Farmers Insurance Exchange v. Christenson

No. 83-177
IN THE SUPREME COURT OF THE STATE OF M I J A J
O'TZA
1984

FAPaERS INSURANCE EXCHANGE
Plaintiff and Respondent,

MARK ALLEN CHRISTENSON, ROLAND J.
CIIRISTENSON and KARENSE M.
CHRISTENSON,
Defendants and Appellants.

APPEAL FROM: The District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable William J. Speare, Judge presiding.

COUNSEL OF RECORD:

For Appellants:
Lloyd E. Hartford argued, Billings, Montana

For Respondents:

Crowley Law Firm; Ronald Lodders argued, Billings,
Montana

Submitted: March 2, 1984
Decided: July 12, 1984

--
Clerk
 CORRECTION. In preparing thig opinioil for pub-
Hon. John C. Sheehy lication, we noted in our verification of titles and
Justice, Supreme Court citations the matters listed below. Corrections have
Room 414 ~usticeBuilding been made on our copy o the opinion.
f
215 North Sanders
Helena, Montana 59620
August 9, 1984
Farmers Ins. Exchange v. Christenson, No. 83-177, July 12, 1984,
dissenting

Page 14, line 2 from bottom - - (Section 33-33-201, MCA) should read
-
(Section 33-23-201, MCA).
/Page 17, line 14 s m bottom - - (Wash.Rev.Code S48-22-303) should read
"/ (Wash.Rev.Code XXX-XX-XXXX.
-
, line 12 from bottom - - Toole v. Paumie Persian Dye House
should read Toole v. Paumie perisian Dye House.
line 11 from bottom - - (1935) should read (1938).
Page 22, line 3 from bottom - - 576 P.2d at 592 should read 576 P.2d at
J 492.

WEST PUBLISHING COMPANY
Box 3526
S . Paul, MN 55165
t
 J u s t i c e J o h n Conway H a r r i s o n d e l i v e r e d t h e O p i n i o n o f
the Court.
T h i s is a n a p p e a l f r o m a n o r d e r d e n y i n g a m o t i o n t o

vacate a default judgment and stay of execution. The
d e f e n d a n t s s o u g h t t o v a c a t e a d e f a u l t judgment by c l a i m i n g
the judgment to be void. The District Court of the
Thirteenth Judicial District, in and for the County of

Yellowstone, denied t h e d e f e n d a n t s ' motion.
On June 6, 1981, defendant Mark A. Christenson

apparently caused an accident by improperly operating a
motor vehicle. K r i s t i n e N. Hinckley, a passenger in the
vehicle, sustained injuries as a result of the accident.
B o t h C h r i s t e n s o n and H i n c k l e y w e r e m i n o r s a t t h e t i m e o f t h e

accident. C h r i s t e n s o n had no i n s u r a n c e on t h e v e h i c l e when
t h e accident occurred.
F a r m e r s I n s u r a n c e Exchange ( F a r m e r s ) i n s u r e d H i n c k l e y

and p a i d $7,000 on h e r c l a i m a r i s i n g o u t of the injuries
she sustained i n the accident. Farmers p a i d t h i s under an
uninsured motorist provision i n the Hinckley insurance
policy. A s required i n the policy, t h e Hinckleys assigned

their personal injury action to Farmers as part of a
subrogation clause.
On F e b r u a r y 1 0 , 1 9 8 2 , F a r m e r s f i l e d a n a c t i o n a g a i n s t
C h r i s t e n s o n and h i s p a r e n t s f o r $ 7 1 0 0 0 p a i d on t h e p e r s o n a l
i n j u r y claim. The C h r i s t e n s o n s r e c e i v e d p r o p e r s e r v i c e o f
the complaint and summons. The Christensons failed to
answer o r t a k e any a c t i o n t o d e f e n d a g a i n s t t h i s a c t i o n . On
A p r i l 1, 1 9 8 2 , F a r m e r s f i l e d a m o t i o n f o r d e f a u l t j u d g m e n t
and on J u l y 2 9 , 1 9 8 2 , t h e c o u r t g r a n t e d s a i d m o t i o n .
On J a n u a r y 11, 1 9 8 3 , t h e C h r i s t e n s o n s f i l e d a m o t i o n
t o v a c a t e t h e d e f a u l t j u d g m e n t and s t a y t h e e x e c u t i o n . They

asserted the judgment was void because Farmers was an
improper party in the action. The Hinckleys lacked the
ability to assign their personal injury action via the
s u b r o g a t i o n c l a u s e t o Farmers. F o l l o w i n g a h e a r i n g on t h e i r

c a s e , t h e c o u r t found t h a t t h e s u b r o g a t i o n o c c u r r e d p r o p e r l y
and t h a t t h e d e f a u l t judgment was e n t e r e d p r o p e r l y .
A p p e l l a n t s r a i s e two i s s u e s on a p p e a l :
(1) Can a n i n s u r e d p a r t y s u b r o g a t e a p e r s o n a l i n j u r y

action to an insurance company following the payment of
claims a r i s i n g o u t of a p o l i c y p r o t e c t i o n a g a i n s t uninsured
motorist?
(2) Was t h e d e f a u l t judgment v o i d i f F a r m e r s was a n

improper p a r t y t o t h e a c t i o n ?
Appellants contend the District Court erred in

determining that respondent received a valid subrogation
interest from Kristine Hinckley. They contend that an

i n j u r e d p a r t y cannot subrogate a personal i n j u r y claim t o an

i n s u r a n c e company. Such s u b r o g a t i o n i s i n v a l i d . Therefore,

t h e i n s u r a n c e company is n o t a r e a l p a r t y i n i n t e r e s t i n t h e
s u i t and c a n n o t s u e t h e t o r t f e a s o r .
A p p e l l a n t s r e l y h e a v i l y on A l l s t a t e v . R e i t l e r (Mont.

1 9 8 1 ) , 628 P.2d 667, 38 St.Rep. 821, for the proposition
t h a t the insured cannot subrogate personal i n j u r y claims t o
a n i n s u r a n c e company. R e i t l e r i n v o l v e d a woman, W e l t o n , who

suffered an injury in an automobile accident caused by
Reitler. Welton received $2,000 from Allstate for her
m e d i c a l e x p e n s e s , b u t t h a t amount f a i l e d t o c o v e r t h e t o t a l
expenses.
She then settled with Reitler's insurance company
(Farmers Insurance Exchange) and signed a release of claims
against them. Allstate then claimed a right to subrogation
and tried to recover the $2,000 it paid to Welton from
Reitler . This Court held that subrogation clauses on
medical insurance policies are invalid, and went on to say
the insured could not subrogate their personal injury claim
to the insurance company.
Appellants also cite Cody v. Cogswell (1935), 100
Mont. 496, 50 P.2d 249, to support their claim that personal
injury claims cannot be assigned. That case involved a writ
of attachment on a personal injury cause of action before a
judgment was rendered. This Court held that personal injury
suits were not subject to writs of attachment.
Respondent distinguishes Reitler in that it involved
medical payment coverage and not uninsured motorist
coverage. It dismisses the broad statements against
assignment of personal injury claims as dicta.
Justice Morrison, the author of Reitler, carefully
limited the holding to medical payments subrogation clauses:
"We hold that medical payment subrogation
clauses are invalid. In doing so, we are
mindful that this Court is joining a
minority of jurisdictions so holding.
However, the public policy considerations
militate in favor of such a result." 628
P.2d at 670, 38 St.Rep. at 824.
This is not to say we approve of the wording of the
clause in this contract which in our opinion could be abused
by the insurance company. The clause reads:
"Subrogation. In the event of any
pa.yment under this policy, the company
shall be subrogated to all the insured's
right of recovery therefore, against any
person or organization, and the insured
shall execute and deliver instruments and
papers and do whatever else is necessary
to secure such rights. The insured shall
 do nothing after loss to prejudice such
rights." (Emphasis added. )
In our opinion under this clause it could be possible
that the insurance compa.ny could collect an amount in excess
of what was paid out to the insured. That will not be
permitted. The insurance company can only be permitted to
be subrogated for the amount paid out to insured.
Respondent asserts that equity dictates the need for
subrogation. It cites Skauge v. Mountain States Tel. & Tel.
(1977), 172 Mont. 521, 565 P.2d 628, to support this claim.
In Skauge, this Court permitted subrogation of a claim for
damages to personal property that resulted from defendant's
negligence. We said subrogation may occur after the insured
has been made whole for his entire loss.
Respondent argues that public policy requires
subrogation in this case. If this Court precluded
subrogation of claims against uninsured motorists, then the
uninsured motorist would probably benefit. Once the insured
plaintiff receives the insurance compensation for the
accident, it is less likely he will pursue litigation
against the uninsured motorist. Therefore, subrogation
enhances the chances that the uninsured motorist will pay
for his wrongdoing, and promote the policy requiring
motorists to carry insurance.
As noted above, the controlling issue here is one of
public policy. We hold that an uninsured motorist carrier
can make payment to an insured, and when the insured settles
his claim or obtains a judgment against a third party, the
carrier can subrogate and collect back the amount paid to
the insured. Further, the uninsured motorist carrier can
require that the action be instituted in the name of the
insured against the uninsured motorist in order to
effectuate the subrogation interest of the uninsured
motorist carrier. But said action must not impair, diminish
or jeopardize insured's ability to recover any damages in
excess of the subrogation amount. If a subrogation occurs,
then the uninsured motorist carrier must, in good faith,
seek for the insured any other damages (general, special or
punitive) that he may not have received in his payment from
the carrier.
While it is argued that this issue hinges on this
Court's interpretation of Reitler, where we denied
subrogation to medical payment coverage, we believe that
public policy demands that our holding in that case is
limited to medical payment coverage.
Appellants1 reliance on Cody, supra, also cited in
Reitler for the proposition that Montana has long opposed
assignment of personal injury claims, is unfounded. Cody
never dealt with the issue of assignment. That case only
involved an issue of attachment.
"In their briefs and argument on this
question, counsel for both sides have
devoted considerable time and space to
the question of whether such a cause of
action is assignable, or whether it
survives the death of the person in whom
it reposes. As we view the case, these
matters have no relevancy to the real
issue presented here. The only question
to be determined is whether a cause of
action for personal injuries is subject
to attachment before judgment is rendered
thereon." 100 Mont. at 500, 50 P.2d at
250.
In the second issue, appellants claim that because
subrogation cannot occur, then respondent cannot be a real
party in interest. They cite Rule 17(a), M.R.Civ.P., that
"[elvery action shall be prosecuted in the name of the real
party in interest . . . " The l a c k o f a real party in

interest renders the judgment void. A void judgment is
always subject to collateral attack as provided in Rule

60(b) ( 4 ) , M.R.Civ.P.

Due t o t h e f a c t w e f i n d t h e s u b r o g a t i o n i s p r o p e r , w e

w i l l n o t t r e a t t h e second i s s u e due t o mootness.

The D i s t r i c t C o u r t p r o p e r l y f o u n d s u c h j u d g m e n t v a l i d .

W e hereby affirm.

W e concur:

DA&J.wab&
Chief J u s t i c e

Justices

Nr. J u s t i c e D a n i e l J . Shea w i l l f i l e a s e p a r a t e o p i n i o n l a t e r .
Mr. Justice Frank B. Morrison, Jr., specially concurring:
I concur in the result but for a different reason.
This action was initiated by Farmers Insurance Exchange
filing a complaint against Mark Allen Christenson, Roland J.
Christenson and Karense M. Christenson seeking to recover
damages in the sum of $7,000. The record reflects that
proper service was had upon defendants and they failed to
appear. A default judgment was entered on July 29, 1982.
Defendant's motion to vacate judgment was not filed until
January 11, 1983, some 166 days later. Defendants
acknowledge that the default judgment cannot be set aside
upon any grounds other than that the judgment is void.
Christensons argue that the damages sought by Farmers
Insurance Exchange resulted from an unlawful assignment of a
personal injury claim belonging to Farmers assignor. This
argument was urged in the District Court and the District
Court ruled against Christensons. The District Court based
its ruling on the merits of the legal argument. The District
Court held that Farmers' claim rested on a valid subrogation
interest.
The District Court should not have reached the merits.
There simply is no basis for arguing that the judgment
entered July 29, 1982 was void. The District Court clearly
had jurisdiction of both the subject matter of the action and
of the parties personally. When a court ha.s jurisdiction
then a judgment can only be collaterally attacked if the
court's action involves a "plain usurpation of power. l1 7
Moore's Federal Practice, §60.25[2].
Here it is clear that the judgment of the District Court
cannot be collaterally attacked. Christenson's motion to set
aside the default judgment is not timely. This Court cannot
reach the merits involving validity of Farmers' subrogation
interests.
Mr. J u s t i c e F r e d J . Weber s p e c i a l l y c o n c u r s a s f o l l o w s :

I concur i n t h e r e s u l t reached i n t h e majority opinion

for the reasons set forth in the foregoing special

concurrence of J u s t i c e Morrison. I therefore vote t o affirm.
Mr. Justice John C. Sheehy, dissenting:
I dissent.
The ancients tell us that Aeneas descended with the
Sibyl to the melancholy regions of the dead. He was shown,
near the river of oblivion, a place of torment for one who
perverts the law, making it say one thing today and another
tomorrow.
I am not implying that by this decision the members of
the majority will go to Hades. That is not in my
jurisdiction. I am implying that the members of the majority
should look over their shoulders to the past and their earlier
pronouncements.
On May 28, 1981, we stated it was invalid in Montana to
assign a personal injurv claim against a tortfeasor to a
subrogee. Today, in 1384, we permit such assignment.
The Court today is approving the assignment, in the name
of subrogation, of a personal injury claim so the insurer can
sue as the real party in interest. No statute supports the
Court's action.
The facts of the case must first be understood. On June
6, 1981, Mark Allen Christenson, 17 years old, was operating

a 1968 Ford motor vehicle owned by Eric T. Christenson.
Mark's passenger in the automobile was Kristine N. Hinckley,
a minor at the time. The automobile overturned on a county
road in Yellowstone County and Kristine suffered personal
j n juries.

Mark Allen Christenson, the driver, was the minor son of
Roland J. and Karense M. Christenson. Mark's parents, in
compliance with &Iontana law, had agreed to assume Mark ' s
liability so that he could get a driver's license. These
parents undoubtedly did not realize, and I am sure that most
parents do not realize, that in Montana, when they assume
full liability for the issuance of a driver's license to a
minor person, they are on the legal hook for absolute
liability without limit if the minor person is driving an
uninsured vehicle which injures someone, or if their own
policy of liability insurance does not follow the minor when
he drives a non-owned automobile.
In this case, the minor was driving an automobile owned
by Erick T. Christenson, a brother, and not owned by his
parents. It is quite possible (we have no record on this
point) that the parents here had a policy of liability
insurance, which would foll-ow Mark and provide him coverage,
unless the automobile Mark was driving was owned by a member
of the same household, but was not insured under the parents'
policy. In that situation, the parents' policy of insurance
coverage does not follow the minor driver.
Because of this unfortunate situation, the net result to
the parents of Mark Allen Christenson is that they will
probably be called upon to pay the judgment required now by
the majority of this Court. While the parents were always at
risk to Kristine, if she were injured through Mark's driving
an uninsured vehicle, the parents were never at risk to her
insurer until the majority opinion of this Court.
At the time of the collision, Kristine N. Hinckley was
insured by Farmers Insurance Exchange, probably through a
policy of automobile liability insurance owned by her
parents, Dan K. and Rae D. Hinckley. The policy of insurance
owned by the Hinckleys with the Farmers Insurance Exchange
provided uninsured motorists coverage as is required in
Montana. Farmers I~suranceExchange, without suit, entered
into a settlement agreement with the parents of Kristine
Hinkley for the sum of $7,000. It should. be remembered that
when an automobile accident occurs to which an uninsured
motorist coverage applies, the insurance company becomes an
adversary of its own insured, taking the part of the
uninsured motorist as aga.inst its insured in nesotating a
settlement.
On February 10, 1982, Da.n K. Hinckley, as the fath.erand
conservator of the estate of Kristine and Rae D. Hinckley as
her mother, entered into a release agreement with Farmers
Insurance Exchange for the sum of $7,000, which release
contains the following language.
"NOW THEREFORE the undersigned, individually, as
father of Kristine Hinkley and as conservator of
the estate of Kristine N. Hinkley, protected
person, in consideration of the payment of Seven
Thousand Dollars ($7,000.00) received by him, does
hereby forever release and discharge Farmers
Insurance Exchange and Farmers Insurance Group, its
agents, and employees, of and from any and all
claims and causes of actions of every kind and
character arising out of the injuries to Kristine
Hinkley on or about June 6, 1981. The parties
expressly agree, in the event that Kristine Hinkley
or Dan K. Hinckley, as her guardian, successfully
pursue a.ny claim against the driver of the
automobile, Mark Allen Christenson, Farmers
Insurance Exchange shal.1 become subrogated to and
entitled to indemnity for the payment made, namely
Seven Thousand Dol-Lars ($7,000.00) ."
Note please that the language in the release instrument
does not constitute a transfer of the cause of action, but
instead is a conditional provision for indemnity in the event
that either Kristine or her guardian presses a claim against
the uninsured motorist. No mention is made in the release of
a suit by the insurance companl7, acting for itself, aga-inst
the parents of Mark Allen Christenson.
This is not the first release that the Hinckley's signed
for Farmers Insurance Exchange, but I will discuss that later
in thi.s dissenting opinion.
 Farmers Insurance Exchange, instead of following the
language of its release, above, and allowing Kristine Hinkley
or her guardian to pursue the personal injury claim against
Mark and his parents, chose instead to file its action in its
own name directly in the District Court for the $7,000 it
paid on Kristine's claim. It took a default judgment. Some
nine months after the default judgment was entered, the
financial responsibility division of the Montana Highway
Patrol suspended the driver's license of the father of Mark
Christenson. It was this unlooked-for incident that
triggered the motion of the parents of Mark to set aside the
default judgment obtained against them in favor of Farmers
Insurance Exchange on the ground that the assignment of a
personal injury claim is inval-id in Montana.
The assignment of a personal injury claim based on tort
in Montana is indeed invalid, or was until now. That a
personal injury claim could not be assigned was established
in Caledonia Insurance Co. v. Northern Pacific Railroad Co.
(1.905), 32 Mont. 46, 79 P. 544. There Judge Holloway noted
the distinction that a right of action growing out of a
violation of property rights was assignable, but a right of
action growing out of the violation of a purely personal
right was not. As recently as May 28, 1981, this was the law
in Montana. This Court affirmed that position in All-State
Insurance Co. v. Reitler and Farmers Insurance Exchange
(Mont. 1981), 628 P.2d 667, 670, 38 St.Rep. 821, 824-25
(authored by Morrison, J., and concurred in by Haswell, C.
J., Harrison, Shea, and Weber, J.). In that case it is
stated:
"Montana has long opposed the assignment of
personal injury claims (citing a case). Whether an
insurance policy pr0~7ides for subrogation [as in
 this case] or provides that the carrier has a lien
on the proceeds of an insured's third party
recovery, that policy has the effect of assigning a
part of the insured's right to recovery against a
third party tortfeasor. We hold that such an
assignment is invalid." (Material in brackets
added. )
As I have pointed out above, the release agreement does
not permit Farmers Insurance Exchange to sue in its own name
against the tortfeasor, since the release agreement is one
for indemnity between the insurance company and its insured.
If Farmers Insurance Exchange has an independent right of
subrogation at all it must come from its insurance policy
isued to the Hinkleys which includes the foll-owing clause:
"Subrogation. In the event of any payment under
this policy, this company shall be subrogated to
all the insured's right of recovery therefor,
against any person or organization, and the insured
shall execute and deliver instruemtns and papers
a.nd do whatever else is necessary to secure such
rights. The insured shall do nothing after loss to
prejudice such rights."
This is the clause on which Farmers Insurance Exchange
claims the right to sue as the real party in interest aga.inst
the tortfeasor for the insured's right of recovery, and
against all persons or organiza-tionsfrom whom recovery might
he obtained, including the parents of the uninsured driver.
That constitutes a transfer of the personal injury claim of
Kristine Hinkley. The clause appears in the general
provisions of the insurance policy, and not on the insured
motorist endorsement itself. I recognize that a general
subrogation clause is necessary in an insurance policy
because the company has a right of subroga.tion for property
damage payments for which i.t might make. There is no quarrel
in Montana about that. Applying the clause however to
personal injury claims paid for under the endorsement was
invalid at the time of the issuance of the policy because of
this Court's long standing position that personal injury
claims could not be assigned or subrogated. It is this
clause upon which Farmers Insurance Exchange right of action
must stand or fall.
The majority members are injudicious in permitting
Farmers' action here on at least the following grounds:
(I) The Court has no statutory authority to permit it; (2)
The Court fails to distinguish between subrogation proper and
assignment; (3) Farmers' action is not a bar to further
suits by the Hinckleys against the tortfeasor; and (4) The
insurer's action is improper when the insured is not fully
compensated; and (5) There will be no accompanying reduction
in the premiums Montanans pay for uninsured motorist
coverage.
(1) - -of Sta-tutoryAuthority
Lack
In the absence of statutory authority permitting
subrogation of. uninsured motorist coverage claims we should
scruple to permit subrogation. Other states have adopted
such permitting legislation. An analysis of cases rising in
other states, under permissive statutes, reveals a number of
incidental questions relating to subrogation that require
legislation to solve. Waiting for legislative direction in
the field would undoubtedly help close the avenues to some
needless litigation in our state opened up by the majority.
In examining the statutes of other states within the
Pacific Digest system, we find Arizona (Section 20.259.01
Ariz. Stat.) , Col-orado (Colo. Rev. Stat. S10-4-609) , Hawaii
(Section 431-448 HRS) , and Utah (Section 41-12-21.1 UC) have
provisions nearly the same as ours (Section 3 - 3 2 1
3)-0, MCA).
No hint of subrogation is found in those statutes.
 The California legislature has adopted the following
provision (Section 11 580.2 (7)( g ) ) :

"Subrogation. The insurer paying a claim under an
uninsured motorist ind-orsement or coverage, shall
be entitled to be subrogated to the rights of the
insured to whom such claim was paid against a.ny
person causing such injury or death to the extent
that the payment was made. . ."
Note that the California provision provides for
subrogation not only against the uninsured motorist but
against "any person causing such injury or death." This
means that joint and several tortfeasors can be made to
respond in subrogation to an insurer who has made a payment
under the uninsured motorist coverage.
In California, however, the right of the subrogating
insurer to collect from others in sublimated to the right of
the injured party to be made whole. Thus, if the injured
party is not fully compensated by the recovery of the limits
of the uninsured motorist coverage, and has an action against
other joint tortfeasors, the insurer making payment under the
uninsured motorist coverage has no right of subrogation until
the injured party has been made whole from the other
tortfeasors. United Pacific-Reliance Insurance Companies v.
Kelly (1983), 189 Cal.Rep. 323; Security ~ationalInsurance
Co. v. Hand (1973), 107 Cal.Rep. 439. The majority opinion
in this case ignores this restrictive provisi.on protecting
insureds.
In the case we are deciding here, the general grant of
authority for subrogation by the majority of this Court to
the insurer does not take into account the result as to joint
tortfeasors. I submit the legislature should decide such
issue.
 Here is the other side of the joint tortfeasor coin: In
Washington, section 48.22.040(3), R.C.W., provides:
"In the event of payment to an insured under the
coverage required by this chapter and subject to
the terms and conditi-ons of such coverage, the
insurer making such payments shall, to the extent
thereof, be entitled to the proceeds of any
settlement or judgment resulting from the exercise
of any rights of recovery of such insured against
any person or organization legal responsible for
the bodily injury for which such payment
made,. . ."
In Hawaiian Insurance and Guaranty Company v. Mead
(1975), 538 P.2d 865, 869, the Washington Appellate Court
held that the statute provided subrogation only against the
uninsured motorist, the person causing the damage, and no
right. of recovery existed against other parties. The
Washington decision recites that four states, Mississippi,
Michigan, Missouri, and Georgia have held likewise. The
majority in this case permit suit by the insurance company
against the parents of the uninsured driver.
Subrogation is founded upon the equitable theory that
one who pays the legal obligation of another should stand in
the shoes of the payee to recover the payment from the one
who should have made payment. That makes equitable sense.
The five states which limit the right of recovery in
subrogation against the uninsured motorist, and no others,
recognize that the theory on which subrogation is founded
should not be extended to grant a right of recovery against
parties who have not participated in the condition of being
uninsured. Again the majority has deficiently considered the
implications of its majority decision in this case with
respect to third parties, other than the uninsured motorist.
In section 743.795 ORS, the state of Oregon is careful
to keep the right of action in the insured, not the company,
in the event of payment under an uninsured motorist coverage.
Its statute sets out clauses to be included in the policy of
motor vehicle insurance including ll(a) "the insurer shall
be entitled to the extent of such payment to the proceeds of
any settlement or judgment that may result from the exercise
of any rights of recovery of such person against any
uninsured motorist . . ." Clause 11 (b) provides that "such
person shall hold in trust for the benefit of the insurer all
rights of recovery which he may have against the uninsured
person . . ." Clause 11 (c) allows recovery to be made from
joint tortfeasors. Clause llle) provides the insured shall
bring action against the uninsured motorist or other parties
if the insured is requested to do so by the insurer.
Clearly Oregon still observes the common law sanction
against assignment of personal injury claims.
The statutes of Kansas (Kan.Stat.Ann. § 40-287), Idaho
(Idaho Code S 41-2505) , Washington (Wash.Rev.Code §
:03L
48-22-303) , and Wyoming (F7yo.Stat. 5 31-10-104) point to
another interesting result. In those states where the
statutes are nearly the same, it is provided that the insurer
making a payment on the uninsured motorist coverage, "shall,
to that extent, be entitled to the proceeds of any settlement
or judgment resulting from the exercise of any right of
recovery" against a responsible party. Each of those
statutes goes on to provide that the insurer shall have a
direct right of action only if the insurer is required to
make an uninsured motorist payment by virtue of the
insolvency of the motorist. It may be deduced from the terms
of these statutes that the right to sue remains in the
insured, subject to reimbursement of the insurer making
payment after judgment or set.tlement, but a direct right of
action to the insurer is given where the responsible motorist
is insolvent against his insolvent estate.
From the foregoing, it can be seen that the issue is not
simply should the Court without statutory authority, allow
subrogation of uninsured motorist coverage payments and
direct action therefore by the insurer. The related problems
are too complex to be answered by a court in a single case
and the whole subject should be decided by the legislature.

(2 - majority
The failed -
to distinguish between
subrogation and assignment.
The gist of the issue in this case is whether Farmers
can bring a direct action against the uninsured motorist and
his guarantors. This Court noted in Allstate Insurance Co.
v. Reitler, supra, that a subrogation which results in a
transfer of the cause of action to the insurer, is in effect
an assignment and not subrogation.
The distinction should be kept clearly in mind. There
is, of course, no reason why Farmers should not be able to
recover to the extent it made payment its settlement un.der
the uninsured motorist coverage clause, if that recovery is
made by the insureds. Certainly that is what the release
which Farmers took from the Hinckl-eys contemplated. I would
agree if the majority held that the subrogation clause on an
automobile policy merely asserted a right to reimbursement,
contribution or indemnity, but I cannot agree that the
insurer became the owner of the cause of action. Idaho, in
Rinehart v. Farm Bureau Mutual Insurance Co. (Idaho 19741,
524 P.2d 1343, was careful to note that distinction.
If Farmers according to its release was simply seeking
to recover here to the extent of its payment from any
judgments or settlement received in the name of the
Hinckleys, I would have no quarrel with its right to such
recovery. When it insists on the right to sue directly, in
its own name, as a real party in interest, its subrogation
becomes an assignment. In Fifield Manor v. Finsten (Cal.
1960), 354 P.2d 1073, the California Supreme Court was
careful to preserve the distinction and to refuse subrogation
where no statutory authority for the assiqnment of the cause
of action existed.
(3) Farmers action against - uninsured motorist -
the is
not a bar t o further action
---- . -
Q the Hinckley's.

An excellent reason for refusing at this juncture, in
the absence of legislative action, to permit direct suit by
insurers who have made payments under uninsured motorist
coverage is that such d.irect suits do not bar further action
by the injured parties against the same uninsured motorist or
his guarantors. Thus, the cause of action is split, which
goes against the grain of all jurisprudential sense and
finality.
This case is an excellent i-llustration. Attached as an
appendix is a copy of the release obtained by Farmers in this
case. In the second "whereas" clause, it is noted that the
policy issued to the Hinckleys included uninsured motorist
and medical payments coverages. In view of those coverages,
it is curious that the release also includes the following

"In this rega.rd, the parties agree that the
origina.1 release, dated. September 16, 1981, was
incorrect so far as the recitations therein
concerning the insurance provisions under which the
$7,000 payment was made. It is now expressly
understood that the sum of $7,000 was paid pursuant
to the uninsured motorist coverage."
The release goes on to say, however, that the $7,000
payment is full and final payment of every - -
kind of claim
against Farmers Insurance Group by the Hinckleys, presumably
including medical coverage payments.
Two possibilities exist with respect to the release:
(1-1 payment was made exclusively under the uninsured motorist

coverage, and no payment was made to the Hinckleys under the
medical payment provision. In such case, Hinckleys have the
right to recover medical expenses against the uninsured
motorist or his guarantors. Thus, permitting Farmers to
recover on the uninsured motorist coverage and the Hinckleys
to recover on the medical payments expenses constitutes a
splitting of the cause of action. (2) Or, the medical
payments were subsumed by Farmers in the single payment of
$7,000. In that event, Farmers is suing for medical benefits
paid, under medical payments coverage, which, under our
holding in Reitler, is invalid in Montana.
Of course, the statute of limitations may now have run
as far as the Hinckley suit against the uninsured motorist is
concerned, but at the time of the taking of the release here
in question, only seven months had elapsed. Again, this
Court should consider the rule in California, quoted above,
that the insurer has no right of subrogation where an insured
has not been fully compensated. I would hope that we would
continue the rule adopted in Skauge v. Mountain States Tel.
and Tel. Co. (Mont. 1977), 172 Mont. 521, 565 P.2d 628, 632,
to the effect that when an insured has sustained a loss in
excess of the reimbursement by the insurer, the insured is
entitled to be made whole for his entire loss and any cost of
recovery including attorneys fees before the insurer can
assert its right of legal subrogation against the insured or
the tortfeasors.
 (4) Action % the insurer would - improper where the
be
insured - - fully compensated.
is not
We have cited the California cases above, and Skauge,
our case, indicating that subroga-tionis not available to an
insurer unless the insured is fully compensated. When, as in
this case, a right is granted to an insured to bring direct
action, there will be a race to the courthouse between the
insurer and the insured to achieve a first recovery. That is
the inevitable result of splitting a cause of action.
It should be a matter of embarrassment to this Court,
and to the law firm involved, that the arguments made in this
case, and the stance adopted by this Court, are exactly
opposite to the arguments and stances adopted in Reitler,
supra. In Reitler, the same law firm then representing
Farmers Insurance Exchange filed a brief in this case in
which it urged upon this Court that we had expressly
recognized the rule that causes of action against personal
injury are not assignable. It cited in support of that
$'
proposition Coty v. Cogswell (193,5), 100 Mont. 496, 50 P.2d
i , / 1 n ~
249; Toole v. Paumie Persian Dye House (1935), 101 Mont. 74,
52 P.2d 162; Baker v. Tullock (1935), 106 Mont. 375, 77 P.2d
1035; Caledonia Insurance Co. v. Northern Pac. Ry. Co.
(1905), 32 Mont. 46, 79 P. 544; and 40 A.L.R.2d 480, relating
to assignability of claims for personal injury, and the
Restatement (Second) of Contracts S 547.
Now, three years later, the same law firm and the same
insurance company take an opposite stance, and in the name of
public policy, ask this Court to reverse without statutory
a.uthority our longstanding position with respect to the
non-assignability of personal injury claims. Farmers argued
and the majority swallowed, that public policy in providing
insurance on all motor vehicles in the state is enhanced by
allowing insurers to bring direct actions against uninsured
motorists! It should be evident to all of us that Farmers is
not going to sue uninsured motorists who are judgment-proof.
It is only because in this case the parents signed a
liability form for Mark that suit had been brought in this
case. Insurance companies are not eleemosynary institutions.
There are no more apt to chase good money after bad than a.ny
other party.
(5) There - -be no accompanying reduction - premiums
will - in
Montanans pay - uninsured motorist coverage.
for
The right of subrogation granted by the majority in this
case is complete gravy to the insurance company. Subrogation
is not a factor used by insurance companies in determining
the rate of premiums charged. Arizona took note of this fact
in refusing to make any disti-nction between assignment and
subrogation with respect to the right of the insurer to
recover. It held in Allstate Insurance Co. v. ~ u r k e (~rj.2.

"Also, to require an injured policy holder to
return to his insurer the benefits for which he has
paid premiums is to deny him the benefits of his
thrift and foresight. In terms of public policy
the only justification for allowing an insurance
company to recoup the benefits it contracted to pay
out in exchange for the receipt of premium payments
which are presumably actuarially adequate would be
the lowering of premium rates as the result of such
a recoupment. This is generally not the case:
"'Subrogation is a windfall to the insurer, it
plays no part in the rate schedules (or only a
minor one), and no reduction is made in insuring
interest . . .
where the subrogation right will
obviously be worth something.' Patterson,
Essentials of Insurance Law at 151-152 (2d ed.
.
1957) (citing authority) " 576 P. 2d at ,592.
'+
Thus, although the majority has opened up to insurance
companies a right of subrogation to sue in its own name
wherever it might make recovery, not only aga.inst uninsureds,
but against other parties, no accompanying benefit will
accrue in the form of reduced premiums to be paid by
Montanans for their uninsured motorist coverage. The
insurers will toll-ect the same amount of money from us for
that coverage whether or not we permit subrogation.
Insurers can rejoice in that. Subrogation is not
factored in by insurers when they set the premiums for
uninsured motorist coverages. The loss cost is spread among
the policy holders without regard to subrogation. Montanans
won't see a drop in uninsured motorist coverage premiums
because of this decision. They will see a proliferation of
lawsuits by insurers "enforcing public policy" as the
majority believes, to collect that gravy.
The term "law" can be defined as that group of
principles and precedents which, it may be fairly predicted,
a court will apply to a given set of facts. Predicability is
of the essence. A court which swings unpredictably from one
end of the spectrum to the other, not pa.using at any shades
between, is not a-pplying law. It is actina as no more than
an - - committee.
ad hoc
I would reverse and dismiss.
 WHEREAS, on J u n e 6 , 1981, X r i s t i n e f!inckcly r e c e i v e d i n -
j;l-ie. when t h e a u t o m o b i l e i a which silo w ~ rsi d i r i g a s a p a s s e n g e r ,
wh~ch automobile was o p e r a t e d by Kark Ailan C h r i s t e n s o n , on County
?ozd ~ 7 4 5near t h e j u n c t i o n w i t h 2i.y C r a c k Ttoad went o u t of c o n t r o l ,
left the r o a d , and o v e r t u r n e d . S a i d a ~ t o a o b i l ed r i v e n by Mark A l l a r i
C h r i s t e n s o n w a s u n i n s u r e d ; and i

Wi-iEilEAS, t h e u n 2 e r s i g n a $ :.an K. i i i z c k i e y h o l l s a p o l i c y
2: i n s u r a n c e i s s u e d by F a r n e r s I c s u r a n c c Exchafiye which i r i c l u d e s
..-.-
, ;...sured m o t o r i s t c o v e r a g e ar,d a f;,ec?ical payzent 2 r o v i s i o n ; and
,,
f

. WdEREAS, t h e u n d e r s i 5 c e d Dan X. Xinckley was a p p o i n t e z
c o a s e r v a t o r of t h e e s t G t e of K r i s t i n e liincXley, a n d i n h i s i n d i v l d u z l
ez;acity as f a t h z r and as conservator of t?.c cstate o f K r i s t i n e
I:i~.ckley, h i s minor daughter, h a s aow ~ g r c c du?on a Z u l l and final
zcttlaxent with F a m e r s Xnsurcincc Zxchancjo nr.d Farmers I n s u r a n c e
Gzb.;p; &

NOW, THEREFORE, Dhe u n < e r s i g n e d , i n 6 i v i d ~ a l l y , a s f a t h e r
%

of K r i s t i n e Z i n c k l e y , and a s c o n s e r v a t o r of t h e e s t a t e of K r i s t i n e
Z i n c k l e y , p r o t e c t e d f i e r s o n , i n c o n s i Z c r z t i o n of t h e payment o f
Seven Tnoasand acd rio/lOG D o l l c r s ( $ 7 , G C 0 . 0 0 ) , r e c e i v e 2 by him,
does h e r e b y f o r e v e r r e l e a s e and d i s c h a r g e FaLmers I n s u r a n c e Exchanqe
2r.Z T a m e r s Icsurance Group, i t s agcrits, and employees, of and froin
;zy and a l l claims and c a u s e s 02 a c t i o n of e v e r y k i n d and c h a r a c t e r
a r i s i n g o u t o f t h e i n j u r i e s t o L r i s t i n e Ziinckley on o r a b o u t J u n e 6,.
1 9 8 1 . The p a r t i e s e x p r e s s l y a g r e e , i n the e v e n t t h a t K r i s t i n e H i n c k l e y
o r Dan X. B i n c k l e y , a s her g u a r d i d n , s u c c e s s f u l l y p u r s u e any claim
a g z i n s t t h e d r i v e r o f t h e autonohLle, Xark A l l a n C h r i s t e n s o n ,
Psrmers I n s u r a n c e E x c h a n g e , s h a i l bedorcie s u b r o g a t e d t o and e n t i t l e d
t o i n d e m n i t y f o r t h e payxeAt a a d e , namely $7,000.00.
'

I n t h i s regard, t h e p a r z i e s a g r e e that the o r i g i n a l r e l e a s e ,
Gated S e p t e ~ ' 3 e r16, 1981, was i n c o r r s c t so f a r a s t h e r e c i t a t i o n s
r.i..erein c o n c e r n i n g t h e i n s u r a n c e ";?revisions under which t h e $7,000
.--
, ~ y x e n t was made. I t i s now e x p r e s s l y u n d e r s t o o d t h a t t h e sum o f
:7,000 w a s p a i d p u r s u a n t t o t h e ~ n i n s u r e dx o t o r i s t c o v e r a g e .
It i s the i n t e n t h e r s o f t h a t ail c l a i m s of e v e r y k i n d
er4d c h a r a c t e r a c j a i n s t Farmers I n s u r a n c e Group and Farmers I n s u r a n c e
Zxchange b e h e r s b y f u l l y and f i n a i l y coxpror,ised a n d s e t t l e d .

This r e l e a s e i s given p ~ r s u a n tt o a n o r C e r o f t h e D i s t r i c t
C o u r t o f t h e T h i r t e e n t h J u d i c i a l D i s t r i c t o f t h e S t a t e of Montana,
-2 and f o r t h e County of Yellowstone.

Dated t h i s '

f a t h e r , and a s c o n s e r v a t o r o f t h e
e s t a t e of K r i s t i n e H i n c k l e y , pro-
tected p r s o n .

Rae D . John

Appendix t o Sheehy's d i s s e n t i n g o p i n i o n .
 CONCURRENCE O F MR. J U S T I C E D A N I E L J. S H E A

No. 8 3 - 1 7 7

FARMERS I N S U P A N C E EXCHAIIGE,

MARK A L L E N CHRISTEhTSON, ROLAND
J. C H R I S T E N S O N a.nd KARENSE M.
CHRISTENSON.

Dated: J a n u a r y 6, 1985
Mr. Justice Daniel J. Shez, specially concurring:

I agree with the special concurrence of Mr. Pustice
Morrison and would decide this appeal without reaching the
substantive issues presented. The first trial court, having
acquired proper subject matter jurisdiction over this
controversy and personal jurisdiction over the parties,
entered a valid default judgment against the defendants.
This default judgment was binding, and could not be attacked
directly. Upon the defendant's motion to vacate the default
judgment, the second trial court incorrectly decided the case
on the merits of the subrogation claim, and this Court
improperly affirmed that decision.
If it would have been proper for the trial court and
this Court to reach the subrogation issue, I would then join
jn the dissent of Mr. Justice Sheehy and agree with the
arguments expressed therein. In particular, in order for the
insurance company to properly sue in its own name as the real-
party in interest, it must have received a ~7al.i.dassignment
of Kristine Hinckley's personal injury cause of action. In
All-State Insurance Co. v. Reitler and Farmers Insurance
Exchange (Mont. 1981), 628 P.2d 667, 38 St.Rep. 821-, this
Court held that assignment of personal injury cl-aims was
invalid. Further, it held that such an assignment was
invalid even when it takes the form of subrogation or
indemnification. This is not to say that an insurance
company cannot truely subrogate or indemnify itself to a.
valid claim of its insured, but it must do so in the name of
the insured and maintain the jnsured as the real party in
interest.
 If this case could properly be decided on the merits of

the subrogation claim, I would reverse the trial court's
decision and dismiss.