Summary
In Federal Kemper Insurance Co. v. Western Insurance Cos., 97 Mich.App. 204, 293 N.W.2d 765, 767 (Mich.Ct.App. 1980), the Michigan Court of Appeals opined that "where an insurer, whose liability is arguably secondary to that of a primary insurer, pays the claim, it becomes subrogated to the rights of the insured."
Summary of this case from American Medical v. Auto Club Ins. AssnOpinion
Docket No. 44335.
Decided April 24, 1980.
Carpenter, Fenner, Barney Hoffman, for plaintiffs.
Before: DANHOF, C.J., and R.B. BURNS and MacKENZIE, JJ.
Plaintiffs appeal as of right from an order of the trial court entered March 21, 1979, granting defendant accelerated judgment under GCR 1963, 116.1(5) on the ground that the instant action was barred by the one-year statute of limitations for recovery of personal injury protection benefits in the no-fault act, MCL 500.3145; MSA 24.13145, and summary judgment under GCR 1963, 117.2(1) for failure to state a claim upon which relief can be granted.
The lawsuit herein arose out of a one-car accident which occurred on October 2, 1973. In that accident, Donald Krzesowiak was injured while a passenger in a vehicle driven by plaintiffs' insured, Jon Forrest Smith, now deceased. According to plaintiffs, defendant was also potentially liable as the primary insurer since it insured Donald Krzesowiak's brother with whom Donald was domiciled at the time of the accident. Initially, both parties refused payment upon the premise that the other was primarily liable under the no-fault insurance statute, MCL 500.3101 et seq.; MSA 24.13101 et seq. After both parties were contacted by the Michigan Insurance Commissioner, plaintiffs agreed to provide benefits and then either arbitrate or litigate legal issues with defendant. Thus far, plaintiffs allege they have paid $9,914.15 in personal injury protection benefits and expect to pay additional benefits, so that the total will exceed $10,000. Although plaintiffs demanded that defendant assume responsibility for payment of benefits, as defendant continued to refuse to provide benefits, plaintiffs filed the instant action on September 29, 1976.
The first issue is whether the trial court erred in granting defendant summary judgment on the grounds that the no-fault act preempts plaintiffs' claim for equitable relief, that plaintiffs have not alleged sufficient facts to maintain an action in quasi-contract and that plaintiffs are not the real parties in interest.
In Maryland Casualty Co v HA Moss Son, Inc, 276 Mich. 219, 229-230; 267 N.W. 819 (1936), a worker's compensation insurer tried unsuccessfully to recover in an action of quasi-contract against the employer for money paid to an injured employee after the insurer had given the employer notice that it was terminating the insurance contract. There the Court recognized the following principles as limiting recovery in an action for unjust enrichment:
"The action for money paid does not lie in all cases where one pays the debt of another. There must be a relationship out of which one is required to pay a debt which the other ought to pay. So a volunteer may not recover. 2 RCL p 776. And the circumstances must be such as to raise controlling equities in favor of the payor or against the real debtor. While one may have a right of action if he is required to pay by reason of the fault of the other (Van Santen v Standard Oil Co, 81 N.Y. 171), it is held he may not recover if his liability to pay arises out of his own negligence or misconduct and without fault of the other (Hungerford v Scott, 37 Wis. 341; Harris v Champion, 4 NJ Law, 152), but negligence will not always bar recovery (Treat v Craig, 135 Cal. 91 [ 67 P. 7] Rees v Eames, 20 Ill. 282 [71 Am Dec 267]; 41 CJ p 13)."
In balancing the equities in the instant case, we are not blind to the fact that though plaintiffs are trying to recover for personal injury benefits they paid under the no-fault act, they are bringing the instant action in quasi-contract solely to avoid the one-year statute of limitations in the act, MCL 500.3145(1); MSA 24.13145(1).
Further recognizing our discretion in granting equitable relief, we believe the proper action here is one in equity for subrogation. In Farmers Ins Group v Progressive Casualty Ins Co, 84 Mich. App. 474, 484; 269 N.W.2d 647 (1978), this Court held that where an insurer, whose liability is arguably secondary to that of a primary insurer, pays the claim, it becomes subrogated to the rights of the insured. Under these circumstances the Court held that a separate suit for "indemnification" is the preferable method of handling the dispute "since the injured person recovers for his injuries without delay while the insurers thereafter iron out their respective liabilities".
Although the Court in Farmers Ins Group, supra, stated in certain portions of the opinion that plaintiff's claim was for "indemnification", we believe the term "subrogation" more accurate since plaintiff's cause of action was clearly the latter. See generally 6A Appleman, Insurance Law and Practice, §§ 4051-4057.
Although plaintiffs in their complaint did not mention the term "subrogation", they pleaded sufficient facts to state a claim for subrogation as the complaint reasonably informed defendant of the nature of the cause it must defend. See Wynn v Cole, 68 Mich. App. 706, 712-713; 243 N.W.2d 923 (1976). Therefore, the trial court erred in granting summary judgment under GCR 1963, 117.2(1) for failure to state a claim upon which relief can be granted. Alternatively, plaintiffs should have been allowed to amend their complaint under GCR 1963, 118 to plead subrogation.
The trial court also erred in holding that plaintiffs cannot institute this lawsuit because they are not the real parties in interest under GCR 1963, 201.2. In a comparable situation in Farmers Ins Group, supra, this Court held that where one insurance company defended the claimant and paid the settlement, it was subrogated to her cause of action against the other insurance company and the action by one insurer against the other was entirely proper.
The next issue is whether the trial court erred in granting accelerated judgment for defendant on the ground that plaintiffs did not file the instant action within the one-year statute of limitations in the no-fault act, MCL 500.3145(1); MSA 24.13145(1). The section does not state specifically whether it is applicable to a subrogation action by an insurer.
In Davis v Farmers Ins Group, 86 Mich. App. 45, 48; 272 N.W.2d 334 (1978), this Court held that the provision created a one-year statute of limitations and stated that the provision does not unduly restrict access to the courts, but rather "its effect is to encourage those with a claim against their insurance company to bring the matter to court while it is fresh. It differs from statutory notice provisions which trap unwary litigants who have claims which are brought within the time limited, but without proper notice".
Because we have decided that plaintiffs' action is more properly denominated a claim for subrogation, we note the principle, set forth by the court in Northwestern Mutual Ins Co v Jackson Vibrators, 402 F.2d 37, 40 (CA 6, 1968), that:
"A subrogee acquires no greater rights than those possessed by his subrogor and the subrogated insurer is merely substituted for his insured. Couch on Insurance 2d, § 61.36; Indemnity Ins Co of North America v Otis Elevator Co, 315 Mich. 393, 24 N.W.2d 104, 71 ALR 266 (1946). This is true whether subrogation is equitable or conventional as in the instant case pursuant to a clause in the insurance contract. General Acc F L Assur Corp, Ltd v Finegan Burgess, Inc, 351 F.2d 168 (6th Cir, 1965), Hardware Dealers Mutual Insurance Co v R H Hidey, Inc, 349 Mich. 490, 84 N.W.2d 795 (1957)."
See also Foremost Life Ins Co v Waters, 88 Mich. App. 599, 603; 278 N.W.2d 688 (1979).
In Home Ins Co v Rosquin, 90 Mich. App. 682; 282 N.W.2d 446 (1979), this Court held that where an insurance company had paid property protection insurance benefits to its insured but did not sue defendant for subrogation within the one-year statute of limitations in MCL 500.3145(2); MSA 24.13145(2), the action was barred. The Court stressed that although this result may appear harsh, the statute is clear and "plaintiff is an insurance company itself and is presumably well aware of the much-publicized insurance law of this state". Id., 686.
In the case at bar, defendant never gave plaintiffs or the insured any reason to believe it would pay the claim; on the contrary, defendant denied liability ab initio. Yet plaintiffs allowed almost three years to elapse before filing this lawsuit. It is clear that if the insured had followed this course of procedure, his action would have been barred by the one-year limitation in the statute. In this respect, it would be inequitable to afford plaintiffs the benefit of the more liberal statute of limitations for an action in quasi-contract. Doing so would thwart the legislative intent of the no-fault act to give quick notice of claims and provide prompt payment. Therefore, we hold that the trial judge did not err in granting defendant accelerated judgment on the basis of the one-year limitation in the no-fault statute.
Affirmed.