General Casualty Ins. Co. v. Edwin Brown et al (2010)

MEMORANDUM OF DECISION ON MOTION FOR SUMMARY JUDGMENT

The motion for summary judgment is a subrogation action brought by the plaintiff insurance company General Casualty Insurance Company.   It arises out of a motor vehicle accident which occurred on April 16, 2007.   On that date the defendant Mcduffie was operating a vehicle owned by the defendant Brown.   The vehicle operated by Mcduffie collided with a car operated by Robert Hardy.   The plaintiff paid the property damage claim of its insured Mr. Hardy pursuant to a contract of insurance.

General Casualty then initiated the present action against Brown and Mcduffie claiming it was entitled to be subrogated to the rights of Mr. Hardy, its insured, to recover the $17,123.25 it paid to Hardy for property damage to his vehicle.   In paragraph 12 it notes the plaintiff paid the just stated figure to Hardy and Mr. Hardy “absorbed $500 of said damages by virtue of his deductible ․ General Casualty also received $1,493 in salvage value for Robert Hardy's vehicle.”

On April 7, 2009 Mr. Hardy initiated his own lawsuit against Mr. Mcduffie and Mr. Brown.   That complaint sets forth the allegations as to how the accident occurred and makes various claims in common law and statutory negligence arguing in paragraph 5 these claims of negligence resulted in “the collision and resulting injuries, damages and/or loss” sustained by Hardy.   Paragraphs 6 through 11 list the claimed personal injuries suffered by Mr. Hardy and also make a claim for lost earnings and loss of earning capacity.

The claim for relief states, however, that “the plaintiff (Hardy) claims (a) Money damages for personal injury and property damage.   The attorney who filed the complaint was Attorney Henry Silverman.

In relation to this suit brought by Mr. Hardy, he signed a release on September 24, 2009 whereby he released Mr. Brown and Mcduffie, according to the language of the release, in “a full and final release of all claims of every nature and kind whatsoever arising out of the aforementioned accident” (referring to the accident that occurred on April 16, 2007.)   In the release Mr. Hardy agreed “that he will make no further claims against (Mr. Brown) (Mr. Mcduffie) and Hartford Accident and Indemnity Company for any and all claims on account of, or arising out of, or resulting from, the motor vehicle accident which occurred on April 16, 2007.”   Hartford Accident is presumably the insurer of Brown and Mcduffie.   Mr. Hardy signed the release, as indicated on September 24, 2009.   His oath to the release was taken by his lawyer, Attorney Silverman.

Other matters which appear uncontested should be noted.   The attorney representing Mcduffie and Brown in this subrogation action also represented them in Mr. Hardy's suit against them.   Further an examination of the release indicates it was to be a general release for Brown and Mcduffie and also Hartford Accident and Indemnity Company which would be their insurer.

(1)

In any event the defendants in this subrogation action, Brown and Mcduffie, have now filed a motion for summary judgment.   The claim is that General Casualty's right to subrogation “was destroyed by the release executed by its insured Robert Hardy.”  Wilkinson v. Boats Unlimited, 236 Conn. 78, 88 (1996), is cited which quotes from an earlier case Orselet v. DeMatteo, 206 Conn. 542-47 (1988), to the effect that:

[T]he insurer can take nothing by subrogation but the rights of the insured, and is subrogated to only such rights as the insured possesses.   The principle has been frequently expressed in the form that the rights of the insurer against the wrongdoer cannot rise higher than the rights of the insured against such wrongdoer, since the insurer as subrogee, in contemplation of law, stands in the place of the insured and succeeds to whatever rights he may have in the matter.   Therefore, any defense which a wrongdoer has against the insured is good against the insurer subrogated to the rights of the insured.

This is apparently the law in all jurisdictions, see “Insurance,” 44 Am.Jur.2d § 1775, page 246 and numerous cases cited therein including Hanover Insurance Co. v. Fireman's Fund Ins. Co., 217 Conn. 340 (1991).   Also see Couch on Insurance 3D, Vol. 16 at § 222.5;  Insurance Law & Practice Appleman Vol. 6A, § 4051.

It is necessary to examine the complaint made by Mr. Hardy against these defendants in conjunction with the language of the release signed by Hardy, General Casualty's insured.   Mainly it is a claim for personal injuries but in the demand for relief there is a claim for property damage.   Hardy of course would have a right to make such a claim since he had, after all, a $500 deductible for property damage.   The language of the release is also quite broad as has been discussed.   But the court does not get all the analytical mileage the defendants seek to procure as a result of all these facts.   The defendants position is as follows:  A. There was a putative subrogation claim because General Casualty had paid its insured for property damage.   B. Because of that General Casualty, all things being equal, had a right to bring a subrogation action against the tortfeasors for the monies it paid Hardy for property damage.   C. All things are not equal because Hardy signed a general release, releasing the defendants from any and all claims arising out of the accident which include claims for property damage.   D. Because of this since General Casualty can only stand in Hardy's shoes in bringing the subrogation claim, General Casualty cannot bring an action for subrogation against these defendants.   However, the discussion cannot end there.

(2)

Of course it is true that, “When an insured settles with or releases a third party from liability for a loss that the third party has caused, the insurer's subrogation right may be destroyed, Gibbs v. Hawaiian Eugenia Corp, 966 F.2d 101, 106 (CA2, 1992);  Bill Gray Enterprises, Inc. v. Gourley, 248 F.3d 206, 222 (CA3, 2001).   But the operative word in Gibbs, is “may.”

But under certain circumstances the subrogation right is not destroyed even though the insured has signed a release with the tortfeasor.   Why is this so?   Because subrogation is an equitable remedy and principles of equity should apply.   It is universally accepted that:  “A settlement between an injured party and a tortfeasor does not destroy the subrogation claim of the injured party's insurer if prior to the release the tortfeasor has knowledge of those rights or if the tortfeasor's insurer has knowledge of those rights and the insurer does not consent,” Couch on Insurance, 3D, Vol. 16 § 224:113, pp. 224-38 to 224-41.   The cases cited are too numerous to list, see footnotes 8 through 10.   In Appleman's Insurance Law and Practice Vol. 6A at § 4092 at pp. 246-48 it states, citing many cases, that:  “A release procured by a tortfeasor, knowing that the insured has already received payment from the insurer, has generally been held not to constitute a defense to the insurer's action against the wrongdoer to enforce its right of subrogation.   A settlement effected by the tortfeasor under such circumstances has been held to be a fraud upon the insurer.”

In 44 Am.Jur.2d at Section 1788 page 257 homage is paid to the general stand in the shoes argument, also recognized in Couch and Appleman as indicated by the court.   But in § 1789 at pp.   257-58 Am.Jur. it states, also referring to many cases,

§ 1789 Effect of post-injury release if tortfeasor knows of insurer's claim

An act of the insured releasing the wrongdoer from liability after the injury does not defeat the rights of the insurer if the wrongdoer has knowledge of the insurer s right of subrogation under the insurance contract or the fact that the insured has already been indemnified by the insurer, and the release is given without the consent of the insurer.   The rationale for this rule is that a tortfeasor cannot expect to rely on a release from the victim if he or she knows that equity has transferred a portion of the victim's claim into the hands of a third party, who has paid part of what the tortfeasor by rights should pay.   For the purposes of this rule, the tortfeasor's knowledge of the insurer's right to subrogation may be constructive;  the release does not destroy the insurer's subrogation claim if the tortfeasor has information that, reasonably pursued, should give him or her knowledge of the insurer's subrogation rights.

We can look at one jurisdiction for an understanding as to how these principles apply.   In New York the law is that “when an insured executes a general release in favor of a tortfeasor without reserving the rights of his or her insurer, the insured impairs the insurer's right of subrogation, Progressive Ins. v. Torah, 44 AD.3d 837, 838, 847 N.Y.S.2d 90 (2007), Weinberg v. Transamerica Ins. Co., 62 N.Y.2d 379, 381-382 (Ct. of Appeals), also see Gibbs v. Hawaiian Eugenia Corp., supra, which was applying New York law.   But New York accepts the qualification to the general principle that “where a third party tortfeasor obtains a release from an insured with knowledge that the latter has already been indemnified by the insurer or with information that, reasonably pursued, should give him knowledge of the existence of the insurer's subrogation rights, such release does not bar the insurer's right of subrogation,” Allstate Ins. v. Mazzola, 175 F.3d 255, 260 (CA2, 1999), applying New York law and citing Hamilton Fire Ins. Co. v. Greger, 246 N.Y. 162, 158 N.E. 60, 62 (1927), also see Aetna Casualty & Surety Co. v. Bekins Van Lines, 492 N.E.2d 1222, 67 N.Y.2d 901 (Ct. of App., 1986).

Here Mcduffie and Brown received abode service of General Casualty's subrogation claim and the amount General Casualty paid to its insured on April 8, 2009, the release was signed by Hardy on September 24, 2009 in the suit brought by him against these defendants.   The motion for summary judgment is denied.¹

Thomas J. Corradino

Judicial Trial Referee

FOOTNOTES

FN1. The court could find no Connecticut Appellate case adopting the exception to the preclusion of an insurer's right to subrogation when a release has been obtained from an insured.   But the overwhelming weight of authority supports the view, there is no contrary authority to the court's knowledge, and the concept is rooted in principles of fairness and equity.   The court is aware of no reason why our Appellate Court's would adopt a rule contrary to national authority which would increase our insurance premiums and might discourage companies from writing policies in our state..  FN1. The court could find no Connecticut Appellate case adopting the exception to the preclusion of an insurer's right to subrogation when a release has been obtained from an insured.   But the overwhelming weight of authority supports the view, there is no contrary authority to the court's knowledge, and the concept is rooted in principles of fairness and equity.   The court is aware of no reason why our Appellate Court's would adopt a rule contrary to national authority which would increase our insurance premiums and might discourage companies from writing policies in our state.

Corradino, Thomas J., J.