Summary
In Ervin v. Garner (1971), 25 Ohio St.2d 231, 236, [54 O.O.2d 361], this court stated that any party may request joinder "so that all claims of interest arising out of the single occurrence could be resolved."
Summary of this case from Hambleton v. R.G. Barry Corp.Opinion
No. 69-626
Decided March 17, 1971.
Insurance — Fire — Loss partially covered — Assignment of all claims against tort-feasor — Not affected by insured's letter attempting to vary terms of agreement — Priority between insured and insurer as to proceeds recovered from tort-feasor.
1. Where, pursuant to a contract of insurance an insured executes to his insurer a written assignment of all claims against a tort-feasor arising from his loss or damage, and returns the assignment to the insurer, together with a letter in which he attempts to limit the amount of his claim assigned to the insurer, such letter, alone, will not operate to alter the terms of the written assignment.
2. Where an insured sustains a loss which is partially covered by a policy of insurance, and assigns to the insurer all right of recovery against a third-party wrongdoer to the extent of the payment by the insurer to the insured; and where prior to the filing of the insured's lawsuit against the tort-feasor the insurer communicated to insured's counsel its wish to enter the lawsuit as a co-plaintiff, and asked insured's counsel to represent it, which request was never answered; and although no cooperation and assistance was given thereafter by the insurer, equity does not require that the insured be first indemnified out of proceeds of such recovery. ( Peterson v. Ohio Farmers Ins. Co., 175 Ohio St. 34, and Newcomb v. Cincinnati Ins. Co., 22 Ohio St. 382, distinguished.)
APPEAL from the Court of Appeals for Athens County.
On June 18, 1966, Michael Garner, while operating Claude Garner's automobile, negligently caused a barn and its contents owned by appellant to be destroyed by fire. Appellee, Ohio Insurance Association, had in force an insurance policy covering fire loss or damage to the barn to the extent of $5,000. The contents of the barn were not insured. The parties have stipulated that the barn had a value of $15,000 and the contents $6,100.
On June 22, 1966, the appellee offered to pay appellant $5,000 for the loss of the barn if appellant and his wife would sign a receipt and subrogation assignment, which stated, in pertinent part:
"* * * in consideration of such payment, the undersigned hereby assigns and transfers to the said Association each and all claims and demands against any other party, person, persons, and property or corporation, arising from and connected with such loss or damage (and the said Association is hereby subrogated in the place of and to the claims and demands of the undersigned, against the party, person, persons, property, or corporation in the premises) to the extent of the amount above named, and the said Association is hereby authorized and empowered to sue, compromise, or settle in our name or otherwise to the extent of the money paid as aforesaid billed."
On July 11, 1966, appellant, through his attorney, notified appellee that he had a priority over appellee under the subrogation assignment in recovering the balance of his losses. On July 13, 1966, appellee, by letter, informed appellant that:
"In regard to your letter stating you could rephrase the subrogation papers for Mr. Scott Ervin has priority due to the amount of his loss which was not covered by insurance, we do not feel we can go along with that since all we have insured is the barn No. 4 which is a total loss and it is insured for $5,000. We expect to pay for the barn whenever Mr. Ervin signs the subrogation papers for us and they are returned to this office. We also do not feel it is our responsibility to get in touch with you however if you want to contact us we are located in Bellville, Ohio and are close by where someone in the office can contact us in a very short time."
On July 29, 1966, appellant and his wife executed the subrogation agreement containing the language set forth above and forwarded it to appellee, under a cover letter from his attorney, which stated:
"I am returning herewith the receipt and subrogation agreement that you mailed my client, Scott Ervin. Mr. Ervin had as a result of this fire losses exceeding $25,000. We are hopeful that we will be able to recover at least $5,000 from the insurance company that had the liability insurance on the car of the person who caused the fire. It will be through Mr. Ervin's efforts and mine that this $5,000 is recovered. We are willing to share with your company any amount recovered in excess of this amount.
"It is with this understanding that Mr. Ervin is signing the enclosed."
On August 24, 1966, appellee by letter requested appellant and his wife to again execute the receipt and subrogation assignment because the appellee had misspelled the name of the tort-feasors. In this letter there was no mention of the appellant's letter of July 29, 1966. The subrogation assignment was re-executed and appellee promptly paid the $5,000.
On August 31, 1966, appellee wrote to appellant's attorney:
"In as much as the Ervins did have considerable loss not covered by insurance I would assume that you will be proceeding with a suit to collect from the responsible parties. This will be for loss over and above that covered by our policy and will no doubt name Michael (Mike) Garner, Claude Garner his father and Lightning Rod Mutual Insurance Co., as defendants.
"If so we wish to enter into this suit as co-plaintiffs and hereby ask that you represent us as well as the Ervins in this matter."
Appellant's attorney did not answer appellee's letter and did not agree to represent it in the cause below.
It is stipulated by the parties:
"That between June 18, 1966 and August 31, 1966 plaintiff [appellant herein] and his attorney did investigation of witnesses and documents as to the events, research into the law and into the knowledge and conduct of Claude Garner who owned the aforementioned 1960 Buick automobile which was insured by the Lightning Rod Mutual Insurance Company. That such work and research continued through September 30, 1966 when plaintiff filed the petition in this case against defendants Claude Garner and Michael O. Garner requesting judgment against them for $21,135.50 ($15,000 for the value of the barn and $6,335.50 [ sic] for the value of the contents of the barn)."
The suit against the tort-feasors did not name appellee as a co-plaintiff or as a defendant. On November 14, 1966, the Lightning Rod Mutual Insurance Company filed a motion and affidavit, alleging that it had in force a $5,000 liability policy on Claude Garner's vehicle; that it was on notice as to the payment by the appellee to the appellant; that it was uncertain who should receive the $5,000; that it requested the appellee be made a party; and that it sought to pay its $5,000 into court for distribution in the event a judgment was secured against the tort-feasors. The motion was granted and appellee was made a co-defendant.
Thereafter, appellee answered and prayed that the $5,000 be paid to it by virtue of its payment to appellant and its subrogation rights. Appellant replied and alleged an agreement by appellee to waive its priority over the claims of appellant, and further asserted that the appellee had not assisted or cooperated in the prosecution of the lawsuit.
Prior to trial, appellant filed an amended petition, setting up a claim for loss for the contents of the barn only, in the sum of $6,335.50. The amended petition contained no prayer for recovery for loss of the barn. Appellee filed a general denial to appellant's amended petition and also filed a cross-petition in which it again asserted that it was entitled to the $5,000 by virtue of the subrogation assignment executed by appellant and his wife.
The parties submitted the case to the trial court on the pleadings and on a written stipulation of facts, including stipulations that the tort-feasors have no assets beyond the $5,000 insurance coverage on the automobile and that no additional claim of liability would be made against the tort-feasors.
The Court of Common Pleas found that appellant was entitled to the $5,000 and entered judgment in favor of appellant against the tort-feasors and Lightning Rod Mutual Insurance Company. The Court of Appeals reversed the judgment of the trial court and awarded $1,500 to appellant's counsel for reasonable attorney fees, $30 to appellant for court costs advanced and the balance of $3,470 to appellee. The cause is now before this court pursuant to the allowance of a motion to certify the record. The appellee did not file a cross-appeal from the judgment of the Court of Appeals.
Messrs. Lavelle Yanity and Miss Helen H. Madsen, for appellant.
Messrs. Knell Freehafer, Mr. George H. Knell, and Mr. A. Douglas Freehafer, for appellee.
It should be noted at the outset that the appellee's right of subrogation in this case cannot be defeated by appellant filing an amended petition to pray only for the uninsured items of loss. Appellant, at the time of the loss, had only one cause of action, and his execution of the subrogation assignment and appellee's payment of the $5,000 pursuant to the insurance policy then in force created no new cause of action in favor of the insurer. Rush v. Maple Heights (1958), 167 Ohio St. 221; Hoosier Casualty Co. v. Davis (1961), 172 Ohio St. 5, paragraph two of the syllabus as limited by paragraph three thereof; Shaw v. Chell (1964), 176 Ohio St. 375; Nationwide Ins. Co. v. Steigerwalt (1970), 21 Ohio St.2d 87, paragraph two of the syllabus as limited by paragraph three thereof. Cf. Holibaugh v. Cox (1958), 167 Ohio St. 340. When appellant instituted the suit against the tort-feasors, he had the option to sue for all or for part of his damage. No matter which course of action appellant chose, the tort-feasors could properly request that appellant's subrogee be made a party to the action so that all claims of interest arising out of the single occurrence could be resolved. Civil Rule 19(A); Holibaugh v. Cox, supra; Hoosier Casualty Co. v. Davis, supra; and Nationwide Ins. Co. v. Steigerwalt, supra. The appellee was made a party to the action upon the motion of the tort-feasors' insurance carrier. Appellee is a party to the action and has asserted a claim. Thus, any rights of the appellee, under the subrogation assignment, are properly to be considered in the action.
In view of the stipulations of the parties, the dispute in this case concerns distribution of the $5,000 tendered to the trial court by the tort-feasors' insurance carrier.
The appellant argues, in essence, that certain equitable principles which operate where there is partial insurance of a loss should be in effect here. Those principles were first set forth in Newcomb v. Cincinnati Ins. Co. (1872), 22 Ohio St. 382, a case in which there was neither a written subrogation agreement and assignment by the insured nor, upon request, cooperation in the prosecution of the lawsuit by the insurer. The result reached was that the insured realized a priority of indemnity from the proceeds of the suit against the tort-feasor.
Appellant next looks to Peterson v. Ohio Farmers Ins. Co. (1963), 175 Ohio St. 34. In Peterson, there was a subrogation agreement and assignment and there was some cooperation by the insurer in the recovery. The result was that the insurer was entitled to a priority of indemnity from proceeds obtained from the wrongdoer up to the amount which it had paid the insured.
The instant case is different from both Newcomb and Peterson. Here, there was a written assignment (as in Peterson but not Newcomb), but there was no cooperation (as in Newcomb but not in Peterson). Therefore, appellant's argument, which favors the same result as that reached in Newcomb, where there was no cooperation and no assignment, does not logically follow, since the Newcomb facts are quite different.
In this case, no great significance can be assigned to the phrase "who has cooperated and assisted in recovering from the wrongdoer," which appears in the syllabus of Peterson. Appellant chooses to read that phrase as an announcement that cooperation and assistance are necessary prerequisites for the insurer's recovery. The language of the Peterson syllabus, quoted above, reflects the judicial tendency to limit a syllabus statement to the specific facts involved, and was not intended to be a general requirement for the insurer's recovery. This conclusion is drawn from the tenor of the entire Peterson opinion, and especially from the following language, at page 37:
"It seems clear that the assignment of all the insured's right of recovery against the third-party tort-feasor to the extent of the insurer's payment to the insured conveyed every bit of the insured's right of recovery up to $7,814 [the amount the insurer paid the insured]. The insured's conveyance of all right of recovery up to a certain limit, viz., the extent of the insurer's payment in settlement of the insured's claim, can mean only that the assignee is the owner of all the insured's rights of recovery until he is paid. The assignee * * * must have priority in payment out of the funds recovered. * * *" (Emphasis added.)
In addition, the Peterson case states, at page 38, that the more important distinction between Peterson and Newcomb is that there was a specific subrogation provision or assignment existing in Peterson which did not exist in Newcomb. Thus, the important distinction between Newcomb and Peterson, which caused different results, was the specific written assignment in the latter.
This view does not exhibit a lack of concern over a possible windfall to the insurer who sits back and allows the insured to pursue the action against the tort-feasor. Obviously that could happen, but such a result should not be characterized as unfair if it is in accordance with the provisions of the policy as sold. The insured knew, or should have known, when he bought the policy that in case of any payment he would be required to assign " all right of recovery against any party for loss to the extent that payment * * * is made * * *." That is a specific provision of the policy. Even assuming that cooperation and assistance are prerequisites under Peterson, an assumption which we are not ready to concede, it appears that the instant decision requires some delineation and discussion of what is necessary to fulfill the requirement of cooperation and assistance. In Peterson, the cooperation and assistance consisted only of the fact that each party employed his own counsel who collaborated in conducting the litigation. In the instant case, the insurance company offered to enter the suit as co-plaintiff and requested the insured's counsel to represent it. Appellee's letter of request was not specifically answered, but in oral argument before this court appellant's counsel stated that he felt he was representing both appellant and appellee Ohio Insurance Association at the time the lawsuit was filed, and that for reasons of litigation strategy the suit was brought in the name of appellant Ervin alone.
Newcomb v. Cincinnati Ins. Co., supra ( 22 Ohio St. 382), involved refusal of the insurer to cooperate after request. Here, the insured failed to communicate after an offer of cooperation was extended by appellee. After an appraisal of the pragmatics of a trial, an insured may conclude that the presence of an insurance company as a party is disadvantageous to his desired result, and for that reason shun the insurer's cooperation. In such a case, the insurer would then be relegated to some form of unilateral assistance — a basically inequitable result. To conclude that the controlling fact is the insurer's actual lack of cooperation, and not his refusal to cooperate, would be to ignore the willing insurer's plight.
Appellant contends further that the terms of the executed subrogation assignment have been supplemented by the cover letter returning that form to the appellee. He argues that the cover letter asserted a prior claim to the first $5,000 recovered; that the appellee paid his claim without objection to the terms of the letter; that the terms specified in the letter are a part of the assignment contract between the insurer and the insured; and that the terms contained in the letter control over the printed provisions of the assignment form. We do not agree.
The language of the subrogation form signed by appellant is clear and unambiguous in stating that: "The undersigned hereby assigns and transfers to the said association each and all claims and demands * * * to the extent of the amount above named * * *." (Emphasis added.) We fail to see how the insured can specifically assign each and all claims and demands to the insurer concerning the single cause of action, limited only by the monetary amount which the insured has paid, and yet still retain any part of his claim or demand.
We also find unpalatable the proposition that one may alter the terms of what one agrees to in signing a subrogation agreement by a cover letter setting forth terms that are contradictory or limiting. In contracting for the policy itself, appellant agreed to grant appellee full rights of subrogation; which agreement was reaffirmed by his signature on the unaltered assignment form. Further, it would be highly illogical to hold that the appellee accepted the incorporation of the terms of the cover letter into the agreement by tender of the $5,000 on the policy.
Generally, inadequacy of consideration will not in validate a contract. Judy v. Louderman (1891), 48 Ohio St. 562, paragraph two of the syllabus. See, generally, 17 Corpus Juris Secundum 843 and 846, Contracts, Sections 127 and 128. Cases of contractual interpretation should not be decided on the basis of what is "just" or equitable. This concept is applicable even where a party has made a bad bargain, contracted away all his rights, and has been left in the position of doing the work while another may benefit from the work. Where various written documents exist, it is the court's duty to interpret their meaning, and reach a decision by using the usual tools of contractual interpretation ( e.g., the written documents, the intent of the parties, and the acts of the parties) and not by a determination of what is fair, equitable, or just.
We are mindful that the judgment of the Court of Appeals included an award of attorney fees to appellant's counsel; however, inasmuch as the appellee took no appeal from that judgment, the Court of Appeals is affirmed.
Judgment affirmed.
O'NEILL, C.J., CORRIGAN, STERN and LEACH, JJ., concur.
SCHNEIDER and HERBERT, JJ., concur in the judgment.
Instead of asserting that the subrogation contract was unconscionable (see Cantor v. Berkshire Life Insurance, 171 Ohio St. 405; Sheehy v. Seilon, 10 Ohio St.2d 242, wherein contracts were judicially nullified on the ground of undue advantage), and what I believe to be an equitable claim that the loss be shared proportionately between him and appellee, appellant pursued a strategy calculated to capture the entire proceeds of the culprit's insurance for himself. For this reason, I concur in the affirmance of the judgment of the Court of Appeals.
But, I do not read the court's opinion as strengthening the vitality of Peterson v. Ohio Farmers (1963), 175 Ohio St. 34, or as settling the question of proration of the loss in a situation like the instant one. That question must now await a case in which it is directly presented and argued.
I concur in the judgment reached by the majority because, in oral argument, it was conceded that at the time the present lawsuit was filed below, appellant's counsel was representing both appellant and the appellee insurance carrier. By letter, the carrier had requested appellant's counsel to assume this role.
To me, the letter coupled with counsel's undertaking the requested representation was sufficient to constitute a reasonable effort by the insurance carrier to both cooperate and assist in the recovery of the disputed funds.
As I view the combined impact of Peterson and Newcomb, equity and the facts of this case required the carrier's reasonable effort to both cooperate and assist in the recovery of these funds.