Travelers Ins. Co. v. Hartford Acc. & Indem. Co.

• Decision Date: 19 September 1972
• Parties: The TRAVELERS INSURANCE COMPANY, Appellant, v. HARTFORD ACCIDENT AND INDEMNITY COMPANY, Appellee.
• Court: Pennsylvania Superior Court

294 A.2d 913

222 Pa.Super. 546

The TRAVELERS INSURANCE COMPANY, Appellant, v. HARTFORD ACCIDENT AND INDEMNITY COMPANY, Appellee.

Superior Court of Pennsylvania.

September 19, 1972.

Robert J. Murphy, Joseph J. Murphy Philadelphia, for appellant.

Joseph F. Ricchiuti, Philadelphia, for appellee.

Before WRIGHT, P.J., and WATKINS, JACOBS, HOFFMAN, SPAULDING CERCONE, and PACKEL, JJ.

SPAULDING Judge.

Appellant Travelers Insurance Company, appeals from the dismissal of its action in assumpsit to recover the sum of $2039.23 plus interest and costs. Suit was brought in the Court of Common Pleas of Philadelphia County against appellee Hartford Accident and Indemnity Company. The background of this action follows.

On October 2, 1958, Herman C. Lehman, an employee of Welding Engineers, Inc., was injured while allegedly acting within the course and scope of his employment. Subsequently, appellant, indemnity carrier for Welding Engineers, Inc., paid $2039.23 in compensation benefits and medical expenses on Lehman's behalf pursuant to the Pennsylvania Workmen's Compensation Act. The injured employee, Lehman, brought a third-party suit for personal injury in the State of Michigan against alleged tort-feasors Mitts and Merrill Company, a Michigan corporation and appellee's assured, and Standard Press Steel Co. of Jenkintown, Pennsylvania. The case proceeded to trial resulting in a hung jury. On November 9, 1965, before the case was retried, Lehman and both defendants entered into a 'Consent Judgment' for $9000.00 exclusive of interest and costs. On the same date, Lehman executed a 'Satisfaction of Judgment'.

On or about April 28, 1961, appellant had advised appellee of its claim to be subrogated to Lehman's interest in the Michigan suit in accordance with the Pennsylvania Workmen's Compensation Act ^[1] to the extent of the compensation benefits and medical expenses furnished to Lehman. Representatives of appellant and appellee continued to exchange correspondence concerning this case for the next several years. The record indicates that appellant even made its office file on the matter available to appellee. However, during this time, appellant failed to contact Lehman or his attorney. Appellant also failed to intervene in the Michigan action against Mitts and Merrill Company, Inc., et al., in order to protect its subrogation rights.

After the 'Consent Judgment' was entered into, appellant made demand on appellee for $2039.23 the amount paid to Lehman. The demand was rejected. Appellant filed its action in assumpsit against appellee. On appeal from an arbitration panel's finding for appellee, the court below, sitting without a jury, dismissed the suit on the grounds that the 'Consent Judgment' in Michigan barred any recovery by appellant in the present action. We affirm this holding, although on somewhat different grounds than those expressed in the trial court's opinion.

The court below is correct in citing our adherence to the time-honored principle that an injured party must consolidate into a single action against a wrongdoer all damages arising out of a tort. Fields v. Philadelphia Rapid Transit Co., 273 Pa. 282, 117 A. 59 (1922); Moltz, to Use of Royal Indem. Co., v. Sherwood Bros., Inc., 116 Pa.Super. 231, 176 A. 82 (1935). As a subrogee derives his right to recovery from the injured party, the prohibition against splitting of actions is no less binding where the interest of a subrogee is involved. Moltz, to Use of Royal Indem. Co., v. Sherwood Bros., Inc., supra; Spinelli v. Maxwell, 430 Pa. 478, 243 A.2d 425 (1968). The trial court is also correct in concluding that, despite language to the contrary in an early case, ^[2] more recent precedents indicate that the right of subrogation is not self-executing once payment has been made to, or on behalf of, the legal plaintiff and notice has been given to the defendant; but that the subrogee must exercise 'reasonable diligence' ^[3] to protect its interest. Saber v. Supplee-Wills-Jones Milk Co., 181 Pa.Super. 167, 124 A.2d 620 (1956); Moltz, to Use of Royal Indem. Co., v. Sherwood Bros., Inc., supra.

If the only communication between the parties to this action had been appellant's notice to appellee of its subrogation claim, we would be compelled to conclude on the basis of the aforementioned precedents that, as appellant failed to prove an enforceable contract with appellee for the protection of its subrogation rights, it is foreclosed from bringing a second action against appellee based on the same tort which precipitated the Michigan judgment. However, in light of evidence of more extensive communications between the parties, we believe that an appropriate inquiry for the court below would have been whether appellee made such representations, rising to the nature of a promise, as could have been reasonably foreseen could induce appellant to forbear from taking affirmative steps to protect its interests, and whether appellant's failure to act was based on reasonable reliance on those representations. The trial court never addressed itself to this issue, i.e., whether appellee is promissorily estopped from denying appellant's subrogation claim.

Even before the nomenclature 'promissory estoppel' was coined, and before the doctrine was adopted in § 90 of the Restatement of Contracts, Pennsylvania jurisprudence had accepted the notion that where a party acts or fails to act to his detriment in reasonable reliance upon the promise of another, the promissor may be estopped from repudiating his promise, even in the absence of legal consideration. See Fried v. Fisher, 328 Pa. 497, 196 A. 39 (1938); also Cameron v. Townsend, 286 Pa. 393, 133 A. 632 (1926).

If the facts are as alleged by appellant, that it forbore in asserting its subrogation rights in reliance upon appellee's promise to recognize and protect those rights, the promissory estoppel doctrine is applicable. If the facts are as appellant alleges, neither the Pennsylvania statute of limitations for tort actions nor the Michigan judgment is a bar to appellant's cause of action, as this cause of action derives from appellee's breach of promise, not from the injured employee's negligence claim. Moreover, application of the promissory estoppel concept may be particularly appropriate in this type of case. We have long recognized that subrogation is a doctrine governed by equity--the basis of the doctrine 'is the doing of complete, essential and perfect justice between all parties without regard to form.', Wilson v. Pittsburgh B & I Works, 85 Pa.Super. 537 (1925); Long v. Marino Masse, Inc., 205 Pa.Super. 344, 208 A.2d 920 (1965). A thorough inquiry into this question would have required the court to consider not only the actions of these two parties, but also the custom within the insurance industry.

Notwithstanding our belief that appellant is not foreclosed from seeking recovery, we must still affirm the judgment of the court below because appellant produced absolutely no evidence to establish appellee's negligence as the cause of Lehman's injury. Appellant was aware of this court's holding in Broderick v. Great Lakes Casualty Co., 152 Pa.Super. 449, 33 A.2d 653 (1943), that a subrogee, suing in either tort or assumpsit must prove the negligence of the third-party tort-feasor. However, appellant evidently assumed that the Michigan judgment ^[4] sufficiently established appellee's negligence. This reliance was misplaced.

Both Michigan law and federal constitutional principles militate against a finding that the Michigan consent judgment is conclusive of appellee's negligence. Although, under Michigan law, a consent...