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KRAPFL v. FARM BUREAU MUT. INS. CO.5/22/1996
This appeal presents a dispute concerning whether a subrogated medical payment insurer, who intervened in plaintiffs' personal injury action, may be held responsible for a pro rata share of plaintiffs' attorney fees and litigation expenses in recovering damages from defendants. The district court interpreted our decision in Principal Casualty Insurance Co. v. Norwood, 463 N.W.2d 66 (Iowa 1990), as relieving the subrogated insurer from that responsibility. We disagree and reverse the judgment of the district court.
Plaintiffs, Nancy and Thomas Krapfl, are insured under a family auto policy purchased from the intervenor, Farm Bureau Mutual Insurance Company (Farm Bureau). When Nancy Krapfl was injured in an automobile collision involving defendants Paul Yearous and Mark Recker, she received medical payments of $10,000 under Farm Bureau's policy. Farm Bureau contacted defendants and asserted a subrogation interest in any claim that plaintiffs might make against them. Defendants' liability insurer responded, stating that it would protect Farm Bureau's interest in attempting to settle with plaintiffs. Later, Farm Bureau wrote plaintiffs' attorneys and informed them that if they filed suit on plaintiffs' behalf Farm Bureau would intervene to protect its own interests. Plaintiffs' attorneys responded by indicating that such intervention would not insulate Farm Bureau from responsibility for a pro rata share for attorney fees and expenses.
Eventually, the Krapfls filed an action against Yearous and Recker alleging that their negligence caused bodily injury to Nancy and loss of consortium to Thomas. Farm Bureau intervened in the action. In its prayer, it requested "that the court recognize its subrogation interest in this lawsuit and establish a lien for the amount of actual medical expenses paid." As intervenors, Farm Bureau filed requests for admissions and interrogatories directed to both the plaintiffs and defendants. Its attorney also appeared at a pretrial settlement conference.
The district court ordered that the intervenor would not be allowed to participate in any manner during the trial nor sit at counsel table. The case was settled prior to trial for the sum of $93,333.33. A dispute arose as to whether the intervenor would be required to pay a pro rata share of the attorney fees and expenses incurred by the plaintiffs in obtaining the settlement. Pending the resolution of that issue, the sum of $10,000 of the settlement proceeds was placed in trust.
At a hearing on the question of the intervenor's responsibility for fees and expenses, a lawyer for the tortfeasors, Yearous and Recker, testified that no action by the intervenor in any way contributed to the defendants' willingness to settle for the agreed sum. The only interaction between intervenor and defendants, according to this witness, was that defendants requested a compromise of the $10,000 subrogation interest, and the intervenor declined that request. The district court, relying on our decision in the Norwood case, determined that, when an insurer employs its own attorney and participates in an action to the extent of participating in discovery and settlement negotiations, it is not obligated to pay a pro rata share of plaintiffs' attorney fees and expenses.
The obligation of intervenor to pay a portion of plaintiffs' attorney fees and expenses from its share of the recovery is founded on subsections 3 and 4 of Iowa Code section 668.5 (1993). These subsections read as follows:
3. Contractual or statutory rights of persons not enumerated in section 668.2 for subrogation for losses recovered in proceedings pursuant to this chapter shall not exceed that portion of the judgment or v
Page 1 2 3 Iowa Personal Injury Attorneys
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