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.
2
1130503
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.
3
1130503
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.
4
1130503
Rawle 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.
5
1130503
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
6
1130503
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
7
1130503
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
8
1130503
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).
9
1130503
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).
10
1130503
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
11
1130503
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
12
1130503
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)).
13