HUMANA HEALTH CARE PLANS OF KENTUCKY, INC. v. MISTI JO BENGE AND KENTUCKY FARM BUREAU MUTUAL INSURANCE COMPANY
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RENDERED:
APRIL 26, 2002; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
2001-CA-000411-MR
HUMANA HEALTH CARE PLANS
OF KENTUCKY, INC.
APPELLANT
APPEAL FROM LETCHER CIRCUIT COURT
HONORABLE SAMUEL T. WRIGHT III, JUDGE
ACTION NO. 97-CI-00242
v.
MISTI JO BENGE
AND KENTUCKY FARM BUREAU
MUTUAL INSURANCE COMPANY
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
GUDGEL, CHIEF JUDGE; BARBER AND GUIDUGLI, JUDGES.
BARBER, JUDGE:
The Appellant, Humana, Inc.,(“Humana”) seeks
review of a judgment of the Letcher Circuit Court, which held
that the damage claim of the Appellee, Misty Jo Benge (“Benge”)
had priority over Humana’s subrogation claim.
Finding no error,
we affirm.
The facts are not in dispute.
This case arose out of a
May 19, 1997 motor vehicle accident involving Benge and Nedra
Wheeler, the driver of the other vehicle.
Kentucky Farm Bureau
provided PIP coverage for Benge’s vehicle.
Wheeler was insured
through California Casualty.
Benge filed a complaint against
Nedra Wheeler and her husband, Raymond Wheeler.
Humana, which
had paid $52,274.98 in medical expenses on behalf of Benge,
intervened to protect its subrogation interest, as did Kentucky
Farm Bureau.
Benge joined Nedra Wheeler’s employer, Kentucky
Valley Educational Cooperative (“KVEC”), as a defendant, because
Nedra Wheeler was allegedly working at the time of the accident.
On or about December 16, 1999, Nedra Wheeler filed a voluntary
petition for bankruptcy under Chapter 7.
[By order of the US
Bankruptcy Court for the Western District of Virginia, dated
March 31, 2000, Benge’s motion for relief from the automatic stay
was granted, allowing her to pursue her non-bankruptcy claim
against Nedra Wheeler].
On January 20, 2000, Benge settled with KVEC for
$201,962.02.
Humana’s subrogation claim was reserved and was
excluded from the release.
On February 4, 2000, the trial court
entered an agreed order, dismissing Benge’s claims and first
amended complaint against KVEC “with prejudice as settled.”
On August 29, 2000, the trial court entered an order
concluding that:
Benge has priority under the law on her
claims and payment thereon over the claims of
Humana . . . in that the plaintiff must be
made whole by any payment before Humana . . .
can receive any payment on its claims herein.
Upon motion of the defendant, Raymond
Wheeler, for summary judgment, the court
sustains said motion as to said defendant,
Raymond Wheeler, as too remote for liability,
and hereby dismisses the plaintiff’s
Complaint, as amended, against Raymond
Wheeler.
Thereupon, [the] attorney . . . for Nedra
Wheeler and her insurance carrier, California
Casualty . . . offered and committed the
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insurance carrier to pay into court
immediately its $100,000.[00] liability
insurance limits.
On December 29, 2000, the trial court entered an order finding
Benge’s damages to be $952,110.43 (including $82,811.43 for past
medicals, and $50,000 for future medicals).
The court found that
Benge’s damages “other than and in addition to past medicals far
exceed the settlement amount with KVEC and the $100,000.[00]
deposited with the court.”
The court determined that:
[T]he plaintiff has priority under the law on
payment of her damages over the claims of
Humana in that the plaintiff’s [sic] must be
made whole by such payments before Humana can
receive any payment on its damages herein.
The court finds that the consideration of the
medical evidence shows that the plaintiff’s
damages exceed the settlement with KVEC and
the $100,000.[00] do not make her whole, and
she is entitled under the law to be made
whole before Humana can receive any part of
said amounts.
It is therefore, ORDERED and ADJUDGED by the
court that the $100,000.[00] shall be paid
over to the plaintiff as payment on her
damages . . . .
By order entered January 24, 2001, Humana’s motion to
alter, amend, or vacate was denied.
On February 23, 2001, Humana
filed a notice of appeal, naming Benge, Nedra Wheeler, Raymond
Wheeler, KVEC, California Casualty and Kentucky Farm Bureau as
appellees.
By order of this Court entered September 10, 2001,
Nedra Wheeler, Raymond Wheeler, California Casualty and KVEC were
dismissed as parties to the appeal.
On appeal, Humana argues that: (1) the trial court
erred in holding that Benge had to be made whole before Humana’s
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subrogation interest arose; and (2) that the trial court erred by
failing to consider the policy limits of KVEC’s coverage.
We
will address these arguments in reverse order.
Humana provides
no authority in support of its second argument.
Thus, there is
nothing for us to consider upon appeal.
It is not our function
to practice cases for litigants, nor research issues for parties
“who do not consider their case of sufficient importance to give
the court assistance in reaching a proper decision.”
Allen v.
Murphy, Ky., 255 S.W.2d 23, 25 (1953).
Humana contends that the “made whole provision” does
not apply where there is a contractually-mandated obligation on
the part of an insured to reimburse an insurer, citing Wine v.
Globe American Casualty Company, Ky., 917 S.W.2d 558 (1996), and
Great American Insurance Companies v. Witt, Ky. App., 964 S.W.2d
428 (1998).
1
Wine explains the doctrine of subrogation, and when it
arises.
“The issue before us is not whether the right of
subrogation exists, rather it is when does this right arise?
In
a world of limited resources, who has priority in its claim,
. . . .”
1
Witt applied the “made whole” rule to claims under Kentucky’s workers’
compensation subrogation statute, KRS 342.700(1); however, the Supreme Court has held that the
“made whole” rule is a common law rule, grounded in equity, that does not apply to statutory
rights, such as those created by KRS 342.700(1). The workers’ compensation subrogation statute
“specifies the rights and limitations of both the subrogor and the subrogee and tailors those rights
and limitations to the peculiar nature of workers’ compensation.” “IK Selective Self-Insurance
Fund v. Bush, Ky., ____S.W.3d _____ (2002). The court explained that the statute expresses a
legislative purpose that the employer/insurer is entitled to recoup from the third-party tortfeasor the
benefits it paid to the injured worker. Thus, the common law made “whole rule” cannot be applied
to preclude that recovery. To that extent, Bush overruled Witt.
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In Williston on Contracts, Section 1269, (Third Ed.
1967) the author states:
The surety's right of subrogation does not
arise ordinarily until the debt is paid in
full. A partial payment of the debt, even
though it may be the full amount for which
the surety has bound himself, will not
entitle him to subrogation to the creditor's
rights and securities.
And at Section 1273:
There is no equity on which to base the
deprivation of the creditor of any of his
legal rights for the benefit of the surety
until he has been paid in full. In the
absence of relevant statutory law or
contractual obligations between the parties,
the answer to when the right of subrogation
arises is rooted in equity. In order to
achieve "natural justice" we look to the
purpose of subrogation and the relationship
between the insurer and its insured.
The doctrine of subrogation has a long and
rich tradition of benevolence and fairness,
[citation omitted] and is irrevocably
anchored in principles of natural
justice.[citation omitted]. It was an
invention of equity, designed to prevent
unjust enrichment by requiring those who
benefitted from another paying their debt to
ultimately pay it themselves. It was often
called the rule of substitution because one
legally required to pay the obligation of
another became legally entitled to be
substituted in the place of the creditor.
[Citations omitted.]
Because the goal of subrogation is to
accomplish justice between the parties, under
common law great care is taken to ensure that
invoking the doctrine does not impair one
with a superior equitable right.
Accordingly, the doctrine is applied only
after considering the rights of all parties
and "where an injustice will be wrought" the
doctrine will not be applied. [Citation
omitted.] These principles underlying the
common law doctrine of subrogation must also
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underlie the determination of when the right
to subrogation arises. Under common law, it
has generally been held that no subrogation
rights exist (or the right does not arise)
until the insured has first recovered the
full amount of loss sustained. In Couch on
Insurance 2d, Section 61:64 (Rev. Ed. 1983),
the author states:
The insurer may in a
given case have made the
full payment required of
it by its contract of
insurance but this amount
is not adequate to
indemnify the insured in
full. In such an
instance, it has been
held, in absence of
waiver to the contrary,
that no right of
subrogation against the
insured exists upon the
part of the insurer where
the insured’s actual loss
exceeds the amount
recovered from both the
insurer and the
wrongdoer, after
deducting costs and
expenses. In other words,
the insurer has no right
as against the insured
where the compensation
received by the insured
is less than his loss
. . . .
. . . .
Under general principles of equity, in the
absence of statutory law or valid contractual
obligations to the contrary, an insured must
be fully compensated for injuries or losses
sustained (made whole) before the subrogation
rights of an insurance carrier arise.
Id. at 561-562.
(Emphasis added.)
Thus, absent statutory law or a valid contractual
obligation to the contract, Benge is entitled to be made whole,
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before Humana’s subrogation right arises.
contend that any statutory law controls.
Humana does not
We turn to the
insurance contract to determine if it gives Humana priority over
Benge.
We have examined the relevant provisions of the policy,
set forth in both Humana’s and Benge’s briefs.
The policy
language provides Humana with the right to recover sums paid,
“where circumstances warrant the assertion of . . . [Humana’s]
rights, to the fullest extent allowed by the applicable laws of
the jurisdiction involved.”
The policy language does not express
an intent to invest Humana with a priority over its less than
fully compensated insured.
Id. at 564.
The trial court did not
err in applying the “made whole” rule to the facts of this case.
We affirm.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE, KENTUCKY
VALLEY EDUCATION COOPERATIVE:
Mary-Ann Smyth Rush
J. Warren Keller
Taylor, Keller & Dunaway, PLLC
London, Kentucky
George B. Hocker
William H. Partin, Jr.
Clark, Ward & Cave
Lexington, Kentucky
BRIEF FOR APPELLEE, MISTI JO
BENGE:
Ronald G. Polly
Polly & Smallwood
Whitesburg, Kentucky
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