Summary
In Peterson, the cooperation and assistance consisted only of the fact that each party employed his own counsel who collaborated in conducting the litigation.
Summary of this case from Ervin v. GarnerOpinion
No. 37629
Decided June 12, 1963.
Insurance — Fire — Subrogation provision — Right of recovery against wrongdoer — Insurer's right to be indemnified from proceeds of recovery.
Where the policy subrogation provisions and the subrogation assignment to the insurer convey all right of recovery against any third-party wrongdoer to the extent of the payment by the insurer to the insured, an insurer, who has cooperated and assisted in recovering from the wrongdoer, is entitled to be indemnified first out of the proceeds of such recovery.
APPEAL from the Court of Appeals for Ashland County.
The Ohio Farmers Insurance Company, appellee here and hereafter referred to as the insurer, issued a policy of fire insurance to Merle and Ethel Peterson, appellants here and hereafter referred to as the insured, covering a barn and personal property. The policy limits are $5,000 on the barn, $1,000 on machinery and equipment, $1,500 on hay and grain, $500 on a combine, and $2,000 on household goods.
While such policy was in effect the insured had a fire loss. The insurer employed an adjustment agency to determine and settle the loss. The agency reported that the total loss was $17,629.56 and that there was due the insured under the policy the sum of $7,814. The itemized report of loss and schedule of payment prepared by the insurer through its agency and accepted by the insured in settlement is in pertinent part as follows:
Items Value Loss Insurance Claim Barn $ 14,259.40 $ 14,259.40 $ 5,000.00 $ 5,000.00 Machinery and equipment 2,500.00 1,256.16 1,000.00 1,000.00 Hay and grain 1,296.00 1,296.00 1,500.00 1,296.00 Combine 800.00 800.00 500.00 500.00 Household goods 5,000.00 18.00 2,000.00 18.00 Total $ 23,855.40 $ 17,629.56 $ 10,000.00 $ 7,814.00
The insured signed the proof-of-loss and executed insurer's standard subrogation receipt at time of payment of $7,814.
Subsequent to the insurance settlement, insured and insurer jointly filed a petition for damages against the third-party wrongdoer, claiming that the insured's loss was $17,629.56 plus an item of $275 for certain fertilizer not insured. Each party had employed his own counsel who collaborated in conducting the litigation against the third-party tort-feasor. Each made his own expenditures and counsel-fee contracts. A joint verdict in favor of the insured and the insurer against the third-party tort-feasor in the amount of $11,514 was returned and judgment entered thereon.
The judgment was paid by check to both parties jointly. Thereupon a dispute arose between insured and insurer as to the division of the proceeds, there having been no prior agreement between the parties as to the division of the proceeds of the judgment.
the insured then filed a declaratory judgment action, alleging, inter alia, that the fire loss was $17,904, admitting the insurance payment of $7,814 and the execution of the subrogation receipt and claiming that the insurer has no right of subrogation until the insured is fully indemnified for the loss of $17,904 plus counsel fees and other expenses of recovery. By its answer the insurer admits substantially all the allegations of the petition but claims that the jury in the third-party tort action fixed the fire loss at $11,514 and that in any event insurer is entitled to first payment of $7,814 out of the $11,514 recovery, by reason of the subrogation agreement in its policy and the subrogation receipt.
The Court of Common Pleas, in allocating the proceeds of the judgment recoverd by both parties in the amount of $11,514 against the third-party tort-feasor, awarded judgment to the insured in the amount of $10,090 and to the insurer in the amount of $1,424. On appeal the Court of Appeals found that the total fire loss was $11,514 as determined by the jury verdict and judgment against the tort-feasor rather than $17,629 as determined by the insurer through its agency and as set forth in the proof-of-loss, and that the insurer is entitled to be first reimbursed for the $7,814 payment made to insured, thus leaving a balance of $3,700 for the insured.
The cause is before this court upon the allowance of a motion to certify the record.
Mr. Kenneth J. Nordstrom, for appellants.
Messrs. Lutz Oxley, for appellee.
The object of this declaratory judgment action, here under review, is to effect a division and allocation of $11,514 in money recovered by the insured and the insurer from the third-party tort-feasor. It may be likened to a suit to marshal liens on a particular fund.
Although judicial rulings are cited by both parties to sustain their respective positions, it is our opinion that the key to resolution of this case lies in the subrogation provision of the insurance policy and the subrogation receipt signed by the insured upon settlement of the claim for loss. The language of the insurance policy relating to subrogation reads as follows:
"This company may require from the insured an assignment of all right of recovery against any party for loss to the extent that payment therefor is made by this company."
In the exercise of its contractual option to require an assignment of rights, the insurer upon settling the claim of the insured obtained a subrogation receipt reading in pertinent part:
"Received of the Ohio Farmers Insurance Co., the sum of seven thousand eight hundred fourteen dollars (7,814.00) in full settlement of all claims and demands of the undersigned for loss and damage by fire occurring on the 19th day of May A.D. 1959, to the property described in Policy No. 270774 issued through the Fritzinger Agency of said Company.
"In consideration of and to the extent of said payment the undersigned hereby subrogates said Insurance Company, to all of the rights, claims and interest which the undersigned may have against any person or corporation liable for the loss mentioned above, and authorizes the said Insurance Company to sue, compromise or settle in the undersigned's name or otherwise all such claims and to execute and sign releases and acquittances and endorse checks or drafts given in settlement of such claims in the name of the undersigned, with the same force and effect as if the undersigned executed or endorsed them."
It seems clear that the assignment of all the insured's right of recovery against the third-party tort-feasor to the extent of the insurer's payment to the insured conveyed every bit of the insured's right of recovery up to the amount of $7,814. The insured's conveyance of all right of recovery up to a certain limit, viz., the extent of the insurer's payment in settlement of the insured's claim, can mean only that the assignee is the owner of all the insured's rights of recovery until he is paid. The assignee, being the owner of all of insured's right of recovery, must have priority in payment out of the funds recovered. Otherwise, the words "all right of recovery" are without meaning.
The insured relies heavily upon Newcomb v. Cincinnati Ins. Co. (1872), 22 Ohio St. 382, and Holibaugh v. Cox (1958), 167 Ohio St. 340, for the proposition that, where there is partial insurance coverage only, the insured is entitled to recover the balance of his full loss out of the proceeds of a judgment against a third-party wrongdoer before having to account to the insurer upon a subrogation assignment. While the Newcomb case stands generally for such a rule, it is distinguishable from the case at bar on a number of grounds. First, in Newcomb the insured proceeded against the tort-feasor without the cooperation and assistance of the insurer. Second, and more important, it appears that in Newcomb no specific subrogation provision or assignment existed as it does here. In Holibaugh the pertinent question was whether the recovery against the third-party tort-feasor was limited to the amount which the insured and his insurer have agreed to be the extent of the liability of the insurer to the insured. Obviously, such a question is far different from that now before this court.
In summary then we conclude that, where the policy subrogation provisions and the subrogation assignment to the insurer convey all right of recovery against any third-party wrongdoer to the extent of the payment by the insurer to the insured, the insurer, who has cooperated and assisted in proceedings against the wrongdoer, is entitled to be indemnified first out of the proceeds of any recovery against the wrongdoer. Since this is the effect of the judgment of the Court of Appeals, such judgment is affirmed.
Judgment affirmed.
TAFT, C.J., ZIMMERMAN, MATTHIAS, O'NEILL, GRIFFITH and HERBERT, JJ., concur.