Westchester Fire Ins. Co. v. Allstate Ins. Co.

• Decision Date: 19 March 1996
• Docket Number: No. 15158,15158
• Court: Connecticut Supreme Court
• Parties: WESTCHESTER FIRE INSURANCE COMPANY v. ALLSTATE INSURANCE COMPANY.

Page 939

672 A.2d 939

236 Conn. 362

WESTCHESTER FIRE INSURANCE COMPANY v. ALLSTATE INSURANCE COMPANY.

No. 15158.

Supreme Court of Connecticut.

Argued Nov. 1, 1995.

Decided March 19, 1996.

Joan Keating-McKeon, with whom, on the brief, was Joseph A. Hourihan, West Hartford, for appellant (plaintiff).

Anita M. Varunes, Hartford, for appellee (defendant).

Kurt D. Koehler and William F. Gallagher, New Haven, filed a brief for the Connecticut Trial Lawyers Association as amicus curiae.

Before PETERS, C.J., and CALLAHAN, BORDEN, NORCOTT and PALMER, JJ.

BORDEN, Associate Justice.

The dispositive issue in this appeal is whether an uninsured motorist insurance carrier that has paid underinsured motorist benefits to its insured may bring a subrogation action against the tortfeasor's liability insurer, which, the uninsured motorist carrier contends, wrongfully denied coverage of the insured's claim against the tortfeasor. The plaintiff, Westchester Fire Insurance Company, also known as Crum and Forster Personal Insurance (Crum and Forster), appeals ¹ from the judgment of the trial court granting the motion of the defendant, Allstate Insurance Company (Allstate), to strike Crum and Forster's complaint. Crum and Forster claims that: (1) this case is distinguishable from our decision in Berlinski v. Ovellette, 164 Conn. 482, 494, 325 A.2d 239 (1973), in which we held that an uninsured motorist carrier may not be subrogated to its insured's claim against an uninsured tortfeasor; and (2) if Berlinski controls, we should overrule it. We agree that Berlinski should be overruled, and we therefore reverse the judgment of the trial court. ²

The complaint alleged the following facts, which we assume to be true for purposes of the motion to strike. On September 12, 1989, William J. Peck, Jr., was injured when the automobile he was driving was struck by an automobile owned by Gilbert A. Knight and operated by Robert A. English. At the time of the accident, English was employed by Vendors, Inc. (Vendors), and was acting as its agent in the course of and within the scope of his employment. Knight's automobile was insured by Aetna Casualty and Surety Company (Aetna), which provided liability coverage in the amount of $100,000. Aetna paid the full amount of its liability coverage to Peck in settlement of his claim against Knight. Vendors was insured by Allstate under a commercial policy of automobile insurance. After Peck had received the full amount of liability coverage available under Knight's policy with Aetna, Peck made demand for payment under the liability coverage in Vendors' policy with Allstate. Allstate denied coverage under Vendors' policy because the automobile operated by English was not listed on Vendors' policy as a covered vehicle. Having exhausted all of the available liability policies, Peck then pursued his own underinsured motorist coverage with Crum and Forster. During arbitration proceedings, Crum and Forster settled Peck's underinsured motorist claim for $72,500.

Crum and Forster then instituted this subrogation action against Allstate, claiming that Allstate had improperly denied benefits that were due Peck under Vendors' liability policy with Allstate. ³ Crum and Forster alleged that, because General Statutes § 38a-336(b) ⁴ requires payment of underinsured motorist benefits only after the limits of all applicable liability policies have been exhausted, if Allstate had properly made payment on Peck's claim against Vendors, Crum and Forster would not have been required to pay Peck's underinsured motorist claim against it. Alleging that Allstate had been unjustly enriched by the amount of the payment to Peck, Crum and Forster sought to recover that amount, plus attorney's fees and the cost of investigation.

Allstate moved to strike ⁵ Crum and Forster's complaint, arguing that the cause of action involved an assignment of a personal injury action, which is impermissible under Connecticut law. The trial court granted Allstate's motion on the ground that Berlinski v. Ovellette, supra, 164 Conn. 482, 325 A.2d 239, which invalidated subrogation actions by providers of uninsured motorist benefits, was controlling authority. Crum and Forster then moved the trial court to render judgment on the motion to strike so that it could bring this appeal. The court rendered judgment and this appeal followed.

We first address Crum and Forster's claim that, in granting Allstate's motion to strike, the trial court improperly relied on Berlinski as controlling authority because, according to Crum and Forster, Berlinski is distinguishable. Specifically, Crum and Forster argues that, unlike Berlinski, in which the uninsured motorist carrier stepped into the shoes of its insured to bring an action against the uninsured tortfeasor in order to recover moneys that the uninsured motorist carrier had paid to its insured, in this case the insurer is standing not in the shoes of its insured, Peck, but rather in the shoes of English, the tortfeasor. Crum and Forster argues that it was injured by Allstate's wrongful denial of coverage to English, in light of Allstate's contract with English's employer, Vendors. It is the denial of coverage to English, Crum and Forster claims, that triggered this action. Although we agree that Allstate's denial of coverage to English underlies Crum and Forster's claim, we are not persuaded that this case is distinguishable from Berlinski.

In Berlinski, the insurance company paid uninsured motorist benefits to its own insured, and then sought to join in its insured's action against the tortfeasor. Id., at 484, 325 A.2d 239. In that case, it was the tortfeasor's wrongdoing that resulted in the insurer's obligation to pay uninsured motorist benefits, and the insurer therein attempted to prevent the tortfeasor from being unjustly enriched by being relieved of the duty to compensate the injured party.

In the present case, Crum and Forster's obligation to pay underinsured motorist benefits to its insured arose when Allstate refused to cover Vendors under its liability policy. Thus, although Allstate's denial of coverage caused Crum and Forster's loss by triggering its obligation to pay Peck, it is Crum and Forster's payment to Peck, not Allstate's denial of coverage to Vendors, that gives rise to Crum and Forster's subrogation claim.

Thus, although the party in the wrong may differ between the two cases, from the perspective of the uninsured motorist carrier, there is no distinction. In each case, the uninsured motorist carrier has paid benefits that were allegedly properly payable by another party. In both cases, the uninsured motorist carrier is stepping into the shoes of the party it paid in order to recover the payments that it made, and thus to prevent the unjust enrichment of the party whose debt it paid. From the viewpoint of the subrogee, therefore, this case is not distinguishable from Berlinski.

Furthermore, the reasoning of Berlinski equated the subrogation process, by which the insurer would have become entitled to sue for the damages resulting from its insured's personal injuries, with an assignment of its insured's cause of action. That assignment, we concluded, carried with it the kind of social evils associated with champerty. See id., at 486, 325 A.2d 239. We perceive no reason why, if Berlinski remains as our law, the same equivalency would not flow from the subrogation involved in this case. In Berlinski v. Ovellette, supra, 164 Conn. at 489, 325 A.2d 239, we concluded that, in the context of an uninsured motorist claim, a subrogation action by an insurer against the party responsible for the loss was indistinguishable from an assignment of a personal injury action, which has long been against public policy. See Iseli Co. v. Connecticut Light & Power Co., 211 Conn. 133, 136, 558 A.2d 966 (1989); Whitaker v. Gavit, 18 Conn. 522, 526 (1847). In the absence of a decision overruling Berlinski, therefore, that rule governs the present case, and Crum and Forster may not maintain this action against Allstate.

We therefore turn to Crum and Forster's argument that we should overrule Berlinski. "Stare decisis, although not an end in itself, serves the important function of preserving stability and certainty in the law. Accordingly, a court should not overrule its earlier decisions unless the most cogent reasons and inescapable logic require it. Maltbie, Conn.App.Proc., p. 226." (Internal quotation marks omitted.) Kluttz v. Howard, 228 Conn. 401, 406, 636 A.2d 816 (1994). We are persuaded that this is such a case.

When we decided Berlinski, uninsured motorist coverage and insurance provisions for payment of medical expenses were relatively new phenomena and we looked to other jurisdictions for guidance on this issue. We relied on Hardware Dealers Mutual Fire Ins. Co. v. Krueger, 486 P.2d 737 (Okla.1971) (Hardware Dealers), in which, after making payment of medical expense benefits to its insured, the insurer attempted, in accordance with a subrogation clause in the insurance policy, to sue the tortfeasor in order to recover the payments it had made to its insured. In that case, the Oklahoma Supreme Court determined that the subrogation "provisions merely attempt to change (by transfer) the party entitled to enforce the personal injury claim of [the insured] against the defendant tortfeasor. As applied to the present circumstances there is nothing distinguishable between the effect of subrogation and assignment. While subrogation and assignment have certain technical differences, each operates to transfer from one person to another a cause of action against a third person, and the reasons of policy which make certain causes of action nonassignable would seem to operate as forcefully against the transfer of such causes of action by subrogation." Id., at 738. Quoting that language in Berlinski, we concluded similarly that "[s]ubrogation, where applied in a manner to transfer the right...