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Youngblood v. American States Ins. Co.12/14/1993
to the subrogee and the legal title to the claim is never removed from the subrogor, but remains with him throughout.
Skauge v. Mountain States Tel. & Tel. Co. (1977), 172 Mont. 521, 526, 565 P.2d 628, 630-31.
Montana law has long held that a property damage claim is assignable, while a cause of action growing out of a personal right, such as a tort, is not assignable. Caledonia Ins. Co. v. Northern Pac. Ry. Co. (1905), 32 Mont. 46, 49, 79 P. 544, 545. Notwithstanding, and because we have, on occasion, blurred the distinction between subrogation and assignment, there has been some confusion between the assignment of a personal injury claim and subrogation of a personal injury claim. See Allstate Ins. Co. v. Reitler (1981), 192 Mont. 351, 628 P.2d 667.
With some exceptions, subrogation against an insured is allowed if that insured has been made whole and has been fully compensated, which compensation includes costs and attorney's fees. Skauge, 565 P.2d at 632. However, an insurance company is only allowed to subrogate to the amount it actually paid. Farmers Ins. Exchange v. Christenson (1984), 211 Mont. 250, 254, 683 P.2d 1319, 1321.
At issue here is one of the exceptions under Montana law to the general rule allowing subrogation. We have previously refused to allow subrogation of medical payment benefits. In Reitler, Welton sustained personal injuries and incurred medical expenses after she was hit from behind by a vehicle driven by Reitler. Welton was insured by Allstate Insurance Company (Allstate), which paid her $2,000 in medical benefits. Allstate sent a notice of subrogation to Reitler's insurer, Farmers Insurance Exchange (Farmers). Thereafter, Welton settled her claim with Farmers for $9,500, and Farmers obtained a release from Welton. Allstate then filed an action against Farmers for the amount of its subrogated interest against Welton. Reitler, 628 P.2d at 668. We held that medical payment subrogation clauses are invalid, due in part to public policy considerations. Those public policy considerations included the following: (1) the insured has paid a premium for medical payment coverage; (2) the insured person is the one likely to suffer most if medical payments received must be repaid out of a third-party recovery; and (3) the tortfeasor's carrier may consider that the injured person has already been paid medical expenses and can make a smaller offer which allows that such payment has already been made. Reitler, 628 P.2d at 670.
Unfortunately, we also reasoned that a subrogation clause has the effect of assigning a part of the insured's right to recover against a third party tortfeasor and, the assignment of a personal injury claim being prohibited, we held that medical payment subrogation clauses in insurance contracts were invalid. Reitler, 628 P.2d at 670. The result reached in Reitler was correct, not because there was a prohibited assignment of a personal injury claim, but because of the public policy reasons expressed therein as outlined above, and because Allstate's right to reimbursement via subrogation was dependent upon the ability of the indemnified party to sue the tortfeasor. Welton, however, had already settled, thus precluding suit by Allstate.
The latter conclusion is clear from our holding in St. Paul Fire & Marine Ins. Co. v. Allstate Ins. Co. (1993), 257 Mont. 47, 847 P.2d 705. In St. Paul, Lynn, insured by St. Paul Fire and Marine Insurance Company (St. Paul), and Glassing, insured by Allstate Insurance Company (Allstate), were involved in a motor vehicle accident. Allstate refused to settle Lynn's complaint, and Lynn succeeded in obtaining a jury verdict in her favor against Glassing. S
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