State Farm Mutual Automobile Insurance Company v. Baggett

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Justia Opinion Summary

In December 2005, Charles Baggett and Diana Morris were involved in an automobile accident, as a result of which Baggett was injured. Baggett sued Morris, who was insured by Sagamore Insurance Company. Baggett added his underinsured-motorist ("UIM") carrier, State Farm Mutual Automobile Insurance Company as a party to the action. The limit of State Farm's UIM policy was $60,000. Before Baggett commenced the action against Morris, State Farm paid Baggett $25,000, the limit of the liability policy issued by Sagamore to Morris, to protect its potential subrogation interest against Morris. At the time State Farm advanced the $25,000 to Baggett, Baggett executed an agreement entitled an "Advancement of Funds to Protect Future Subrogation Rights." State Farm opted out of the action. Following a jury trial, Baggett obtained a judgment against Morris for $181,046. Therefore, Baggett was entitled to $85,000--the total of the limits of both the Sagamore policy ($25,000) and the State Farm policy ($60,000). Sagamore paid $25,000; State Farm, rather than paying Baggett $35,000 and receiving credit pursuant to the "Advancement of Funds" agreement for the $25,000 it had advanced, mistakenly paid $60,000, resulting in an overpayment to Baggett of $25,000. As a result of the overpayment, the trial court ordered Baggett to reimburse State Farm $25,000, less a one-third attorney fee under the common-fund doctrine. State Farm appealed. The Court of Civil Appeals affirmed the trial court's judgment, without an opinion. State Farm petitioned the Supreme Court seeking review of the application of the common-fund doctrine. Upon review, the Court found that State Farm was entitled to a refund of the overpayment, and that if an attorney fee was due Baggett's attorney with respect to all or part of the $85,000 actually owed in the aggregate by Sagamore and State Farm, then the fee should be taken from the $85,000, not from the $25,000 State Farm overpaid and as to which it was entitled to be reimbursed.

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Rel: 09/21/2012 Notice: T h i s o p i n i o n i s s u b j e c t t o formal r e v i s i o n b e f o r e p u b l i c a t i o n i n t h e advance s h e e t s o f Southern R e p o r t e r . R e a d e r s a r e r e q u e s t e d t o n o t i f y t h e R e p o r t e r o f D e c i s i o n s , Alabama A p p e l l a t e C o u r t s , 300 D e x t e r A v e n u e , M o n t g o m e r y , A l a b a m a 3 6 1 0 4 - 3 7 4 1 ((334) 2 2 9 - 0 6 4 9 ) , o f a n y t y p o g r a p h i c a l o r o t h e r e r r o r s , i n o r d e r t h a t c o r r e c t i o n s may be made b e f o r e t h e o p i n i o n i s p r i n t e d i n Southern R e p o r t e r . SUPREME COURT OF ALABAMA SPECIAL TERM, 2012 1100578 Ex p a r t e S t a t e Farm Mutual Automobile Insurance Company PETITION FOR WRIT OF CERTIORARI TO THE COURT OF CIVIL APPEALS (In r e : S t a t e Farm Mutual Automobile Insurance Company v. Charles Baggett) (Baldwin C i r c u i t Court, CV-07-900118; Court o f C i v i l Appeals, 2100221) PER CURIAM. I n December 2005, C h a r l e s involved i n an B a g g e t t was was insured automobile injured. by B a g g e t t and D i a n a M o r r i s accident, as Baggett subsequently Sagamore Insurance B a g g e t t added h i s u n d e r i n s u r e d - m o t o r i s t a result of were which sued M o r r i s , Company who ("Sagamore"). ("UIM") c a r r i e r , S t a t e 1100578 Farm M u t u a l A u t o m o b i l e I n s u r a n c e Company ( " S t a t e F a r m " ) , as a p a r t y to the a c t i o n . $60,000. The l i m i t o f S t a t e Farm's UIM p o l i c y was B e f o r e B a g g e t t commenced t h e a c t i o n a g a i n s t M o r r i s , S t a t e Farm, p u r s u a n t t o t h e p r o c e d u r e a u t h o r i z e d by L a m b e r t v. State Farm M u t u a l A u t o m o b i l e I n s u r a n c e Co., 576 So. 2d 160 ( A l a . 1 9 9 1 ) , a d v a n c e d B a g g e t t t h e sum o f $ 2 5 , 0 0 0 , t h e l i m i t o f t h e l i a b i l i t y p o l i c y i s s u e d b y Sagamore t o M o r r i s , t o p r o t e c t its potential time State executed subrogation interest Farm against Morris. a d v a n c e d t h e $25,000 an a g r e e m e n t e n t i t l e d to Baggett, an "Advancement At the Baggett o f Funds t o Protect Future Subrogation R i g h t s . " State Nationwide Following Morris Farm o p t e d o u t o f t h e a c t i o n p u r s u a n t Insurance a jury Co., trial, f o r $181,046. 521 Baggett So. 1309 ( A l a . 1988) . o b t a i n e d a judgment a g a i n s t Therefore, $85,000--the t o t a l of the l i m i t s 2d t o Lowe v. Baggett was entitled o f b o t h t h e Sagamore ($25,000) and t h e S t a t e Farm p o l i c y ($60,000). policy Sagamore $ 2 5 , 0 0 0 ; S t a t e Farm, r a t h e r t h a n p a y i n g B a g g e t t $35,000 receiving credit to agreement f o r t h e $25,000 $60,000, r e s u l t i n g pursuant the "Advancement of to paid and Funds" i t had advanced, m i s t a k e n l y p a i d i n an o v e r p a y m e n t t o B a g g e t t 2 o f $25,000. 1100578 As a result of the Baggett to reimburse attorney fee under overpayment, appealed. The State the Court of C i v i l Co. v. B a g g e t t (Ala. less a doctrine. Appeals an o p i n i o n . 2011) ordered one-third State Farm the trial affirmed S t a t e Farm Mut. A u t o . (table). State t h i s Court f o r a w r i t of c e r t i o r a r i , the court (No. 2100221, Feb. 4, 2 0 1 1 ) , C i v . App. Both p a r t i e s ' trial $25,000, common-fund c o u r t ' s judgment, w i t h o u t Ins. Farm the a r g u m e n t s assume So. 3d Farm p e t i t i o n e d w h i c h we granted. that case a p p l i c a t i o n o f t h e common-fund this doctrine. involves This Court, h o w e v e r , has d e t e r m i n e d t h a t t h i s c a s e i s s i m p l y one i n w h i c h an i n s u r e r i n a d v e r t e n t l y p a i d $25,000 i n e x c e s s o f i t s p o l i c y l i m i t s , and t h e i n s u r e r i s e n t i t l e d t o a r e f u n d o f t h a t e x c e s s amount. I f an a t t o r n e y respect to a l l or p a r t f e e was due B a g g e t t ' s a t t o r n e y o f t h e $85,000 actually with owed i n t h e a g g r e g a t e by Sagamore and S t a t e Farm, t h e n t h e f e e s h o u l d taken from overpaid Baggett t h e $85,000, and as t o w h i c h obtained Sagamore Including paid a not t h e $25,000 t h e $25,000 i t i s entitled judgment $25,000, from against the l i m i t State Farm 3 t o be Morris State Farm reimbursed. f o r $181,046. of i t s insured's had be advanced t o policy. Baggett, 1100578 S t a t e Farm p a i d $ 8 5 , 0 0 0 , $25,000 more t h a n i t s p o l i c y l i m i t o f $60,000. T h u s , S t a t e Farm i s e n t i t l e d t o t h e r e i m b u r s e m e n t o f i t s overpayment. B e c a u s e we c o n c l u d e t h a t S t a t e Farm overpaid B a g g e t t , we r e v e r s e t h e j u d g m e n t o f t h e C o u r t o f C i v i l A p p e a l s and remand t h e c a s e t o t h a t c o u r t f o r i t , i n t u r n , t o remand the case t o the t r i a l court order Baggett court with i n s t r u c t i o n s that the to reimburse State Farm trial t h e amount o f $25,000. REVERSED AND Malone, REMANDED. C.J., and Woodall, Stuart, M u r d o c k , Shaw, M a i n , and W i s e , J J . , c o n c u r . 4 Bolin, Parker,

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