Weber v. Sentry Ins.
| Decision Date | 20 June 1989 |
| Docket Number | No. C4-89-448,C4-89-448 |
| Citation | 442 N.W.2d 164 |
| Parties | Ray WEBER, et al., Appellants, v. SENTRY INSURANCE, Defendant and Third-Party Plaintiff, Respondent, v. HOME INSURANCE COMPANY, Third-Party Defendant, Respondent. |
| Court | Minnesota Court of Appeals |
Syllabus by the Court
1. The trial court erred in finding the underinsurance carrier entitled to reimbursement from its insured when the release agreement entered into by both parties dealt only with the right to subrogation and did not specifically preserve the right to reimbursement.
2. The insured is entitled to bad-faith attorney fees from the tortfeasor's insurer and to attorney fees from its underinsurer based on the Uniform Declaratory Judgment Act.
Sharon L. Van Dyck, Timmer & Van Vliet, Minneapolis, and Anthony J. Elfelt, Elfelt & Associates, Anoka, for appellant.
Mary R. Watson, Miller & Neary, Minneapolis, for Sentry Ins.
Theodore J. Smetak, Arthur, Chapman & McDonough, Minneapolis, for Home Ins. Co.
Heard, considered and decided by PARKER, P.J., and KALITOWSKI and THOREEN, JJ. *
Appellant Ray Weber challenges the trial court's finding that while Home Insurance had no right to subrogation, it was entitled to reimbursement for underinsurance benefits which it had paid to him. Weber also appeals the trial court ruling refusing to award him attorney fees. We reverse and remand.
Ray Weber and his wife were involved in an accident on May 5, 1987. An automobile driven by Deborah Johnson and containing her two children crossed the highway center line and collided with the Weber car. All the occupants of both automobiles were seriously injured. Weber contends that his medical bills have exceeded $46,000, and the trial court assumed damages of $55,000 for purposes of the summary judgment analysis.
At the time of the accident Johnson had an automobile insurance policy issued by respondent Sentry Insurance Company providing bodily injury liability limits of $30,000 per person and $60,000 per accident. Weber had a policy with Home Insurance Company providing underinsured motorist coverage of $25,000 per person and $50,000 per accident.
Before collecting any money from the tortfeasor or her insurer, Weber filed a claim for underinsurance benefits from his own carrier. Pursuant to a release agreement dated December 24, 1987, Home paid him its limits of $25,000. The agreement also provided that Weber would release Home from all future claims for underinsured motorist benefits, including a potential claim for bad faith. Expressly excluded from the settlement were Home's subrogation rights at the time of the settlement or in the future, Weber's claims for, and Home's defenses against, the stacking of underinsured motorist benefits, and any of Weber's potential claims against the Norshor Insurance Agency from which he purchased his policy. It appears that Home did not notify either Sentry or Sentry's insured of the underinsured motorist payment.
Shortly after Weber had initially demanded underinsurance proceeds from Home in October 1987, Sentry offered its policy liability limits of $60,000 to all of the injured parties to divide among themselves. The Johnson children received $30,000 and Weber received $30,000. Weber did not notify Home of these settlement discussions before accepting Sentry's offer on March 17, 1988. On April 4, 1988, Sentry issued its draft for $30,000 to Weber, his wife and their attorney. On that same day, Weber's attorney sent Home a Schmidt v. Clothier letter providing Home with the opportunity to substitute its own draft in place of the Sentry draft and thereby preserve its subrogation rights.
Home did not substitute its draft for Sentry's draft. Rather, on April 25, 1987, Home contacted Sentry to claim entitlement to $25,000 of the $30,000 settlement as reimbursement for the underinsurance payment it had previously made to Weber. Sentry then sent Weber a letter dated April 27, 1988, informing him that it had stopped payment on the $30,000 check it had sent to him. Along with the letter was a second check naming Home Insurance as one of the payees. Weber did not cash it, but commenced an action against Sentry to enforce the terms of their settlement agreement. Weber sought an order requiring the issuance of an unrestricted check, as well as attorney fees, costs and disbursements. Sentry served a third-party summons and complaint on Home, alleging that it had an interest in this action. Home answered the third-party complaint by asking the court to award it $25,000 out of Weber's $30,000 personal injury liability settlement.
The trial court viewed this action as a request for a declaratory judgment because Weber and Sentry were asking the trial court to determine their legal rights with respect to the settlement agreement. The trial court held that Weber was entitled to an unrestricted check from Sentry in the amount of $30,000. The court denied the request for a declaration that Home
was not a proper third-party defendant, which none of the parties challenge on appeal. The court further stated that while Home had no subrogation rights because it failed to respond to the Schmidt v. Clothier letter sent by Weber's attorney, it was entitled to reimbursement based on contractual and statutory provisions. Weber challenges the trial court's conclusion that Home still has a reimbursement right and the trial court's failure to award him attorney fees.
1. Did the trial court err in finding that the underinsurer was entitled to reimbursement from Weber to the extent of its payment of underinsured benefits?
2. Did the trial court err in denying Weber's request for attorney fees?
The Home insurance policy issued to Weber contains the following two provisions in the same section:
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.
* * * * * *
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.
The December 1987 release agreement entered into by Home and Weber provided that Home would pay Weber $25,000 "in full, final and complete settlement, satisfaction and payment of all unstacked underinsured motorist benefits." The agreement specifically provided that "[n]othing in this agreement shall constitute a waiver of any rights of subrogation which Home Insurance Company may now have or hereafter obtain" (emphasis added).
Home contends that while the agreement speaks in terms of "subrogation," it also preserves the right of reimbursement. Home claims that reimbursement does not have an entirely different meaning than subrogation. However, the Minnesota Supreme Court has indicated that the two terms, while having similar effects, are different doctrines. With subrogation, unlike reimbursement, the insurer stands in the shoes of the insured. See Westendorf by Westendorf v. Stasson, 330 N.W.2d 699, 702 (Minn.1983).
The well-recognized rule of "expressio unius est exclusio alterius" provides that the expression of specific things in a contract...
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