No. 93-634
IN THE SUPREME COURT OF THE STATE OF MONTANA
1994
ST. PAUL FIRE & MAFLINE
INSURANCE COMPANY,
GARY GLASSING,
~efendant/Appellant.
APPEAL FROM: District Court of the Eighth Judicial District,
In and for the County of Cascade,
The Honorable Joel G. Roth, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Susan P + Roy, Garlington, Lohn & Robinson, Missoufa,
Montana.
For Respondent:
Gary M. Zadick, Ugrin, Alexander, Zadick & Slovak,
Great Falls, Montana
Submitted on ~ r i e f s : August 18, 1994
Filed:
arc 2 0 1994 Decided: December 20, 1994
Justice James C. Nelson delivered the Opinion of the Court.
Defendant Gary Glassing (Glassing) appeals an order of the
Eighth Judicial District Court, Cascade County, denying his motion
for summary judgment and granting summary judgment in favor of
plaintiff, St. Paul Fire & Marine Insurance Company (St. Paul). We
reverse.
While Glassing raises three issues on appeal, we shall only
address one issue, as it is dispositive of the case:
Is St. Paul's action barred by the statute of
limitations?
This case was previously before us in St. Paul Fire & Marine
Ins. Co. v. Allstate Ins. Co. (1993), 257 Mont. 47, 847 P.2d 705
(St. Paul I), which set forth the underlying facts giving rise to
this action.
St. Paul's insured, Ellen Lynn (Lynn), and Glassing were
involved in a motor vehicle collision in Bozeman on June 12, 1985.
Lynn filed a personal injury action against Glassing in Gallatin
County District Court, and on November 17, 1989, judgment was
entered in favor of Lynn in the net amount of $95,377.92.
At the time of the underlying motor vehicle collision, St.
Paul insured Lynn with a policy which provided coverage in the
event that Lynn was injured by an underinsured motorist. At the
same time, Allstate insured Glassing against liability resulting
from the operation of his motor vehicle. However, the limit of
Glassing's liability coverage was $50,000.
On December 15, 1989, Lynn made a demand for underinsured
motorist benefits to her insurer, St. Paul. St. Paul paid Lynn on
or about May 31, 1990, in the amount of $51,461.16, which
representedthe difference betweenGlassingls $50,000 policy limits
and the judgment with interest to the date of St. Paul's payment.
On June 28, 1990, Lynn executed a release in favor of Glassing and
Allstate, wherein Lynn acknowledged the receipt of $50,000, the
policy limits of Glassing's liability coverage. After receiving
payment from Allstate and St. Paul, Lynn filed a satisfaction of
judgment on October 11, 1990. Stipulations of dismissal with
prejudice were entered on October 11, 1990, and October 15, 1990,
dismissing the Lynn v. Glassing action.
St. Paul initiated this action against Glassing on July 24,
1990, to recover the $51,461.16payment, together with interest and
costs it paid to Lynn pursuant to her underinsured motorist
coverage. St. Paul originally filed its complaint in the United
States District Court, however, the complaint was subsequently
dismissed and refiled in the Eighth Judicial District, Cascade
County. Glassing then moved to dismiss the complaint on the
grounds that the District Court lacked personal jurisdiction over
him. This Court reversed the District Court's ruling in St. Paul
I,
- that this state lacked personal jurisdiction over Glassing, and
remanded the case for further proceedings. St. Paul I, 847 P.2d at
708.
On remand, Glassing moved for summary judgment pursuant to
Rule 56, M.R.Civ.P., on three grounds:
(1) St. Paul's claim was barred by the statute of
limitations;
3
(2) St. Paul's claim was barred by the release and
satisfaction of judgment in the underlying action;
(3) Glassing was not underinsured.
After considering the briefs and arguments of the parties, the
District Court rejected Glassing's arguments and granted summary
judgment in favor of St. Paul, in a Memorandum Opinion and Order
filed August 6, 1993. Glassing appeals from that order.
STANDARD OF REVIEW
The standard of review that this Court applies in reviewing a
grant of summary judgment is the same as that initially utilized by
the district court. Youngblood v. American States Ins. Co. (1993),
262 Mont. 391, 394, 866 P.2d 203, 204. Summary judgment is proper
when there is no genuine issue as to any material fact and the
moving party is entitled to judgment as a matter of law. Rule
56(c), M.R.Civ.P. Younsblood, 866 P.2d at 204.
While there do not appear to be any material facts in dispute,
we nevertheless, conclude that St. Paul was not entitled to
judgment as a matter of law on the undisputed facts. We review a
district court's conclusions of law to determine whether they are
correct. Matter of Estate of Langendorf (1993), 262 Mont. 123,
125, 836 P.2d 434, 436. We determine, in this case, that the
District Court did not apply the correct law, and that St. Paul was
not entitled to summary judgment.
STATUTE OF LIMITATIONS
One issue raised by Glassing is dispositive of this appeal.
Glassing contends that St. Paul's suit is barred by the statute of
limitations. We agree.
In support of his argument, Glassing maintains that the same
statute of limitations applies to an action for subrogation as
applies to the injured party's claim. Because the accident
occurred on June 12, 1985, and St. Paul did not file its action for
subrogation until July 24, 1990, Glassing argues that the
applicable three year statute of limitations on Lynn's negligence
claim had expired, thus barring St. Paulfs claim. See, § 27-2-204,
MCA .
The District Court however, ruled that St. Paulfs right of
subrogation did not accrue until its duty to pay was triggered by
the rendering of the excess judgment in favor of St. Paul's
insured, Lynn. The court concluded that " [p]rior to that time
neither Lynn's right to underinsured motorist benefits nor St.
Paul's right to subrogation existed." In reaching its conclusion
that the statute of limitations had not expired on St. Paul's
claim, the District Court determined a distinction existed between
uninsured motorist benefits and underinsured motorist benefits.
The court concluded that "[ulnderinsured motorist benefits are not
triggered until a settlement or judgment has been rendered by which
the insured persons damages are not fully compensated. Therefore,
the court found that St. Paul ' s subrogation claim did not accrue or
come into existence until November 17, 1989, the date judgment was
rendered in Gallatin County. ~ccordingly,the court concluded that
St. Paul's suit was timely filed. However, the court did not state
what the applicable statute of limitations would be on St. Paul's
suit against Glassing. We conclude that the District Court erred
in ruling that St. Paul's claim was not time-barred for two
reasons.
First, the court's conclusion that St. Paul's claim accrued on
the date of judgment ignores the basic premise of subrogation; that
as a subrogee, St. Paul has no independent claim for its damages.
It is a well established principle of subrogation law, that
subrogation is "the substitution of another person in place of the
creditor, so that the person substituted will succeed to the rights
of the creditor in relation to the debt or claim." Skauge v.
Mountain States Tel. & Tel. (1977)~
172 Mont. 521, 526, 565 P.2d
Additional subrogation principles provide :
Subrogation confers no greater rights than the
subrogor had at the time the surety became subrogated.
The subrogated insurer stands in the same position as the
subrogor, for one cannot acquire by subrogation what
another, whose rights he claims, did not have.
16 Couch on Insurance 2d, §61:36 (1983).
The right of subrogation is purely derivative as the
insurer succeeds only to the rights of the insured, and
no new cause of action is created. In other words, the
concept of subrogation merely gives the insurer the right
to prosecute the cause of action which the insured
possessed against anyone legally responsible for the
latter's harm . . . .
16 Couch on Insurance Zd, §61:37 (1983).
Because an insurer's claim is derived from that of the
insured, its claim is subject to the same defenses, including the
statute of limitations as though the action were sued upon by the
insured. Beedie v. Shelly (1980), 187 Mont. 556, 561, 610 P.2d
713, 716. Accordingly, St. Paul's claim is derivative of Lynn's
claim, and her claim accrued on June 12, 1985, the date of the
accident.
Second, are cited to no authority for the proposition that
the principles of subrogation vary with the type of risk insured
against. We recognize that there are jurisdictions which have
statutes extending the limitation period for subrogation claims of
insurers that have paid damages to their insureds under uninsured
or underinsured motorist policy provisions fromthe date of payment
made under the policy. See, Liberty Mut. Ins. Co. v . F a l e s ( C a l .
1973), 505 P.2d 213. However, Montana has no such statutory
authority extending the limitation date. Whether there should be
such a statute is a matter to be determined by the legislature.
Rather, this Court follows the general principles of
subrogation which provide:
Since the insurer's claim by subrogation is
derivative from that of the insured, it is subject to the
same statue of limitations as though the cause of action
were sues upon by the insured. Consequently, the
insurerfs action is barred if it sues after expiration of
the period allowed for the suing out of tort claims.
16 Couch on Insurance 2d, S6l:234 (1983).
On appeal, St. Paul argues that the following statement from
St Paul I, supports its contention that its right to subrogation
arose upon the rendering of the judgment :
St. Paulfs right to subrogation arises from the judgment
entered in favor of its insured against the defendant,
and that judgment is the result of the defendant's
tortious conduct within the State of Montana.
St. Paul I, 847 P.2d at 707. We note however, that we made this
statement in relation to the jurisdiction question which was before
us. We concluded that the District Court had personal jurisdiction
over Glassing because of the tortious conduct which occurred in the
State of Montana, and that the judgment was entered as a result of
this tortious conduct. Therefore, the statement does not support
St. Paul's argument that its subrogation rights arose upon
judgment .
It is apparent from St. Paul's argument, that St. Paul
confuses the accrual of a claim for subrogation, and the attachment
of the right of subrogation. An insurer's right to subrogation
attaches, by operation of law, upon paying an insured's loss.
Skauqe, 565 P.2d at 630. Accordingly, we held in St. Paul I, that
"[iln this case, St. Paul became substituted for its insured as a
matter of law when it paid Ellen Lynn pursuant to its insurance
policy with her and is entitled to pursue her right to collect the
amount of her judgment against the defendant." St. Paul I, 847
P.2d at 707. While St. Paul's right to subrogation arose upon its
payment to Lynn, the right to subrogation does not operate to
extend the statute of limitations
While a subrogated insurer frequently contends that
its action against the third-party tortfeasor who
allegedly caused the damage or injury for which the
insurer had to recompense its insured did not accrue, and
the statute of limitations did not begin to run thereon,
until the insurer had made the payments required under
its insurance contract, courts have held, generally, that
such a contention was without merit. . . . [Tlhe statute
of limitations begins to run on such actions at the same
time that the statute of limitations would have begun to
run on the insured's action . . . against the third-party
tortfeasor.
Annotation, "When Does Statute of Limitations Begin to Run upon
Action by Subrogated Insurer Against Third-Party Tortfeasor," 91
ALR 3d 844, 850 § 3; See also, Beedie, 610 P.2d at 716; Preferred
Risk Mut. Ins. Co. v. Vargas (Ariz.App. 1988), 754 P.2d 346;
Nationwide Mut. Ins. Co. v. State Farm (N.C.App. 1993), 426 S.E.2d
298.
Finally we note that St. Paul could have protected its
subrogation interest. St. Paul could have intervened in the action
filed by Lynn against Glassing. See, Dominici v. State Farm Mut.
Auto. Ins. Co. (1964), 143 Mont. 406, 414, 390 P.2d 806, 810,
(recognizing the right of the uninsured motorist insurer to
intervene).
For the above stated reasons we hold that St. Paul's
subrogation claim against Glassing was barred by the statute of
limitations, and that the District Court erred in concluding that
St. Paul was entitled to judgment as a matter of law. Accordingly,
we remand this case to the Eighth Judicial District Court for entry
of an order granting summary judgment to Glassing.
REVERSED AND REMANDED FOR FURTHER PROCEEDINGS CONSISTENT WITH
THIS OPINION.
December 20, 1994
CERTIFICATE OF SERVICE
I hereby certify that the following certified order was sent by United States mail, prepaid, to the
following named:
Susan P. Roy
GARLINGTON, LOHN & ROBINSON
199 W. Pine, P. 0. Box 7909
Missoula, MT 59807-7909
Gary M. Zadick
UGRIN, ALEXANDER, ZADICK & SLOVAK, P.C.
P. 0. Box 1746
Great Falls, MT 59403
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA