Duncan v. Integon General Ins. Corp.

482 S.E.2d 325, 267 Ga. 646, 97 Fulton County D. Rep. 883, 1997 Ga. LEXIS 98

• Court: Supreme Court of Georgia
• Decided: March 17, 1997
• Docket: S96G1067
• Status: Published

Opinions

Carley, Justice.

Peggy Duncan brought suit for damages arising out of an automobile collision and, in addition to the tortfeasor, she also served Integon General Insurance Corporation (Integon) in its capacity as her uninsured motorist carrier. Integon denied coverage and filed a counterclaim against Ms. Duncan seeking reimbursement of the $5,000 it previously paid her under the medical payments provision of the policy. In the main action, Ms. Duncan settled her $48,148 claim against the tortfeasor for the $15,000 limit of his liability insurance policy. On cross-motions for summary judgment as to the counterclaim, the trial court denied Integon’s motion and dismissed its counterclaim, but the Court of Appeals reversed. Integon General Ins. Co. v. Thompson, 220 Ga. App. 631 (469 SE2d 346) (1996). We granted certiorari to consider whether the complete compensation rule, which requires that an insured be completely compensated for his losses before his insurer can exercise a right of subrogation or reimbursement, is applicable to an insurance policy provision which requires the insured to reimburse the insurer for amounts paid under medical payments coverage. We hold that, consistent with the public policy of Georgia, the complete compensation rule does limit the applicability of such a reimbursement provision, at least where the insurance contract does not contain an express provision to the contrary. As there is no express provision to the contrary in Ms. Duncan’s policy, we reverse the judgment of the Court of Appeals.

In relevant part, Ms. Duncan’s policy provides as follows:

If we make a payment under this policy and the person to or for whom payment is made recovers damages from another, that person shall: 1. Hold in trust for us the proceeds of the recovery; and 2. reimburse us to the extent of our payment.

It is undisputed that Ms. Duncan’s policy did not expressly state whether her complete compensation would or would not constitute a limitation on Integon’s invocation of this reimbursement provision. Accordingly, the issue for resolution is whether Ms. Duncan is entitled to complete compensation because the policy did not expressly reject the applicability of that condition or whether Integon is entitled to unconditional priority because the policy did not expressly authorize Ms. Duncan’s complete compensation. In making this determination, the absence of an express provision must be strictly construed against Integon and in accordance with the reasonable expectations of Ms. Duncan. Roland v. Ga. Farm Bureau Mut. Ins. Co., 265 Ga. 776, 778 (1) (462 SE2d 623) (1995).

The weight of authority is that, in the absence of an express policy provision to the contrary, “a medical payments insurer may exercise its right of subrogation only after the subrogor has been fully compensated for its loss.” 8A Appleman, Insurance Law and Practice, p. 25, § 4903.65 (Supp. 1996-1997). Thus, in the absence of an express provision in the policy specifying that the complete compensation rule does not qualify the insurer’s invocation of a reimbursement provision as to medical payments, that rule implicitly applies and mandates the insured’s complete compensation.

[N]early every appellate court that has considered the question has recognized that unless an insurance policy contains a provision to the contrary, an insurer’s right to recover under a subrogation clause of an insurance policy requires that the insured must have been fully compensated for the loss covered by the policy.

Shelter Ins. Cos. v. Frohlich, 498 NW2d 74, 80 (Neb. 1993) (involving a subrogation clause in a medical payments provision). In its extensive review of foreign authority, Shelter, supra at 81, sets forth the rationale for this holding: Where the insurer or the insured must go unpaid to some extent, the loss should be borne by the insurer, since the insurer has already been paid a premium for assuming this risk and would have been obligated to pay medical expenses regardless of its insured’s negligence and regardless of whether a culpable third party could have been found. Under the contrary construction, the insurer would receive an unearned premium for assuming no risk whatsoever and “all the insured’s settlement could be applied to a medical payment subrogation claim with nothing left to compensate the insured for excess medical bills or personal injuries.” Shelter Ins. Cos. v. Frohlich, supra at 82.

For the same reasons, we conclude that Georgia public policy strongly supports the rule that an insurer may not obtain reimbursement unless and until its insured has been completely compensated for his losses. Indeed, Georgia public policy encourages insurance coverage which assures no less than full compensation to the insured, while at the same time preventing the insured from recovering more than is necessary to make him whole. Barker v. Coastal States Life Ins. Co., 138 Ga. App. 164, 167-168 (225 SE2d 924) (1976). Furthermore, Georgia law has long recognized that subrogation, a doctrine originating in equity, is founded upon the “dictates of refined justice. Its basis is the doing of complete, essential, and perfect justice between all the parties, without regard to form, and its object is the prevention of injustice.” Cornelia Bank v. First Nat. Bank of Quitman, 170 Ga. 747, 750 (154 SE 234) (1930). These considerations of public policy and equitable principles of subrogation are so strong that some jurisdictions declare that any insurance policy provision which modifies the complete compensation rule is unenforceable and void. However, we need not decide that issue in this case because Ms. Duncan’s policy contains no clause which contravenes the public policy or equitable principles of subrogation which undergird the complete compensation rule. Wine v. Globe American Cas. Co., 917 SW2d 558, 564 (Ky. 1996).

What we do decide today is that the complete compensation rule implicitly applies because the reimbursement provision in Ms. Duncan’s policy contains no “provision to the contrary.” Shelter Ins. Cos. v. Frohlich, supra at 80. At least two courts have applied the complete compensation rule to identical reimbursement provisions, Oss v. United Services Auto. Assn., 807 F2d 457 (5th Cir. 1987); Wine v. Globe American Cas. Co., supra. Even the most careful and intelligent reader would not regard the reimbursement provision “ ‘as qualifying the basic promise to pay, and to give it that effect is to enforce provisions drafted by the insurer that are inherently deceptive.’ ” Oss v. United Services Auto. Assn., supra at 460. The policy language at issue does “not express an intent to invest the [insurance] carrier with a priority over its less than fully compensated insured.” (Emphasis in original.) Wine v. Globe American Cas. Co., supra at 564.

In Cherokee Ins. Co. v. Lewis, 187 Ga. App. 628 (371 SE2d 103) (1988), the Court of Appeals considered a statute which is silent on the question of whether the insurer or the insured has priority of payment from the tortfeasor. However, the relevant statute in Cherokee Ins. Co. subrogates the insurer to the rights of the insured “to the extent that payment was made” and, thus, is very similar to the contractual provision at issue here. Because there was nothing “to the contrary” in the statute, the Court of Appeals correctly applied the complete compensation rule in Cherokee Ins. Co. v. Lewis, supra. See also Mullenberg v. K. J. Saxon Constr. Co., 192 Ga. App. 281, 282 (1) (384 SE2d 418) (1989). Conversely, the Court of Appeals erred by failing to apply the complete compensation rule in this case, there being nothing “to the contrary” in the insurance policy issued by Integon to Ms. Duncan. Thus, the Court of Appeals erroneously reversed the trial court’s order denying Integon’s motion for summary judgment and dismissing its counterclaim.

Judgment reversed.

All the Justices concur, except Fletcher, P. J, Sears and Hines, JJ, who dissent.