Pennsylvania National Mutual Casualty Insurance Company v. Michael S. Bradford

Rel: 09/26/2014

Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter. Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334)
229-0649), of any typographical or other errors, in order that corrections may be made
before the opinion is printed in Southern Reporter.

SUPREME COURT OF ALABAMA
SPECIAL TERM, 2014

_________________________

1130503
_________________________

Pennsylvania National Mutual Casualty Insurance Company

v.

Michael S. Bradford

Appeal from Jackson Circuit Court
(CV-11-900138)

MAIN, Justice.

Pennsylvania National Mutual Casualty Insurance Company

("Penn National") was sued by Jacob T. Walker, an employee of

its named insured, seeking underinsured-motorist ("UIM")

benefits following an automobile accident. After settling the
1130503

claims against it, Penn National filed a cross-claim against

Michael S. Bradford, the alleged tortfeasor, asserting a

subrogation theory of recovery. The trial court dismissed the

cross-claim on the ground that it was barred by the statute of

limitations, and Penn National appealed. We affirm the

judgment of the trial court.

I. Facts and Procedural History

On September 21, 2009, Walker was involved in an

accident when the vehicle he was operating, a truck owned by

his employer, collided with a vehicle being operated by

Bradford. Bradford's vehicle was insured by GEICO Indemnity

Company and carried a bodily-injury limit of $25,000 per

person. On September 14, 2011, Walker sued Bradford and Penn

National in the Jackson Circuit Court. The complaint alleged

that the accident was caused by Bradford's negligent and/or

wanton operation of his vehicle and that the accident caused

Walker to sustain permanent injury and other damage. Walker

also asserted a claim for UIM benefits against Penn National,

the insurer who provided UIM coverage for the vehicle operated

by Walker.

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Before trial, Walker and Bradford reached a tentative

settlement agreement pursuant to which Walker agreed to

dismiss his claims against Bradford for $25,000, a sum

representing the policy limits of Bradford's automobile-

liability insurance with GEICO. Pursuant to the terms of his

employer's insurance policy with Penn National, Walker

notified Penn National of the proposed settlement agreement

and requested Penn National's consent to the settlement and

requested that Penn National waive its subrogation rights.

Penn National declined to consent to the settlement and, under

the guidelines set forth by this Court in Lambert v. State

Farm Mutual Automobile Insurance Co., 576 So. 2d 160 (Ala.

1991), advanced the proposed $25,000 settlement amount to

Walker in order to preserve its subrogation rights.

On June 21, 2013, Penn National and Walker settled

Walker's UIM claim in the amount of $500,000 and filed a pro

tanto stipulation of dismissal of Walker's claims against Penn

National. Because Penn National did not consent to the

proposed settlement between Walker and Bradford, Walker's

claims against Bradford remained pending.

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On July 2, 2013, prior to the entry of an order of

dismissal of Penn National, Penn National filed a cross-claim

against Bradford. The cross-claim asserted that Penn National

was subrogated to the rights of Walker against Bradford and

"assert[ed] against the tortfeasor, Michael Bradford, all of

the causes of action alleged, or that could be alleged,

against the tortfeasor by the plaintiff in this litigation."

Bradford moved to dismiss the cross-claim on the ground that

it was filed almost four years after the accident and thus was

barred by the two-year statute of limitations. The trial

court granted Bradford's motion to dismiss Penn National's

cross-claim, specifically finding that the Penn National's

direct claim against Bradford was barred by the statute of

limitations.

On January 13, 2014, Penn National filed a motion to

substitute Walker's counsel, who had been litigating the

matter, with Penn National's counsel.1 The trial court

denied Penn National's motion to substitute counsel.

On May 16, 2014, the trial court certified its dismissal

of Penn National's cross-claim as final under Rule 54(b), Ala.

1
No motion to substitute Penn National as the party
plaintiff and real party in interest has been filed.
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R. Civ. P. Penn National appeals the dismissal of its cross-

claim.2

II. Standard of Review

"'The appropriate standard of review under Rule
12(b)(6)[, Ala. R. Civ. P.,] is whether, when the
allegations of the complaint are viewed most
strongly in the pleader's favor, it appears that the
pleader could prove any set of circumstances that
would entitle [it] to relief. Raley v. Citibanc of
Alabama/Andalusia, 474 So. 2d 640, 641 (Ala. 1985);
Hill v. Falletta, 589 So. 2d 746 (Ala. Civ. App.
1991). In making this determination, the Court does
not consider whether the plaintiff will ultimately
prevail, but only whether [it] may possibly prevail.
Fontenot v. Bramlett, 470 So. 2d 669, 671 (Ala.
1985); Rice v. United Ins. Co. of America, 465 So.
2d 1100, 1101 (Ala. 1984). We note that a Rule
12(b)(6) dismissal is proper only when it appears
beyond doubt that the plaintiff can prove no set of
facts in support of the claim that would entitle the
plaintiff to relief. Garnett v. Hadden, 495 So. 2d
616, 617 (Ala. 1986); Hill v. Kraft, Inc., 496 So.
2d 768, 769 (Ala. 1986).'"

DGB, LLC v. Hinds, 55 So. 3d 218, 223 (Ala. 2010) (quoting

Nance v. Matthews, 622 So. 2d 297, 299 (Ala. 1993)).

2
Penn National also filed a separate appeal from the order
of the trial court denying its motion to substitute counsel.
On May 13, 2014, that appeal was dismissed as being from a
nonfinal, nonappealable order Pennsylvania Nat'l Mut. Cas.
Ins. Co. v. Bradford (No. 1130568), __ So. 3d ___ (Ala.
2014)(table). Accordingly, the issue as to whether the trial
court properly denied the motion to substitute is not before
us.
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III. Analysis

Penn National contends that the trial court erred in

dismissing its subrogation cross-claim against Bradley on the

ground that it was barred by the statute of limitations. We

disagree.

Alabama follows "the well established rule that a

subrogee can acquire no greater rights than those possessed by

the principal whose rights he asserts." Home Ins. Co. v.

Stuart-McCorkle, Inc., 291 Ala. 601, 607, 285 So. 2d 468, 472

(1973). Alabama, like most other jurisdictions, specifically

applies this principle to the running of the statute of

limitations. Home Ins., 291 Ala. at 607-08, 285 So. 2d at 472

("[T]his court has specifically held this principle applicable

to the running of the statute of limitations."). Thus, in a

subrogation case, the statute of limitations begins to run

when the cause of action accrues, and "the cause accrues as

soon as the party in whose favor its arises is entitled to

maintain an action thereon." 291 Ala. at 608, 285 So. 2d at

473.

In Hardin v. Metlife Auto & Home Ins. Co., 982 So. 2d 522

(Ala. Civ. App. 2007), the Court of Civil Appeals applied the

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above principles to facts markedly similar to those in this

case. Hardin arose out of a two-vehicle automobile accident

that occurred in 2001. The Fotis were injured as a result of

that accident, and they sued the operator of the other

vehicle, Hardin, as well as their own uninsured-motorist

carrier, Metlife. In 2004, the Fotis notified Metlife of

their intention to settle their claims against Hardin.

Metlife, in order to retain its subrogation rights, advanced

the Fotis the amount of the proposed settlement. In 2005,

Metlife settled the remainder of the Fotis' claims. In 2006,

Metlife sued Hardin under a subrogation theory to recover the

amounts it had paid as a result of the Fotis' action. The

trial court denied Hardin's motion to dismiss based on the

statute of limitations and granted Metlife's motion for a

summary judgment. Hardin appealed.

On appeal, the Court of Civil Appeals reversed the

summary judgment in favor of Metlife and, relying on Home

Insurance, concluded that Metlife's subrogation claims were

barred by the statute of limitations:

"In Home Insurance Co. v. Stuart-McCorkle, Inc.,
supra, our supreme court resolved the issue
regarding when, in Alabama, the statute of
limitations begins to run on a subrogated insurer's

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claim against the tortfeasor. ... Therefore, under
the precedent of Home Ins. Co. v. Stuart-McCorkle,
Inc., supra, the statute of limitations for Metlife
to file its cause of action began to run on December
23, 2001, the date of the automobile accident that
gave rise to the claims by the Fotis, Metlife's
insureds."

982 So. 2d at 526-27. Because Metlife's action was not filed

within the two-year limitations period, the Court of Civil

Appeals held that Metlife's action was barred by the statute

of limitations, and it reversed the trial court's summary

judgment in favor of Metlife.

The present case is nearly indistinguishable from Hardin.

Walker's automobile accident occurred on September 21, 2009.

Based on the payments it has made in this case, Penn National

asserts that it is subrogated to Walker's rights against

Bradford arising from the 2009 accident. Penn National,

however, did not file its cross-claim against Bradford until

July 2, 2013, more than three years after the 2009 accident.

Accordingly, Penn National's direct claims against Bradford

are barred by the two-year statute of limitations.

Penn National argues that this result is "grossly

inequitable" and urges us to overrule Hardin. We decline to

do so. First, this result is compelled by the application of

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long-established legal precedent. Other than asserting that

the result in this case is inequitable, Penn National has

failed to provide any basis compelling a departure from stare

decisis. Further, Penn National exaggerates the purported

inequities of the result in this case. Generally speaking,

insurers need not file a direct action against the tortfeasor

to protect their right of reimbursement. Rather, insurers

generally may obtain reimbursement from the insured's recovery

against the tortfeasor. See Ex parte State Farm Mut. Auto.

Ins. Co., 118 So. 3d 699, 704 (Ala. 2012). Indeed, Penn

National's own uninsured-motorist-coverage endorsement

attached to the policy in this case contains the following

provision: "If we make any payment and the 'insured' recovers

from another party, the 'insured' shall hold the proceeds in

trust for us and pay us back the amount we have paid."3

Moreover, most insurance policies, including the Penn National

policy here, impose a duty on the insured to cooperate with

3
See Star Freight, Inc. v. Sheffield, 587 So. 2d 946, 958
(Ala. 1991) (holding that such subrogation and trust
provisions apply only to recovery from the uninsured
tortfeasor).
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the insurer seeking to secure its subrogation rights.4

Accordingly, we do not agree that insurers are unfairly

prejudiced by the application of well settled precedent

concerning the running of the statute of limitations in

subrogation actions.5 We cannot say the trial court erred in

dismissing Penn National's direct claim against Bradford.

IV. Conclusion

For the reasons set forth above, the judgment of the

trial court is affirmed.

AFFIRMED.

Moore, C.J., and Bryan, J., concur.

Murdock, J., concurs specially.

Bolin, J., concurs in the result.

4
The policy provides, in part:

"Transfer Of Rights Of Recovery Against Other To Us.

"If any person or organization to or for whom we
make payment under this Coverage Form has rights to
recover damages from another, those rights are
transferred to us. That person or organization must
do everything necessary to secure our rights and
must do nothing after 'accident' or 'loss' to impair
them."
5
Other courts have addressed similar arguments regarding
the running of the statute of limitations in subrogation cases
and rejected those arguments on the ground that insurers have
ample methods to protect their subrogation interests. See
American States Ins. Co. v. Williams, 151 Ind. App. 99, 107-
08, 278 N.E.2d 295, 301 (1972); Sahloff v. Western Cas. & Sur.
Co., 45 Wis. 2d 60, 70-71, 171 N.W.2d 914, 918 (1969).

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MURDOCK, Justice (concurring specially).

"'The general rule is that when an
insurer pays the insured in accordance with
the insurance contract for a loss of
property proximately resulting from fire
caused by the actionable misconduct of a
third party, the insurer becomes, by the
doctrine of equitable subrogation, the
owner, pro tanto, of the claim of the
insured against the third party.'"

McGuire v. Wilson, 372 So. 2d 1297, 1300 (Ala. 1979) (quoting

City of Birmingham v. Walker, 267 Ala. 150, 154, 101 So. 2d

250, 252 (1958)). Indeed, the subrogation clause in Jacob

Walker's employer's insurance policy with Penn National Mutual

Casualty Insurance Company ("Penn National") expressly states:

"If any person or organization to or for whom we
make payment under this Coverage Form has rights to
recover damages from another, those rights are
transferred to us. That person or organization must
do everything necessary to secure our rights and do
nothing after 'accident' or 'loss' to impair them."

Thus, as a result of its payment of insurance proceeds, Penn

National has become the beneficial owner of "the claims" that

have been filed by Walker against Michael S. Bradford and that

remain pending in the trial court. As the main opinion holds,

however, this does not necessarily mean that Penn National can

file some new claim in its own name against Bradford after the

statute of limitations has expired. Further, Penn National

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has not attempted to substitute itself for Walker as the real

party in interest in Walker's claims (or argued that its

cross-claim should be treated as a motion for such

substitution). I therefore concur in the main opinion.

The fact remains, however -- and I write separately to

note -- that, because Penn National is now the beneficial

owner of "the case" against Bradford, Penn National has the

right to control the prosecution of that case, including the

selection of counsel. The main opinion observes in a footnote

that Penn National purported to file a separate appeal from an

order of the trial court denying its motion to substitute

counsel as to those claims but that this Court dismissed that

purported appeal as being from a nonfinal, nonappealable

order. Although the trial court subsequently purported to

certify its order refusing to allow substitution of counsel as

final and appealable under Rule 54(b), Ala. R. Civ. P., the

appeal of that order already had been dismissed by this Court

and, in any event, was not properly subject to such a

certification because it did not conclusively adjudicate any

substantive rights of the parties. See, e.g., Banyan Corp. v.

Leithead, 41 So. 3d 51, 54 (Ala. 2009) (holding that the trial

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court erred in certifying an order as a final, appealable

judgment under Rule 54(b) because "the order ... did not

completely dispose of any of the substantive claims in this

case, nor did the order fully dispose of the claims as they

relate to at least one party").6 Furthermore, the briefs

before us in the present proceeding focus solely on the issue

of the dismissal of Penn National's cross-claim; therefore,

there is nothing before this Court that could be treated as a

petition for mandamus relief as to this issue.

6
See also, e.g., McCulloch v. Roberts, 290 Ala. 303, 305,
276 So. 2d 425, 426 (1973) ("'The test of the finality of a
decree sufficient to support an appeal is that it ascertains
and declares the rights of the parties ....'" (quoting Carter
v. Mitchell, 225 Ala. 287, 293, 142 So. 514, 519 (1932)));
Lunceford v. Monumental Life Ins. Co., 641 So. 2d 244, 246
(Ala. 1994) ("A final judgment is an order 'that conclusively
determines the issues before the court and ascertains and
declares the rights of the parties involved.'" (quoting Bean
v. Craig, 557 So. 2d 1249, 1253 (Ala. 1990))); State v.
Brantley Land, L.L.C., 976 So. 2d 996, 999 (Ala. 2007)
("'"Only a fully adjudicated whole claim against a party may
be certified under Rule 54(b)."'" (quoting James v. Alabama
Coalition for Equity, Inc., 713 So. 2d 937, 942 (Ala. 1997),
quoting in turn Sidag Aktiengesellschaft v. Smoked Foods
Prods. Co., 813 F.2d 81, 84 (5th Cir. 1987) (emphasis
omitted))); and Haynes v. Alfa Fin. Corp., 730 So. 2d 178, 181
(Ala. 1999) ("[F]or a Rule 54(b) certification of finality to
be effective, it must fully adjudicate at least one claim or
fully dispose of the claims as they relate to at least one
party." (emphasis omitted)).
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