Submitted: May 4, 1994
Filed: May 20, 1994
John A. Hutchison
Charleston, West Virginia
Attorney for Plaintiff
Anita R. Casey
Meyer, Darragh, Buckler,
Bebenek & Eck
Charleston, West Virginia
Attorney for Defendants
JUSTICE MILLER delivered the Opinion of the Court.
1. "'A provision in an insurance policy providing for
the subrogation of the insurer to the rights of the insured to the
extent that medical payments are advanced to such insured by the
insurer is distinct from an assignment of a tort claim and is not
invalid as against the public policy of this State.' Syllabus
Point, The Travelers Indemnity Co. v. Rader, 152 W. Va. 699, 166
S.E.2d 157 (1969)." Syllabus Point 1, Federal Kemper Insurance Co.
v. Arnold, 183 W. Va. 31, 393 S.E.2d 669 (1990).
2. A written notification by the insurance carrier as
to its subrogation claim for medical payments made to its insured
is legally sufficient even though it does not contain the precise
monetary amount of the subrogation claim.
3. The subrogation rights of an insurance carrier are
not barred so long as the tortfeasor's insurance carrier was
notified of the subrogation claim before it settled with the
insured who received the medical payments.
4. Ordinarily the tortfeasor's insurance carrier is
primarily responsible for payment of the subrogation claim. It is
responsible because it was aware of the claim before it obtained
the insured's release.
This case involves several certified questions relating
to whether an insurance carrier that pays its insured's medical
payments under its policy may through the subrogation clause in its
policy recover them from the liability carrier of the tortfeasor.
Nationwide Mutual Insurance Company (Nationwide) insured Sharon Salyers, whose vehicle was struck by James Justice on June 29, 1987. Mr. Justice was insured by Dairyland Insurance Company (Dairyland).See footnote 1 It is conceded for purposes of the certified questions that Mr. Justice was negligent in operating his vehicle. Nationwide paid Ms. Salyers' medical expenses in the amount of $2,325.25. On November 4, 1987, Nationwide, by letter, informed Dairyland that it was seeking reimbursement of its medical payments although no dollar amount was stated.
On March 3, 1988, Dairyland settled with Ms. Salyers for
$500 and received from her a full and complete release.
Thereafter, on December 27, 1988, Nationwide, by letter, again
informed Dairyland that it was seeking reimbursement of its medical payments through subrogation. In this letter, it set out the exact
dollar amount claimed, i.e., $2,325.25. According to Nationwide,
this letter was followed by a January 27, 1989, letter to Dairyland
in which Nationwide asked for a response.
Nationwide asserts it received a response on January 30,
1989, from Dairyland advising of its March 3, 1988, settlement with
and release by Ms. Salyers and stating that it would not honor
Nationwide's subrogation claim. Subsequently, Nationwide filed
suit in the Circuit Court of Raleigh County, and ultimately the
circuit court certified four questions and gave the following
"1. Is a written communication, by one insurance carrier to another insurance carrier, of the first carrier's intention to seek reimbursement from the second carrier for medical expenses paid by the first carrier to, or on behalf of, its insured a legally sufficient and legally enforceable notice of a claim? [Answer: Yes.]
"2. Is the communication from the first carrier to the second carrier required to include a sum certain sought as reimbursement to be valid and enforceable? [Answer: No.]
"3. Does a release executed by the first insurance carrier's insured of the second insurance carrier and its insured bar the first carrier's right of subrogation where a written communication of the claim has been made to the second carrier? [Answer: No.]
"4. Is the first insurance carrier's claim for subrogation enforceable against either its insured, the second carrier, or both and, if both, is there a priority for seeking recovery? [Answer: Yes, as to both; and the second carrier should be placed in first priority position.]"
We, along with a majority of jurisdictions,See footnote 2 have recognized as valid an insurance policy provision granting to the insurer a right of subrogation for the amount paid under the medical payments provisions in its policy. As we set out in Syllabus Point 1 of Federal Kemper Insurance Co. v. Arnold, 183 W. Va. 31, 393 S.E.2d 669 (1990):
"'A provision in an insurance policy providing for the subrogation of the insurer to the rights of the insured to the extent that medical payments are advanced to such insured by the insurer is distinct from an assignment of a tort claim and is not invalid as against the public policy of this State.' Syllabus Point, The Travelers Indemnity Co. v. Rader, 152 W. Va. 699, 166 S.E.2d 157 (1969)."See footnote 3
In Carney v. Erie Insurance Co., Inc., 189 W. Va. 702,
705, 434 S.E.2d 374, 377 (1993), we gave the following description
of the general nature of a medical payments provision in an
automobile liability policy: "It is generally held that the
medical payments provision in an automobile liability insurance
policy is separate from the liability provisions of the policy and
is akin to a personal injury accident policy. Customarily, medical
payments coverage gives a defined amount of coverage for a stated
premium." (Footnote omitted).
Turning to the certified questions, the first two deal with the sufficiency of the notice of the subrogation claim by Nationwide to Dairyland. As earlier noted, prior to Dairyland's settlement with Ms. Salyers, Nationwide's letter dated November 4, 1987, was sent to Dairyland advising it of Nationwide's subrogation claim. Even though the letter did not contain a specific dollar amount, it gave the accident date and the name of its insured, as well as the name of Dairyland's insured. We do not believe that because the letter did not contain the dollar amount of the subrogation claim, it was invalid.
In several cases, courts have held without any lengthy
discussion that the insurer's letter to the tortfeasor's insurance
carrier was sufficient to place them on notice of the subrogation
claim. For example, in Southern Pacific Transport Co. v. State
Farm Mutual Insurance Co., 480 S.W.2d 59, 61 (Tex. Ct. App. 1972),
the court found there was sufficient notice where "[t]he evidence
shows that Southern Pacific had knowledge of the fact that State
Farm had paid its insured's claim and was subrogated to the claim
in that amount. More specifically, William Gilbert, field claims
representative of State Farm, notified Southern Pacific Transport
Co., by letter of State Farm's claim." See also Mulholland v.
State Farm Mut. Auto. Ins. Co., 171 Ill. App. 3d 600, 527 N.E.2d 29
(1988); Employers Mut. Cas. Co. v. Meggs, 229 So. 2d 823 (Miss.
1969); Scavone v. Kings Craft Corp., 55 A.D.2d 807, 390 N.Y.S.2d 20
Most courts address the adequacy of the subrogation
notice in a cursory fashion as a part of the general rule dealing
with the effect of a release given to the liability carrier by the
insured. If the subrogation carrier gave notice to the liability
carrier of its claim before the liability carrier settled with the
insured, then any release obtained will not bar the subrogation
Thus, in Country Mutual Insurance Co. v. Transit Casualty
Co., 59 Ill. App. 3d 283, 375 N.E.2d 575 (1978), the insurance
carrier gave notice of its subrogation claim prior to the
settlement by the liability carrier of the insured's claim. The
liability carrier argued that its settlement with and release by
the insured exonerated it from any further liability. The court,
in rejecting this position, stated: "Since the defendant had
knowledge of plaintiff's [insurance carrier's] subrogation interest
prior to execution of the release and the release did not
specifically include an amount designated as covering the
plaintiff's subrogation interest, the plaintiff has a cause of
action against defendant based upon its subrogation claim." 59
Ill. App. 3d at 285-86, 375 N.E.2d at 577.
Similarly, in Transamerica Insurance Co. v. Barnes, 29
Utah 2d 101, 106, 505 P.2d 783, 787 (1972), the Utah Supreme Court,
although somewhat divided on whether a remand was needed, had no
disagreement as to this principle stated by the majority: "If the
settlement were made with knowledge, actual or constructive, of
plaintiff's [insurance carrier's] subrogation right, such
settlement and release is a fraud on the insurer and will not
affect the insurer's right of subrogation as against the tort-
feasor or his insurance carrier." (Footnote omitted). See also
Ortega v. Motors Ins. Corp., 552 So. 2d 1127 (Fla. Dist. Ct. App.
1989); Home Ins. Co. v. Hertz Corp., 71 Ill. 2d 210, 375 N.E.2d 115 (1978); Travelers Indem. Co. v. Vaccari, 310 Minn. 97, 245 N.W.2d
844 (1976); Milbank Ins. Co. v. Henry, 232 Neb. 418, 441 N.W.2d 143
(1989); Leader Nat'l Ins. Co. v. Torres, 113 Wash. 2d 366, 779 P.2d
722 (1989). See generally 16 George J. Couch, Couch Cyclopedia of
Insurance Law § 61:201 (2d ed. 1983).See footnote 4
Thus, we conclude that the trial court correctly answered
the first two certified questions by stating that a written
notification by the insurance carrier as to its subrogation claim
for medical payments made to its insured is legally sufficient even
though it does not contain the precise monetary amount of the
In addressing the third certified question, we believe
that the subrogation rights of an insurance carrier are not barred
so long as the tortfeasor's insurance carrier was notified of the
subrogation claim before it settled with the insured who received
the medical payments.See footnote 5 The foregoing cases are quite clear on this
point. The Minnesota Supreme Court in Travelers Indemnity Co. v. Vaccari, 310 Minn. at 103, 245 N.W.2d at 848, gave this practical
reason for disallowing the release to bar the subrogation claim:
"To hold that such a settlement destroys an insurer's subrogation rights would have the practical effect of encouraging a tortfeasor or his liability insurer to disregard notice of an insurer's valid subrogation claim and attempt to procure a general release from the insured. We believe that the tortfeasor and his liability insurer have a duty to act in good faith under such circumstances."See footnote 6
Moreover, to allow a release to bar a claim when it is
obtained after notice of a subrogation claim would encourage such
practices by a tortfeasor's insurance carrier. If a plaintiff is
unrepresented, as apparently was the case here, he or she may not
understand the subrogation claim process. Thus, the plaintiff may
be willing to settle the liability claim for a low figure without realizing the subrogation claim may be asserted against him. See
Leader Nat'l Ins. Co. v. Torres, supra. It seems clear that the
tortfeasor's insurance carrier because of its superior knowledge of
insurance practice and law is in a better position to be
responsible for properly handling the subrogation claim than either
the tortfeasor or the insured of the subrogation carrier.
With regard to the fourth certified question as to who
has the priority for payment of the subrogation claim once the
insured's release is not deemed to bar it, we hold that ordinarily
the tortfeasor's insurance carrier is primarily responsible for
payment of the subrogation claim. It is responsible because it was
aware of the claim before it obtained the insured's release. There
may be an occasion where the insured who is represented by counsel
participated in some fraudulent scheme against the subrogation carrierSee footnote 7 that would require that general priority to be reversed.See footnote 8
However, we find no such circumstance to exist in this case.
The certified questions having been answered, this case
is dismissed from the docket.
Answered and dismissed.
Footnote: 1Also sued was Sentry Claims Service which investigated the accident on behalf of Dairyland. For purposes of this opinion, Sentry Claims Service is treated as an agent of Dairyland. Consequently, notice to it is deemed to be notice to Dairyland.
Footnote: 2See generally 8A John A. Appleman & Jean Appleman, Insurance Law & Practice § 4903 (1981); Annot., 19 A.L.R.3d 1054 (1968).
Footnote: 3One of the issues in Federal Kemper, supra, was whether an attorney for an injured plaintiff can be reimbursed under a subrogation clause for the cost of obtaining a recovery. We stated in Syllabus Point 3:
"When an automobile insurer is
reimbursed, under a subrogation clause in the
insurance contract, for benefits paid to a
covered person that such person has then
successfully recovered from a third party,
the reimbursement should be reduced by the
insurer's pro rata share of the cost to the
covered person of obtaining the recovery
against the third party."
Footnote: 4This rule is expressed as follows in Section 61:201 of Couch, supra: "[I]t is generally held that where the tortfeasor obtains a release from the insured with knowledge that the latter has already been indemnified by the insurer, such release of the tortfeasor does not bar the right of subrogation of the insurer." (Footnote omitted).
Footnote: 5Notification can come from the insurance carrier claiming subrogation or from the insured who has received the payments which are subject to the subrogation claim.
Footnote: 6Section 61:194 of Couch, supra, also points out that where the insured settled with the tortfeasor before receiving any subrogation payment, then there is no right of subrogation:
"The insurer may be barred from asserting a right of subrogation against the tortfeasor responsible for the loss or damage where the insured settled with the tortfeasor and executed a valid general release of all liability before the insurer made payment of the claim to the insured, at least in the absence of fraud or collusion. In other words, if before payment by the insurer the insured makes settlement with the tortfeasor or the one primarily liable for the loss and releases him fully from all liability, it is generally held that such release destroys the insurer's right to subrogation." (Footnotes omitted).
Footnote: 7See note 3, supra.
Footnote: 8Moreover, we recognize the general precept with regard to subrogation contained in Syllabus Point 10 of State ex rel. Allstate Insurance Co. v. Karl, ___ W. Va. ___, 437 S.E.2d 749 (1993), cert. denied, ___ U.S. ___, 114 S. Ct. 1302, 127 L. Ed. 2d 653 (1994):
"'"'Subrogation, being a creation of equity, will not be allowed except where the subrogee has a clear case of right and no injustice will be done to another.' Syllabus, Buskirk v. State-Planters' Bank & Trust Co., 113 W. Va. 764, 169 S.E. 738 (1933)." Syllabus point 6, Fuller v. Stonewall Cas. Co. of W. Va., 172 W. Va. 193, 304 S.E.2d 347 (1983).' Syllabus Point 2, Kittle v. Icard, 185 W. Va. 126, 405 S.E.2d 456 (1991)."
See also Syllabus Point 11, State ex rel. Allstate Ins. Co. v. Karl, supra.