Ridge Tool Co. v. Silva

Per Curiam. Plaintiffs-appellants, Ridge Tool Company (“Ridge”) and its parent company, the Emerson Electric Company, appeal the trial court’s order granting summary judgment in favor of defendants-appellees, Kenneth M. Silva and Diann Harlan. Diann Harlan, formerly Diann Silva, was an employee of appellant Ridge. Diann was covered under a medical benefits plan set up and administered by appellants. Sometime in 1982 Kenneth Silva suffered injuries allegedly caused by the malpractice of a local chiropractor. During the years 1982 to 1983 appellants paid a portion of the medical expenses Kenneth incurred in the treatment of his injuries. This totalled $9,699. Diann and Kenneth eventually entered into settlement negotiations *261 with the chiropractor and his insurance company. Before any settlement was made, Ridge notified appellees, the doctor, and the doctor’s insurance carrier that Ridge was claiming a right of subrogation for the medical expenses already paid on behalf of appellees. Appellees ultimately agreed to settle their claim against the chiropractor for $23,000. From this sum appellees must pay $7,666.67 in attorney fees plus all medical expenses not covered by the company insurance plan. At the insistence of the chiropractor, a portion of the settlement monies, equal to appellants’ subrogation claim, was escrowed. Appellants and appellees agreed to resolve their dispute over the funds in escrow without involving the chiropractor. Appellants thereafter filed a complaint in the trial court claiming an equitable right of subrogation to the funds deposited in escrow. Each party filed a motion for summary judgment. It is undisputed that because of the uncertainties and expenses of litigation it was a “fair settlement,” but, if appellants’ claim is allowed, appellees will not be “fully compensated.” The trial court found in favor of appellees and granted their motion for summary judgment. We affirm. Both assignments of error assert the same legal and factual argument and thus will be addressed together: Assignments of Error “I. The court erred in granting the motion of defendants-appellees for summary judgment. “II. The court erred in not granting the motion of plaintiffs-appellants for summary judgment.” The appellants concede that the medical expense benefit plan under which they paid Kenneth’s hospital expenses contained no subrogation clause. Appellants’ claim rests entirely on the theory of equitable subrogation. Equitable subrogation exists by operation of law. It is to be distinguished from conventional subrogation which arises by virtue of the contract between the parties or by statute. 44 American Jurisprudence 2d (1982) 782, Insurance, Section 1794. The applicability of the doctrine of equitable subrogation is dependent upon the type of insurance coverage involved. Where the insurance contract is one of indemnity, courts generally hold the doctrine applicable and allow the insurer to be subrogated to the proceeds received by the insured from the tortfeasor which exceed the amount of the insured’s actual loss. See, generally, 16 Couch, Insurance 2d (Rev. Ed. 1983) 61, 74 et seq., Chapter 61. However, where the contract of insurance is non-indemnity, such as life, automobile, or hospitalization, equitable subrogation has been rejected. Id.; Cunningham v. Metropolitan Life Ins. Co. (1985), 121 Wis. 2d 437, 360 N.W. 2d 33; McCain Foods, Inc. v. Gerard (Me. 1985), 489 A. 2d 503; Frost v. Porter Leasing Corp. (1982), 386 Mass. 425, 436 N.E. 2d 387; Michigan Hosp. Serv. v. Sharpe (1954), 339 Mich. 357, 63 N.W. 2d 638; Annotation (1976), 73 A.L.R. 3d 1140. A major reason advanced for non-application of equitable subrogation to medical insurance cases is the difficulty in determining when there has been full compensation. Equitable subrogation is essentially a theory of unjust enrichment. Where the amount received by the insured from the tort-feasor clearly exceeds the amount of his loss, he is being unjustly enriched by the excess. Allowing subrogation by the insurer prevents any double recovery by the insured. Where property (indemnity) insurance is concerned, the amount of the insured’s property loss is readily ascertainable. However, damages involving personal injuries are non- *262 pecuniary and incapable of calculation. Frost, supra. They include such things as pain and suffering, loss of consortium, and mental anguish. Because the amount of the insured’s damage is inexact in a personal injury case, it is virtually impossible to determine if there has been a double recovery. Thus, the doctrine of equitable subrogation is inappropriate. Other reasons advanced for not allowing equitable subrogation in medical insurance cases include the excess litigation created by such claims, the financial burden on the insured in fighting such claims, and the burden on the courts in administrating equitable subrogation litigation. Frost, supra, at 391. Finally, if an insurance company wants to be subrogated to the rights of its insured, it need only incorporate a subrogation clause into the medical insurance contract. This is the modern trend and has been working satisfactorily. Such clauses have been held valid and enforceable with respect to medical payments. Smith v. Travelers Ins. Co. (1977), 50 Ohio St. 2d 43, 4 O.O. 3d 114, 362 N.E. 2d 264. Accordingly, appellants’ assignments of error are overruled, and the trial court’s order of summary judgment in favor of appellees is affirmed. Judgment affirmed. Quillin, P.J., and Baird, J., concur. George, J., dissents.