West v. State Farm Mutual Automobile Insurance

California Court of Appeal Jan 30, 1973 No. Civ. 31342Published

Before: Good

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Holding. The court held that a subrogation provision in an insurance policy requiring reimbursement from settlement proceeds is valid and does not constitute an unlawful assignment of a personal injury cause of action. Furthermore, the court held that the issue of attorneys' fees under the 'common fund' theory could not be raised for the first time on appeal.

Issues

Is the insurance policy's subrogation provision void as an unlawful assignment of a personal injury cause of action?
Should the case be remanded to determine attorneys' fees under the 'common fund' theory?

Disposition. Affirmed

Quotations verified verbatim against the opinion

“The provision in question in the present case does not effect a transfer to the insurer of any cause of action the insured might have against a third party.”

“The “subrogation” does not arise until proceeds of settlement or judgment come into existence.”

“Appellants did not ask for attorneys’ fees in their pleadings nor otherwise raise these issues in the trial court. They cannot raise them for the first time on appeal.”

Opinion

GOOD, J.

On November 8, 1969, appellants were injured when their car was rear-ended. Appellants were insured by respondent under a policy containing a provision for medical payments up to $1,000 per person, per occurrence. Appellants received and paid for medical treatment sums approximating $900. On November 9, appellants notified respondent’s local agent of the accident. There was no contact between the insured and insurer until after appellants had settled their claim against the driver of the other vehicle for $2,700. On June 26, 1970, they then made demand on respondent for payment of the medical expenses incurred as stated above. Their demand was based on the following clause of the then policy:

“Coverage C—Medical Payments. . . . [The insurer is obligated] ... to pay reasonable medical expenses incurred within one year from the date of the accident:

“Division 1. to or for the first person named in the declarations and, while residents of his household, his spouse and any relative of either who sustains bodily injury, caused by accident, while occupying the owned automobile, or through being struck by any land motor vehicle or trailer other than (1) a vehicle operated on rails or crawler-treads, or (2) a farm type tractor or equipment designed for use principally off public roads, while not upon public roads.”

Respondent refused payment in reliance on policy condition No. 4, which reads in, pertinent part:

“Upon payment under coverages C ... of this policy this company [respondent] shall be subrogated 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 which the injured person or anyone receiving

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such payment may have against any person or organization and such person shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights. Such person shall do nothing after loss to prejudice such rights.”

Appellants (insureds) filed an action in declaratory relief against respondent (insurer) to establish their right to recovery. After a nonjury trial, the superior court found in respondent’s favor and judgment was entered accordingly. This appeal ensued and the following questions are presented:

West v. State Farm Mutual Automobile Insurance

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GOOD, J.

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