Opinion
No. 90-CV-44886.
Decided August 29, 1991.
Kiener Peters and Charles T. Lester, for plaintiff.
Schwartz, Manes Ruby Co., L.P.A., and Harry S. Sudman, for defendant.
This matter is before the court on cross motions for summary judgment. Both parties agree that there are no material facts in dispute, and that summary judgment is proper, though of course they disagree on which motion should be granted.
This dispute grew out of an automobile collision in 1988. The defendant, Leroy Taylor, was admittedly negligent and caused damages to one Gloria Riley, who was covered by medical insurance through plaintiff, Community Mutual Insurance Company ("Community Mutual"). Community Mutual paid Riley's medical bills, and became subrogated to Riley's claim against defendant Taylor. Community Mutual put Taylor, and his insurance carrier, State Farm Automobile Insurance Company ("State Farm"), on notice of plaintiff's subrogation rights. The effect of the notice is the subject of this controversy.
The general rule, in Ohio and elsewhere, is that "[`]an unlimited release executed by an insured-subrogor for consideration not specifically including an amount designated as covering the insurer's subrogation interest does not bar a subsequent subrogation action by an insurer-subrogee against the tortfeasor, if the tortfeasor or his insurance carrier had knowledge of the insurer-subrogee's interest prior to the release.[']" Leader National Ins. Co. v. Torres (1988), 51 Wn. App. 136, 140, 751 P.2d 1252, 1255, quoting from Home Ins. Co. v. Hertz Corp. (1978), 71 Ill.2d 210, 215, 16 Ill.Dec. 484, 487, 375 N.E.2d 115, 118. Similarly, "[a] tortfeasor who settles the claim of a party injured by his act with full awareness of the fact that the claim has been subrogated is liable to the subrogee for the amount paid out by such subrogee." Hartford Accident Indemnity Co. v. Elliott (1972), 32 Ohio App.2d 281, 61 O.O.2d 281, 290 N.E.2d 919, syllabus.
The troubling aspect of our present case is that while plaintiff, Community Mutual, did send a notice of subrogation, which was received by defendant and his insurer, State Farm, the notice was inaccurate. While the notice stated that there was subrogation for medical benefits, it stated an amount of $199. The notice stated, inter alia:
"* * * [The] current amount of our claim is $199.00. Additional bills and related charges will be forwarded to you in the future. This letter is not a demand for settlement. Do not forward payment at this time. You are hereby placed on notice that the amount of this claim is subject to a change as a result of charges that may have been incurred as of this writing and not yet included in the above amount, or that may be incurred and paid in the future. When you are in the position to settle our client's claim and/or the related personal injury claim, please contact our office for the current correct amount of our client's claim. We will advise you at that time of our client's settlement demand."
It is undisputed that defendant's insurer, State Farm, settled the personal injury claim with Riley's attorney, withheld only the sum of $199 from the settlement, and forwarded the $199 to Community Mutual. However, Community Mutual asserts that the amount that it had in fact paid in medical bills was an additional $1,153.40, which is the amount it is seeking in this action.
It is defendant's position that the subrogation notice preserved plaintiff's subrogation rights only as to the $199, and the "related charges that may have been incurred as of this writing and not yet paid or that may be incurred and paid in the future." However, this court notes that this quote is part of page two of the notice sent to State Farm, which in the court's view, must be read in pari materia with the page-one quote set out above. Community Mutual has admitted that the amount was incorrect at the time, the additional bills already having been incurred and long before the notice was sent to State Farm.
Defendant relies upon the case of Motorists Mut. Ins. Co. v. Yates (1988), 44 Ohio Misc.2d 5, 540 N.E.2d 765. In Yates, the tortfeasor caused an accident resulting in personal injury and property damage. The injured party's insurer sent notice to the tortfeasor informing him of the insurer's subrogation rights to recover damages paid to the injured party; however, the notice only contained a request for reimbursement for property damage — it did not mention medical payments at all. The court held:
"The notice of a subrogation claim must be specific in order to place the insurance company on notice of a specific claim; otherwise, a general, non-specific subrogation claim can not place a carrier on notice for any specific type of subrogation claim, including property damages or medical payments. If this notice requirement is not specific, then the insurance company is placed in a position of being unable to settle anything in a good faith manner with the non-negligent party." Id. at 7, 540 N.E.2d at 766.
While this court is not certain whether the Yates holding went too far (would not a general notice of subrogation be sufficient to put the other party upon inquiry?), surely the Yates decision was correct on its facts, considering that the Yates letter only requested payment for automobile damage. In the case sub judice the notice did claim subrogation for the specific type of damages (medical payments) which Community Mutual is seeking. Defendant's contention is that the amount must be specific, or at least the amount should be correct at the time the notice was sent. This court does not believe that the Yates case supports that conclusion.
This court is of the opinion that the notice herein was sufficient to put defendant's insurer, State Farm, upon inquiry to learn the correct and total amount of Community Mutual's claim. The notice specifically directs the recipient to "please contact the undersigned to settle this claim." The notice also stated that no one has authority to settle the claim without authorization from Community Mutual. State Farm simply did not seek such authorization. Strangely enough, it is asserted that if State Farm had sought authorization and release from Community Mutual, Community Mutual may have given State Farm the authority to settle for $199 since its records had not been updated. Of course, had that been the case, Community Mutual's rights would have been extinguished by its own act of authorizing settlement for the smaller amount. It is crucial that settlement be made with consent of the subrogee. Since defendant's insurer did not obtain the consent of Community Mutual, it did not obtain a full release of liability, and Community Mutual's claims survived, to be reasserted in this action.
Plaintiff's motion for summary judgment is granted; defendant's motion is overruled.
Judgment accordingly.