Shelter Ins. Companies v. Frohlich
| Decision Date | 02 April 1993 |
| Docket Number | No. S-90-554,S-90-554 |
| Citation | 243 Neb. 111,498 N.W.2d 74 |
| Parties | SHELTER INSURANCE COMPANIES, Appellee, v. Alice M. FROHLICH, Appellant. |
| Court | Nebraska Supreme Court |
Syllabus by the Court
1. Contracts. A third-party beneficiary who accepts a benefit under a contract also assumes an obligation imposed by the contract conferring the benefit.
2. Subrogation: Words and Phrases. Subrogation is substitution of one person who is not a volunteer, a subrogee, for another, a subrogor, as the result of the subrogee's payment of a debt owed to the subrogor so that the subrogee succeeds to the subrogor's right to recover the amount paid by the subrogee.
3. Subrogation: Liability. To be entitled to subrogation, one must pay a debt for which another is liable.
4. Subrogation. Generally, subrogation is unavailable until the debt owed to a subrogor has been paid in full.
5. Contracts: Subrogation. If a contract provides for subrogation on payment of less than the full amount of a debt or loss, partial payment of a debt or loss may be the basis for subrogation.
6. Contracts: Subrogation: Equity. Unless a contract specifically provides otherwise, equitable principles apply even when a subrogation right is based on contract.
7. Contracts: Subrogation: Equity. If a contractual right of subrogation is merely the usual equitable right which would have existed in any event in the absence of a contract, equitable principles control subrogation.
8. Contracts: Insurance: Subrogation. An insurance policy reaffirms the rights of parties relative to subrogation but, in the absence of an express provision to the contrary, does not alter fundamental principles pertaining to subrogation.
9. Contracts: Insurance: Subrogation. In the absence of a valid contractual provision or statute to the contrary, an insurer may exercise its right of subrogation only when the insured has obtained an amount that exceeds the insured's loss.
10. Appeal and Error. To be considered by an appellate court, an error must be assigned and discussed in the brief of 11. Waiver: Words and Phrases. A waiver is the voluntary and intentional relinquishment of a known right, privilege, or claim, and may be demonstrated by or inferred from a person's conduct.
the one claiming that prejudicial error has occurred.
12. Waiver: Estoppel. In order to establish a waiver of a legal right, there must be clear, unequivocal, and decisive action of a party showing such a purpose, or acts amounting to estoppel.
Daniel J. Duffy and Michael K. Huffer, of Cassem, Tierney, Adams, Gotch & Douglas, Omaha, for appellant.
Kathleen A. Jaudzemis and Andrew D. Strotman, of Cline, Williams, Wright, Johnson & Oldfather, Lincoln, for appellee.
Pursuant to Neb.Rev.Stat. § 25-21,149 et seq. (Reissue 1989) (Uniform Declaratory Judgments Act), Shelter Insurance Co. (Shelter) brought an action for a declaratory judgment against Alice M. Frohlich concerning funds held in trust under an escrow agreement pertaining to distribution of settlement proceeds from Frohlich's settlement of her personal injury claim against Gini and Harlan Denbeste. After the district court for Lancaster County granted summary judgment to Shelter, Frohlich appealed.
On August 12, 1984, Frohlich was a passenger in a car driven by Frankie Tipton, a policyholder insured by Shelter. Tipton's car collided with a car driven by Gini Denbeste. Farmers Mutual of Nebraska had the liability insurance coverage on the Denbeste automobile. As a result of the collision, Frohlich suffered severe and permanent injuries which left her partially disabled and which resulted in medical expenses exceeding $50,000.
On September 6, 1984, since Tipton's policy contained a "medical pay" provision, Frohlich's lawyer telephoned Shelter regarding reimbursement of medical expenses paid by Frohlich on account of the accident. In a September 14 letter to Frohlich's lawyer, Shelter stated that Tipton's policy provided $10,000 in medical payment coverage in the following policy provision:
Coverage C--Medical Payments--The Company will pay all reasonable expenses which are incurred within one year from the date of accident for necessary medical, surgical, x-ray, and dental services, including prosthetic devices, and necessary ambulance, hospital, professional nursing and funeral services, for bodily injury caused by accident and sustained by:
....
(b) Any other person while occupying (1) the described automobile, while being used by the named insured....
Shelter's letter also called attention to a subrogation clause in Tipton's policy:
In the event of any payment under Coverage C [Medical Payments] of this policy, the Company shall be subrogated to all the rights of recovery therefor which the injured person or anyone receiving such payment may have against any person or organization, and such person shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights. Such person shall do nothing after loss to prejudice such rights.
On October 26, Frohlich's lawyer wrote in response to Shelter's letter, disputing Shelter's claimed subrogation interest resulting from any payment made under the medical pay provision of Tipton's policy: "At this time we are not prepared to concede that point as we believe that the Nebraska Supreme Court will resolve that issue with a contrary interpretation." Moreover, in the October 26 letter, Frohlich asserted that she was entitled to the entire $10,000 medical payment coverage because her medical expenses at that time exceeded $31,000. Shelter paid Frohlich $10,000 under Tipton's policy and, in a letter accompanying Later, Frohlich sued Gini Denbeste and her father, Harlan Denbeste. As a result of compromise and settlement of Frohlich's claim against Denbestes, Farmers Mutual paid Frohlich $212,500. Shelter did not participate in the settlement process. The record does not contain the actual settlement agreement or release for Frohlich's claim against Denbestes. However, as an aspect of the settlement, Frohlich, Denbestes, and Farmers Mutual, but not Shelter, signed an escrow agreement which required that $10,000 of the $212,500 settlement be deposited in escrow and which further provided: (1) Farmers Mutual acknowledged receipt of Shelter's subrogation claim; (2) the $10,000 escrow fund would be released when Shelter withdrew its subrogation claim, the statute of limitations barred Shelter's claim, or the subrogation claim was resolved; and (3) Frohlich would hold harmless the escrow agent, Denbestes, and Farmers Mutual from any claim by Shelter concerning its subrogation claim and the escrow fund. The escrow agreement expressly stated that the escrow fund resulted from "a compromise settlement of [the] litigation" between Frohlich and Denbestes.
the payment, stated: "This letter is also to advise we will pursue our own subrogation for medical payments against Farmers Mutual of Nebr."
Shelter subsequently filed its declaratory judgment action against Frohlich, asserting entitlement to the $10,000 escrow fund by virtue of Shelter's payment to Frohlich under Tipton's policy and the doctrine of subrogation. Both Shelter and Frohlich moved for a summary judgment. The court entered summary judgment for Shelter and ordered that the $10,000 escrow fund be paid to Shelter.
Frohlich asserts that the district court erred by (1) finding that Shelter has a subrogation interest in the $10,000 escrow fund and ordering that the fund be paid to Shelter, (2) finding that Shelter was not required to prove that Frohlich was fully compensated for her injuries sustained in the automobile accident, (3) ruling that Shelter's action was properly brought against Frohlich rather that against Denbestes and Farmers Mutual, and (4) failing to find that Shelter waived its subrogation interest in the escrow fund.
A summary judgment is properly granted when the pleadings, depositions, admissions, stipulations, and affidavits in the record disclose that there is no genuine issue concerning any material fact or the ultimate inferences deducible from such fact or facts and that the moving party is entitled to judgment as a matter of law. [Citations omitted.] In appellate review of a summary judgment, the court views the evidence in a light most favorable to the party against whom the judgment is granted and gives such party the benefit of all reasonable inferences deducible from the evidence.
Union Pacific RR. Co. v. Kaiser Ag. Chem. Co., 229 Neb. 160, 162-63, 425 N.W.2d 872, 875 (1988). Accord, Dowis v. Continental Elev. Co., 241 Neb. 207, 486 N.W.2d 916 (1992); Anderson v. Service Merchandise Co., 240 Neb. 873, 485 N.W.2d 170 (1992); Murphy v. Spelts-Schultz Lumber Co., 240 Neb. 275, 481 N.W.2d 422 (1992).
Frohlich contends that Shelter has no subrogation right as the result of the medical payments provision of Tipton's policy. However, Tipton's policy expressly stated that Shelter "shall be subrogated to all the rights of recovery therefor which the injured person or anyone receiving such payment may have against any person or organization."
In Milbank Ins. Co. v. Henry, 232 Neb. 418, 441 N.W.2d 143 (1989), Milbank brought an action against its insured, Henry, who had been injured while driving her car. In the suit against Henry, Milbank joined as defendants the other motorist involved in the accident and his insurance company which provided liability coverage.
Milbank sought to recover the amount paid to Henry under the medical payments provision of her Milbank policy. At issue was the validity of a subrogation provision in Milbank's policy: " '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 hold in...To continue reading
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