Wilson v. Educators Mutual Insurance Ass'n

Citations: 2016 UT App 38; 368 P.3d 471; 807 Utah Adv. Rep. 22; 2016 Utah App. LEXIS 41; 2016 WL 759572Docket: 20150150-CA

Court: Court of Appeals of Utah; February 25, 2016; Utah; State Appellate Court

Original Court Document: View Document

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Everett P. Wilson Jr. and Darla Wilson appealed a trial court order that awarded a portion of $100,000 interpleaded funds from a settlement with Cade Krueger's insurer to Educators Mutual Insurance Association (EMIA), which had paid medical expenses for their deceased daughter, Jessica. After Jessica was killed in a vehicle accident on September 19, 2010, the Wilsons filed a wrongful death claim against Krueger in January 2011 and reached a tentative settlement with Krueger's insurer years later. EMIA subsequently filed a subrogation claim for reimbursement against Krueger, leading to an interpleader by Krueger's insurer.

Despite initially asserting a lien, EMIA acknowledged it could not claim against wrongful death payments to heirs. The trial court found both the Wilsons and EMIA had incurred damages over $100,000 and divided the settlement funds equally, giving the Wilsons $75,817.69 and EMIA $24,182.31, while also awarding the Wilsons an additional $25,817.69 for attorney fees due to their disproportionate efforts in obtaining the settlement.

The Wilsons argued that EMIA lacked standing to pursue the subrogation claim independently and contended they had superior equity over the insurer. The appellate court found in favor of the Wilsons regarding EMIA's lack of standing, leading to a reversal and remand without needing to address the Wilsons' additional arguments.

The trial court's ruling is reviewed for correctness concerning statutory interpretation and precedential law. Utah’s subrogation statute permits insurers to pursue actions in the name of their insured but does not require it, as indicated by the use of "may," which is generally interpreted as permissive. Despite this, the statute lacks explicit authority for insurers to bring subrogation actions in their own name. Legal precedent suggests that insurers derive their subrogation rights from the insured's contract and can only pursue claims that the insured could assert against a third party. Furthermore, common law mandates that subrogation actions must be brought in the name of the insured, except when the insurer has fully indemnified the insured. This is to prevent multiple suits against a wrongdoer and to ensure that the injured party retains control over their claim.

Under Utah law, an insurance carrier's right to reimbursement from a third party is deemed secondary to the injured party's right to control the cause of action. Following Jessica’s death, her personal injury claim transferred to her estate under the survival statute, allowing her estate to pursue damages against the wrongdoer. Although certain statutes prioritize insurer reimbursement in workers' compensation cases, in this instance, where the insurer's expenses were unrelated to workers' compensation, the insured must be made whole before the insurer can be reimbursed from the recovery. Since Jessica's estate had a claim for general damages, the insurer, EMIA, should have initiated the action in the estate's name or intervened in the existing action against Krueger. Instead, EMIA filed its claim in its own name, which is not permitted under Utah law. Consequently, EMIA lacked standing, leading to the trial court's error in awarding it a portion of the interpleaded funds. The court reversed the trial court's decision, instructing that EMIA’s claims be dismissed and all interpleaded funds awarded to the Wilsons. The court rejected EMIA's suggestion for separate claims by the insurer and heirs, citing the potential for multiple lawsuits and risks to the heirs' recovery rights.