Opinion
Case No. 20021026-CA.
Filed March 25, 2004. (Not For Official Publication).
Appeal from the Third District, Salt Lake Department, The Honorable Joseph C. Fratto Jr.
Jay L. Kessler, Magna, for Appellant.
John R. Lund and Jill L. Dunyon, Salt Lake City, for Appellee.
Before Judges Jackson, Orme, and Thorne.
MEMORANDUM DECISION
We have determined that "[t]he facts and legal arguments are adequately presented in the briefs and record[,] and the decisional process would not be significantly aided by oral argument." Utah R. App. P. 29(a)(3). Moreover, the issues presented are readily resolved under applicable law. Summary judgment is appropriate if "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Utah R. Civ. P. 56(c). See Guardian Title Co. of Utah v. Mitchell, 2002 UT 63, ¶ 12, 54 P.3d 130. We review a ruling on summary judgment for correctness. See Price Dev. Co. v. Orem City, 2000 UT 26, ¶ 9, 995 P.2d 1237.
"Under Utah law, `an implied covenant of good faith and fair dealing generally inheres [in] all contractual relationships,'" Prince v. Bear River Mut. Ins. Co., 2002 UT 68, ¶ 27, 56 P.3d 524 (alteration in original) (quoting Rawson v. Conover, 2001 UT 24, ¶ 44, 20 P.3d 876), and in the context of insurance contracts, "the overriding requirement imposed by the implied covenant is that insurers act reasonably, as an objective matter, in dealing with their insureds." Billings v. Union Bankers Ins. Co., 918 P.2d 461, 465 (Utah 1996) (footnote omitted). "In order for [the defendant insurance company]'s conduct to be in good faith, its right to subrogation must have been a fairly debatable matter, either factually or legally." Hill v. State Farm Mut. Auto. Ins. Co., 829 P.2d 142, 147 (Utah Ct.App. 1992). "`When a claim is fairly debatable, the insurer is entitled to debate it, whether the debate concerns a matter of fact or law.'" Callioux v. Progressive Ins. Co., 745 P.2d 838, 842 (Utah Ct.App. 1987) (citation omitted).
"[T]he general rule [is] that where there are no specific terms to the contrary in the settlement agreement or the insurance contract, the insured must be made whole prior to recovery by the insurer on a subrogation claim." Hill, 829 P.2d at 145. The subrogation clause of the insurance contract in this case provides: "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." The contract further provides that the insurance company is entitled to subrogation "only after the person has been fully compensated for damages."
Appellant argues that Appellee's assertion of a lien against the proceeds of her settlement with a third-party insurer — for reimbursement of the $23,000 Appellee paid for personal injury protection benefits — violates the implied covenant of good faith and the insurance contract because the issue of whether the settlement proceeds fully compensated her for damages was not fairly debatable. Because the contract merely makes the implied duty an express duty, both claims are properly resolved by determining whether Appellee acted in an objectively reasonable manner when it asserted a lien against the settlement proceeds. See Billings, 918 P.2d at 465 n. 2.
The evidence before the trial court showed that, at the time Appellee asserted its right to subrogation, the third-party insurer had tendered the $100,000 policy limits on behalf of the defendant in the underlying automobile accident. After chiropractic treatment and a successful surgery, Appellant's medical bills totaled approximately $40,000. The rather significant difference between the amount of her medical expenses and the amount of the settlement to be paid would presumably be enough to satisfy the subrogation claim, with ample cushion left over for other possible expenses. Appellee would not be acting in bad faith to assert such a claim, absent information suggesting that Appellant had damages well beyond the $40,000 in unpaid medical expenses and the $23,000 Appellee had already paid on her behalf. Nothing in the record suggests Appellee had such information when it asserted its subrogation claim. Thus, as a matter of law, Appellee did not act in bad faith in asserting its statutory and contractual rights, regardless of whether it would ultimately prevail on its subrogation claim.
Although Appellant is correct that with respect to ultimately proving entitlement to subrogation, "the burden [would be] on the insurer to prove that the insured has already been fully compensated and that the insurer is thus entitled to subrogation," Hill v. State Farm Mut. Auto. Ins. Co. 829 P.2d 142, 145 (Utah Ct.App. 1992), the only issue before this court is whether the trial court correctly granted summary judgment on the "fairly debatable" issue.
Accordingly, we conclude that Appellee acted reasonably in asserting the lien because the issue of whether Appellant had been fully compensated was unsettled. The trial court correctly granted summary judgment, and we accordingly affirm.
WE CONCUR: Norman H. Jackson, Judge, and William A. Thorne Jr., Judge.