrogation action against a third party tort-feasor to recover medical payments it has made to its insured. We think the Washington Circuit Court was in error in relying upon Lowder v. Oklahoma Farm Bureau Mutual Insurance Company, Okl., 436 P.2d 654, as authority for its holding, because the holding in Lowder was predicated on the rule in Oklahoma against splitting a single cause of action.

It is not necessary to determine Oklahoma law to decide this litigation, for it appears that the question of what constitutes splitting a cause of action and its permissibility is a question of procedure, rather than substantive law, and is thus governed by the law of the forum.

Dr. Robert A. Leflar, Distinguished Professor of Law, and a former member of this court, comments on this question in 'The Law of Conflict of Laws,' § 61, p. 110:

'There are a number of rules of law which are without much doubt treated as procedural. The question of what is the proper court in which to bring an action, for example, as between courts of law and equity, is always governed by the law of the forum. The same is true of the form of action to be brought, the sufficiency of pleadings, the effect of splitting a cause of action, and who are proper or necessary parties to the action.'

In other words, the Oklahoma decision in Lowder was not based on substantive law.

Though we have not passed squarely on the issue of whether the insurance carrier may bring a subrogation action to recover medical payments paid to its insured, the case of Shipley v. Northwestern Mutual Insurance Company, 244 Ark. 1159, 428 S.W.2d 268, as acknowledged by appellee, clearly indicates that such an action would be permissible. There, this court said:

'In the contract of insurance before us the insured and the insurance company entered into an agreement whereby the insurer would be subrogated to any right possessed by the insured to reimbursement of medical expenses from a third party, in this instance a tort-feasor; the contract contained the usual cooperation clause; and it provided that the insured would do nothing after loss to prejudice the insurer's interest under subrogation. In view of those provisions, together with the fact that full medical compensation has been paid by the tort-feasor, Mrs. Baldwin, the Shipleys are precluded from recovering from Northwestern. (Citing cases.)'

The question has been passed upon by numerous other jurisdictions. An annotation on the subject, 'Insurer--Rights Against Third Person,' is found in 92 A.L.R.2d 97. It is pointed out that subrogation is a normal incident of indemnity insurance, and that no act of the insured...