Crystal Ryder v. State Farm Mutual Automobile Insurance Company and Ronald Froud

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SUPREME COURT OF ARKANSAS  No.  07­448  Opinion Delivered  11­15­07  CRYSTAL RYDER,  APPELLANT,  VS.  STATE FARM MUTUAL AUTOMOBILE  INSURANCE CO. AND RONALD FROUD,  APPELLEES,  APPEAL  FROM  THE  WASHINGTON  COUNTY    CIRCUIT  COURT,  NO.  CV­  05­2602,  HON.  MARK  LINDSAY,  JUDGE,  REVERSED AND REMANDED.  ROBERT L. BROWN, Associate Justice  Appellant Crystal Ryder and Ronald Froud were involved in an automobile accident  1  in Washington County on March 7, 2005.  Ryder later filed a complaint against Froud and  alleged that Froud had operated his automobile in a negligent manner, which caused the  accident and resulted in property damage and personal injury to Ryder.  On August 4, 2006, Ryder filed a motion to approve a proposed settlement, in which  Ryder stated that she and Froud had reached a settlement in the amount of $15,000.  The  motion  stated  that  State  Farm  Mutual  Automobile  Insurance  Company  (“State  Farm”),  Ryder’s automobile insurance carrier, claimed an interest in the settlement proceeds due to  its payment of $5,000 in medical benefits on Ryder’s behalf.  The motion further stated that 1  The  circuit  court’s  order  contains  a  caption  that  lists  Ronald  Froud  as  the  only  defendant.  However, the record in this case lists State Farm as an appellee, and State Farm  is the only appellee to file a brief with this court.  the proposed settlement amount between Ryder and Froud did not make Ryder whole.  State  Farm subsequently filed a motion to enter appearance for the purpose of determining its  “subrogation rights” and asserted that it was entitled to reimbursement for the $5,000 it paid  in medical payments coverage on behalf of Ryder, less the cost of collection.  This was followed by Ryder’s amended motion to approve the settlement and for a  declaratory judgment in which Ryder claimed that State Farm had no right to be reimbursed  for the amount of medical benefits it had paid because she had not been made whole.  She  further asserted that State Farm was guilty of bad faith by attempting to avoid liability under  the insurance policy that it had issued to her.  Ryder then filed a motion for partial summary  judgment and argued that there was no genuine issue of material fact that she would not be  made whole by the $15,000 settlement.  In that motion, she asked the circuit court to rule that  State Farm’s lien against that settlement amount was unenforceable.  State Farm answered and filed its own motion for summary judgment, stating that  there were no genuine issues of material fact regarding State Farm’s right of reimbursement  and  that  the  made­whole  doctrine  did  not  apply  to  claims  made  under  Arkansas  Code  Annotated § 23­89­207.  State Farm further alleged that it had agreed to allow Ryder to be  paid the sum of $2,000 for her proportional share of the cost of collection but that it was  entitled to the remaining $3,000.  Following a letter opinion, the circuit court issued its order on January 25, 2007, in  which it granted State Farm’s motion for summary judgment.  In that order, it dismissed 2  Ryder’s motion for partial summary judgment as well as her amended motion to approve the  proposed settlement and her motion for a declaratory judgment. The circuit court determined  that State Farm was asserting its right of reimbursement under § 23­89­207 against Ryder  and was not making a claim for subrogation.  The circuit court additionally ruled that the  statutory  right  of  reimbursement  under  §  23­89­207  was  different  from  a  claim  of  subrogation and that the made­whole doctrine did not apply to these circumstances.  The  circuit court found, as a final point, that State Farm’s assertion of its right to be reimbursed  was not in bad faith and that State Farm was entitled to the $3,000 in dispute.  Ryder  first  contends  in  her  appeal  that  the  circuit  court  erred  in  ruling  that  State  Farm’s claim for reimbursement under § 23­89­207 was not a claim for subrogation.  She  further argues that the circuit court erred in deciding that the made­whole doctrine does not  apply to claims made under § 23­89­207, and that because she was not made whole in the  settlement, State Farm’s lien against the settlement proceeds is unenforceable.  Ryder urges  in support of this argument that previous cases involving the construction of § 23­89­207  have considered a claim for reimbursement under this section to be a claim for subrogation.  Ryder asserts, in addition, that there is no difference between subrogation arising by statute,  as in this case, or arising under the terms of an insurance policy, and that even in cases of  subrogation arising by statute, equitable principles, such as the made­whole doctrine, apply.  She  insists  that  a  repayment  claim  for  benefits  paid,  whether  based  on  the  terms  of  an 3  insurance policy or by statute, is a claim for subrogation and that the made­whole doctrine  is applicable.  This court’s standard of review for the grant of a motion for summary judgment is as  follows:  A party is entitled to summary judgment if “the pleadings, depositions,  answers to interrogatories and admissions on file, together with the affidavits,  if any, shows that there is no genuine issue as to any material fact and that the  moving party is entitled to judgment as a matter of law” on the issue set forth  in the party's motion.  Ark. R. Civ. P. 56(c)(2) (2007). The burden of proving  that  there  is  no  genuine  issue  of  material  fact  is  upon  the  moving  party.  Windsong Enterprises, Inc. v. Upton, 366 Ark. 23, __ S.W.3d __ (2006).  On  appellate review, we must determine whether summary judgment was proper  based on whether the evidence presented by the moving party left a material  question of fact unanswered.  Id.  This court views the proof in the light most  favorable to the party resisting the motion, resolving any doubts and inferences  against the moving party, to determine whether the evidence left a material  question of fact unanswered.  Id.  Price  v.  Thomas  Built  Buses,  Inc.,  __  Ark.  __,  __,  __  S.W.3d  __,  __  (June  28,  2007).  The statute at issue in this case, § 23­89­207, provides in part:  (a)  Whenever  a  recipient  of  benefits  under  §  23­89­202(1)  and  (2)  recovers in tort for injury, either by settlement or judgment, the insurer paying  the benefits has a right of reimbursement and credit out of the tort recovery or  settlement, less the cost of collection, as defined.  . . . .  (c) The insurer shall have a lien upon the recovery to the extent of its  benefit payments.  Ark. Code Ann. § 23­89­207(a) and (c) (Repl. 2004) (amended 2005).  Section 23­89­202  requires  that  all  automobile  liability  insurance  policies  provide  minimum  medical  and  hospital benefits pursuant to subsection (1), income disability benefits pursuant to subsection 4  (2), and accidental death benefits pursuant to subsection (3) to insured parties without regard  to fault.  See Ark. Code Ann. § 23­89­202 (Repl. 2004).  State Farm contends, and the circuit court agreed, that under these statutes, it has an  absolute right of reimbursement, less cost of collection, for the medical benefits it paid on  behalf of Ryder as well as a statutory lien to the extent it made benefit payments.  The carrier  contends, nevertheless, that this statutory right to reimbursement is not subrogation.  Hence,  whether the right to reimbursement pursuant to §  23­89­207 is subrogation is an issue we  must first resolve.  This court has defined subrogation as follows:  Subrogation  is  the  substitution  of  one  party  for  another.    The  party  asserting  subrogation  is  making  a  demand  under  the  right  of  another.  Subrogation is a normal incident of indemnity insurance.  That is to say that  because  insurers  pay  the  obligations  to  their  insureds,  a  right  in  equity  to  subrogation in the insurer arises.  This assures against unjust enrichment by  way of double recovery.  Southern Farm Bureau Casualty Ins. Co. v. Tallant, 362 Ark. 17, 22­23, 207 S.W.3d 468,  471 (2005) (internal citations omitted).  A right to subrogation arises by convention in cases  in which the insurance policy or contract contains a subrogation provision.  See Tallant,  supra.  Legal  or  equitable  subrogation  arises  by  operation  of  law  based  on  the  facts  or  underlying circumstances of the case.  See id.  Subrogation rights may also arise by statute.  See  id.  In  Daves  v.  Hartford  Accident  & Indemnity  Company,  302  Ark.  242,  248,  788  S.W.2d 733, 736 (1990), this court said the right of reimbursement under § 23­89­207 “is in  the nature of subrogation,” and that “[t]he underlying principle of subrogation rights is to 5  2  avoid double recovery by the insured.”  We further note that in State Farm’s motion to enter  an appearance, it did so “for the purpose of determining State Farm’s subrogation rights.”  We  hold,  therefore,  that  the  right  to  reimbursement  under  §  23­89­207  is  a  right  to  subrogation vested in the insurer that is established by statute.  The general rule regarding the right to subrogation is that “an insurer is not entitled  to subrogation unless the insured has been made whole for his loss . . . .”  Shelter Mutual Ins.  Co. v. Bough, 310 Ark. 21, 28, 834 S.W.2d 637, 641 (1992).  This court has explained that  “the  insurer  should  not  be  precluded  from  employing  its  right  of  subrogation  when  the  insured has been fully compensated and is in a position where the insured will recover twice  for some of his or her damages.”  Id.  The Bough case involved the same statutory lien as that involved in the instant case,  and  the  issue  was  whether  this  statute  created  a  right  to  subrogation.    In  analyzing  the  application of § 23­89­207, we considered the statute as one that provides subrogation rights  for the insurer subject to the made­whole doctrine:  Although we have no criticism of the cases cited by Bough, the rule limiting  the insurer’s right to subrogation in those cases is not applicable to the facts  here.  The equitable nature of subrogation is granted an insurer to prevent the  insured from receiving a double recovery.  Thus, while the general rule is that  an  insurer  is  not  entitled  to  subrogation  unless  the  insured  has  been  made  whole for his loss, the insurer should not be precluded from employing its  right of subrogation when the insured has been fully compensated and is in a 2  In Daves, supra, this court held that the insurer was entitled to reimbursement from  the  insured’s  settlement  proceeds  for  the  amount  the  insurer  had  paid  in  benefits  to  the  insured.  Whether the insured had been made whole was not at issue in that case.  6  position where the insured will recover twice for some of his or her damages.  That is the situation here.  310 Ark. at 28, 834 S.W.2d at 641.  In Franklin v. Healthsource of Arkansas, 328 Ark. 163, 942 S.W.2d 837 (1997), this  court expanded the use of the made­whole doctrine and held that an insurer is not entitled  to  subrogation  unless  the  insured  has  been  fully  made  whole,  regardless  of  whether  the  insurance contract between  the  insurer and insured expressly gave the insurer a right of  subrogation for benefits paid.  Later, in General Accident Ins. Co. of America v. Jaynes, 343 Ark. 143, 33 S.W.3d  161 (2000), this court invoked Bough, supra, and Franklin, supra, and held that the made­  whole doctrine applies not only to equitable and conventional rights as well as statutory  rights  as  discussed  in  Bough,  but  also  to  statutory  rights  of  subrogation  provided  under  Workers’ Compensation statutes.  In Jaynes, supra, an employee of J.T. Shannon Lumber  Company was killed in an automobile accident while driving a truck for his employer.  The  employer’s workers’ compensation carrier, General Accident Insurance Company, paid over  $100,000 in benefits to the employee’s family.  The employee’s estate later filed a wrongful  death action against the third parties responsible for the employee’s death, and the parties  reached a settlement whereby the defendants agreed to pay the estate $18,500.  General  Accident  intervened  and  asserted  that  it  was  entitled  to  a  first  lien  on  two­thirds  of  the  estate’s net recovery pursuant to Arkansas Code Annotated § 11­9­410 (Repl. 1996).  The 7  circuit court ruled that General Accident’s right of subrogation did not arise because the  settlement amount was insufficient to make the employee’s survivors whole.  General Accident appealed, and this court affirmed the ruling of the circuit court.  In  doing so, we referred specifically to § 23­89­207 and said:  First, we point out that this court premised its decision in Franklin on  its  holding  in  Shelter  Mutual  Insurance  Co.  v.  Bough,  310  Ark.  21,  834  S.W.2d  637  (1992),  where  an  insurer  sought  subrogation  in  return  for  its  payment to its insured for no­fault medical and wage­loss benefits under Ark.  Code Ann. §  23­89­202(1) and (2) (Repl. 1991).  As in the instant case, the  insurer’s  right  to  subrogation  was  statutory.    Ark.  Code  Ann.  §  23­89­207  (Repl. 1991) provides as follows:  (a)  Whenever a recipient of  §  23­89­202(1)  and (2) benefits  recovers in tort for injury, either by settlement or judgment, the  insurer  paying the  benefits  has  a  right  of  reimbursement  and  credit  out  of  the  tort  recovery  or  settlement,  less  the  cost  of  collection, as defined.  . . . .  (c)  The insurer shall have a lien upon the recovery to the extent  of its benefit payments.  Although the insurer’s subrogation lien right in Bough was established by the  General Assembly, the Bough court held the insurer’s right to subrogation did  not arise until the insured was made whole.  That same rationale applies to the  situation before us now.  Jaynes, 343 Ark. at 152, 33 S.W.3d at 166.  Similar to the carriers in Bough and Jaynes, the insurer in the instant case, State Farm,  maintains  that  because  it  has  been  afforded  a  statutory  lien  by  the  General  Assembly 8  pursuant to § 23­89­207, its right of reimbursement is not conditioned upon whether the  insured, Ryder, has been made whole.  We disagree with State Farm.  In a typical insurance scenario, the insured pays premiums to the insurer to assume  risks.  If the insurer is entitled to reimbursement of the benefits it previously paid to the  insured after the insured receives a settlement from a third­party tortfeasor but has still not  been made whole, then a windfall is created for the insurer because it is not being forced to  assume all of the risks that it has been paid by the insured to assume.  Moreover, nothing in  the language of § 23­89­207 creates an exception to the general rules regarding subrogation  and the made­whole doctrine.  It is well settled that this court will not read into a statute a  provision that was not included by the General Assembly, see Potter v. City of Tontitown,  __ Ark. __, __ S.W.3d __ (Oct. 4, 2007), and this court will not construe a statute to yield  an absurd result.  See Nabholz Const. Corp. v. Contractors For Public Protection Ass’n., __  Ark. __, __ S.W.3d __ (Nov. 1, 2007).  We note, in addition, that the General Assembly has  not seen fit to amend § 23­89­207 in response to our decisions in Bough in 1992 and Jaynes  in 2000 to state that the made­whole doctrine does not apply to this statutory lien.  This is  an important consideration in the construction of our statutes. See Brewer v. Poole, 362 Ark.  1,  207  S.W.3d  458  (2005).  In  sum,  we  hold  that  the  made­whole  doctrine  applies  to  reimbursement claims under § 23­89­207.  Ryder next claims that a genuine issue of material fact exists as to whether she was  made whole by the $15,000 settlement, and, therefore, summary judgment was inappropriate. 9  She asserts that State Farm, in its motion for summary judgment, did not show that there  were no genuine fact issues because it did not address whether she had been made whole.  Because State Farm did not present a sustainable motion for summary judgment under Rule  56  of the Arkansas Rules of Civil Procedure, Ryder maintains that she was not required to  meet proof with proof, and that summary judgment was improperly entered for State Farm.  The fact that both Ryder and State Farm filed motions for summary judgment does  not necessarily eliminate a material question of fact.  See Ison v. Southern Farm Bureau  Casualty Co, 93 Ark. App. 502, 221 S.W.3d 373 (2006); Wood v. Lathrop, 249 Ark. 376,  459  S.W.2d  808  (1970).    In  some  cases,  when  both  parties  file  opposing  motions  for  summary judgment, the parties essentially agree that no material facts are in dispute, and,  therefore, summary judgment may be an appropriate means for resolution of the case.  See  McCutchen v. Patton, 340 Ark. 371, 10 S.W.3d 439 (2000).  In others, our court of appeals  has pointed out that “a party may concede that there is no issue if his legal theory is accepted  and yet maintain that there is a genuine dispute as to material facts if his opponent’s theory  is adopted.”  Ison, 93 Ark. App. at 507, 221 S.W.3d at 377; see also Wood, supra (finding  that opposing motions for summary judgment must both be denied if this court finds that  material facts are in dispute).  That is the situation in the case before us.  Because we hold that the made­whole doctrine does apply to this case, it is clear that  a question of fact remains as to whether Ryder was made whole by the $15,000 settlement.  We remand for further proceedings to resolve that factual issue. 10  Reversed and remanded. 11 

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