Wilson v. Educators Mutual Insurance

2016 UT App 38
THE UTAH COURT OF APPEALS
EVERETT P. WILSON JR . AND DARLA WILSON ,
Appellants,
v.
EDUCATORS M UTUAL I NSURANCE A SSOCIATION ,
Appellee.
Opinion
No. 20150150-CA
Filed February 25, 2016
Fourth District Court, Provo Department
The Honorable Samuel D. McVey
No. 110400083
Jack C. Helgesen and Craig Helgesen, Attorneys
for Appellants
Randall R. Smart and Jeffrey A. Callister, Attorneys
for Appellee
S ENIOR JUDGE P AMELA T. GREENWOOD authored this Opinion, in
which JUDGES M ICHELE M. C HRISTIANSEN and K ATE A. TOOMEY
concurred.1
GREENWOOD, Senior Judge:
¶1 	Everett P. Wilson Jr. and Darla Wilson appeal the trial
court’s 	order 	awarding 	a 	portion 	of 	interpleaded 	funds 	to
Educators Mutual Insurance Association (EMIA). We reverse
and remand.
1. Senior Judge Pamela T. Greenwood sat by special assignment
as authorized by law. See generally Utah R. Jud. Admin. 11-
201(6).

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20150150-CA 	2 	2016 UT App 38
BACKGROUND
¶2 	On September 19, 2010, the Wilsons’ daughter, Jessica,
was killed after having been struck by a vehicle driven by Cade
Krueger. EMIA, Jessica’s insurer, paid nearly $79,000 in medical
expenses on her behalf. No personal representative was sought
or appointed for Jessica’s estate.
¶3 	The Wilsons filed a wrongful death claim against Krueger
on January 12, 2011, seeking damages for the loss, love, and
affection 	of 	their 	daughter 	and 	for 	funeral 	expenses. 	After
several years of discovery and litigation, the Wilsons reached a
tentative settlement with Krueger’s insurer for the $100,000 limit
on his insurance policy.
¶4 	On 	January 	22, 	2014, 	EMIA 	filed 	a 	“Complaint 	for
Subrogation Claim” against Krueger, seeking reimbursement for
medical expenses it had paid on Jessica’s behalf, with accrued
interest.2 EMIA asserted its subrogation claim pursuant to the
terms of its insurance contract with Jessica. All parties agreed to
consolidate 	the 	cases, 	and 	Krueger 	filed 	an 	interpleader
counterclaim against both the Wilsons and EMIA, in which his
insurer agreed to interplead the $100,000 policy limit with the
court. EMIA and the Wilsons agreed to accept the $100,000 in
settlement of their claims against Krueger but disagreed as to
how the funds should be distributed. EMIA and the Wilsons
agreed to dismiss Krueger from the lawsuit with prejudice. The
trial court ordered Krueger’s insurer to deposit the $100,000 with
the court and gave the parties the opportunity to file briefs in
support of their competing claims to the funds.
2. EMIA 	had 	initially 	asserted 	a 	lien 	against 	the 	Wilsons’
wrongful death claim but later acknowledged that it could not
assert such a lien “against payments to the heirs of a deceased on
a wrongful death claim.”

Wilson v. Educators Mutual Insurance
20150150-CA 	3 	2016 UT App 38
¶5 	The Wilsons asserted that they were entitled to the entire
$100,000 settlement. They raised a number of arguments in
support of this position, including that they have “superior
equity” over a subrogated insurer and are therefore entitled to
be “made whole” before the insurer is paid, that EMIA had no
legal right to pursue a cause of action against Krueger in its own
name, and that EMIA’s action was barred by a three-year statute
of limitations.
¶6 	The trial court ultimately rejected the Wilsons’ arguments
and divided the settlement money equally between the Wilsons
and EMIA after finding that each party had incurred damages in
excess 	of 	$100,000. 	However, 	in 	acknowledgment 	that 	the
Wilsons’ 	efforts 	to 	obtain 	the 	settlement 	had 	been
disproportionate to those of EMIA, the trial court determined
that the Wilsons were entitled to $25,817.69 of EMIA’s award to
reimburse them for a portion of their attorney fees. Accordingly,
the trial court awarded $75,817.69 to the Wilsons and $24,182.31
to EMIA. The Wilsons now appeal.
ISSUE AND STANDARD OF REVIEW
¶7 	The Wilsons raise a number of arguments in support of
their assertion that the trial court erred in awarding EMIA a
portion of the settlement. Because we agree with the Wilsons
that EMIA lacked standing to bring a subrogation action in its
own name rather than in the name of Jessica or Jessica’s estate,
we 	do 	not 	address 	the 	Wilsons’ 	other 	arguments. 	As 	this
question involves the interpretation of a statute, as well as
decisional precedents, we review the trial court’s ruling for
correctness. See MacFarlane v. Utah State Tax Comm’n, 2006 UT 25,
¶ 9, 134 P.3d 1116 (“A matter of statutory interpretation [is] a
question of law that we review on appeal for correctness.”
(alteration in original) (citation and internal quotation marks
omitted)); In re Adoption of A.F.K., 2009 UT App 198, ¶ 16, 216
P.3d 980 (explaining that “issues that require interpretation of

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20150150-CA 	4 	2016 UT App 38
prior decisional 	precedents” are “questions of law that are
reviewed for correctness” (citation and internal quotation marks
omitted)).
ANALYSIS
¶8 	Utah’s subrogation statute provides, “Subrogation actions
may be brought by the insurer in the name of its insured.” Utah
Code Ann. § 31A-21-108 (LexisNexis 2014). EMIA asserts that the
use of the word “may” implies that the insurer may bring the
action in the name of the insured but is not required to do so and
may instead choose to bring the action in its own name. See State
v. Gallegos, 967 P.2d 973, 978 (Utah Ct. App. 1998) (“[T]he term
‘may’ is generally construed to be permissive and not mandatory
. . . .” (citation and internal quotation marks omitted)). We
assume, 	without 	deciding, 	that 	the 	statute’s 	use 	of 	the
permissive “may” allows for the possibility that bringing an
action in the name of the insured is not the exclusive manner for
an insurer to pursue a subrogation claim.3 Nevertheless, the
3. Though we assume for purposes of our analysis that the
permissive “may” applies to the manner in which the insurer
brings the action, i.e., in its own name or in the name of another,
we recognize that the legislature may have intended the word
“may” to grant the insurer discretion only as to whether to bring
the action at all. Cf. Thorpe v. Washington City, 2010 UT App 297,
¶¶ 23–24, 243 P.3d 500 (rejecting the assertion that language
providing 	that 	“[a] 	final 	action 	or 	order 	of 	[a 	municipal
employee] 	appeal 	board 	may 	be 	appealed 	to 	the 	Court 	of
Appeals” could be interpreted as permitting a party to appeal in
another venue, explaining that the language “is not permissive
in the sense that the employee may seek review in the court of
appeals if he likes but may complain in some other judicial
venue if he prefers” but that, “[o]n the contrary, the statute is
(continued…)

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20150150-CA 	5 	2016 UT App 38
statute contains no language granting an insurance company the
right to bring a subrogation action in its own name.4 So even
assuming that bringing an action in the name of the insured is
not, statutorily, the exclusive method for bringing suit, there
must be some legal basis, apart from the statute as currently
written, authorizing the insurer to bring the action in its own
name. 	Cf. 	Dehm 	v. 	Dehm, 	545 	P.2d 	525, 	528 	(Utah 	1976)
(providing that permissive language in a 	statute “does not
foreclose the right of a person” to pursue a remedy “by any
other means provided by law” (emphasis added)). Our review of
Utah case law convinces us that, with the possible exception of
an 	insurer 	who 	has 	fully 	indemnified 	the 	insured 	for 	all
damages for which the wrongdoer could be held liable, see
Johanson v. Cudahy Packing Co., 152 P.2d 98, 103 (Utah 1944), no
(…continued)
clear that the only court to which the employee may seek initial
recourse . . . is the Utah Court of Appeals” (first alteration in
original)).
4. Conversely, 	the 	legislature 	has 	expressly 	granted 	insurers
seeking 	reimbursement 	for 	the 	payment 	of 	workers’
compensation benefits the authority to bring such actions in their
own names:
If compensation is claimed and the employer or
insurance 	carrier 	becomes 	obligated 	to 	pay
compensation, the employer or insurance carrier:
(i) shall become trustee of the cause of 	action
against the third party; and
(ii) may bring and maintain the action either in its
own name or in the name of the injured employee,
or 	the 	employee’s 	heirs 	or 	the 	personal
representative of the deceased.
Utah Code Ann. § 34A-2-106(2)(a) (LexisNexis 2011) (emphasis
added).

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20150150-CA 	6 	2016 UT App 38
independent 	right 	exists 	for 	an 	insurer 	to 	seek 	subrogated
damages in its own name.
¶9 	First, EMIA does not have a direct cause of action against
Krueger. “An insurer’s subrogation right to recover from a
responsible third party the amount the insurer paid to or on
behalf of its insured derives from the insurance contract between
the insurer and the insured,” and its causes of action against that
third party are limited “to those rights or causes of action that
the 	insured 	possesses 	against 	the 	third 	party.” 	Bakowski 	v.
Mountain States Steel, Inc., 2002 UT 62, ¶ 23, 52 P.3d 1179. “[E]ven
though the insurance company is subrogated to a part of the
claim of the plaintiff, against the defendant, that does not create
another cause of action and there can only be one suit to recover
on that cause of action.” Cederloff v. Whited, 169 P.2d 777, 780
(Utah 1946).
¶10 	Further, “it has been generally held that a suit at law to
enforce 	[a] 	right 	of 	subrogation 	must, 	at 	common 	law, 	be
brought in the name of the insured, rather than by the insurance
company in its own name and right.” Johanson, 152 P.2d at 104
(citation and internal quotation marks omitted); see also Utah R.
Civ. P. 17(a) (“Every action shall be prosecuted in the name of
the real party in interest. . . . [A] party authorized by statute may
sue in that person’s name . . . .”). “The reason for the rule is that
the wrongful act” of the third party being sued “is single and
indivisible, and gives rise to but one liability.” Johanson, 152 P.2d
at 103. Permitting an insurer to sue in its own name, except
where it has fully indemnified the insured, could compel the
wrongdoer to “defend a multitude of suits” against multiple
insurance 	companies, 	the 	insured, 	and/or 	the 	insured’s
dependents or heirs. Id.
¶11 	Furthermore, “[c]onsiderations of reason and policy impel
the conclusion that the plaintiff, the one who has suffered the
injury and damage, should have basic ownership and control of

Wilson v. Educators Mutual Insurance
20150150-CA 	7 	2016 UT App 38
his cause of action.” Lanier v. Pyne, 508 P.2d 38, 40 (Utah 1973).
Even under statutory schemes that give the insurance carrier’s
right to reimbursement priority over the injured party’s right to
damages,5 our supreme court has concluded “that the rights
conferred 	upon 	the 	insurance 	carrier” 	to 	pursue 	an 	action
against a third party “should be regarded as secondary to the
plaintiff’s interest” in controlling the cause of action. Id. Thus, at
least where the insured or the insured’s estate retains some
interest in the potential damages, an insurance company cannot
pursue a subrogation action in its own name.
¶12 	After Jessica’s death, her cause of action for personal
injury passed to her estate by virtue of Utah’s survival statute.
See Utah Code Ann. § 78B-3-107(1)(a) (LexisNexis Supp. 2015)
(“A cause of action arising out of personal injury to a person, or
death caused by the wrongful act or negligence of a wrongdoer,
does not abate upon the death of the . . . injured person. . . . [T]he
personal representatives or heirs of the person who died, [have]
a cause of action against the wrongdoer . . . .”). The survival
statute grants the personal representatives or heirs of the injured
decedent the right to pursue both “special and general damages”
5. In subrogation actions where the insurer has paid workers’
compensation benefits, such as in Johanson v. Cudahy Packing Co.,
152 P.2d 98 (Utah 1944), and Lanier v. Pyne, 508 P.2d 38, 40 (Utah
1973), the Workers’ Compensation Act expressly provides that
the insurer is to be reimbursed before the employee or the
employee’s 	heirs. 	Utah 	Code 	Ann. 	§ 	34A-2-106(5); 	see 	also
Anderson v. United Parcel Serv., 2004 UT 57, ¶¶ 8–13, 96 P.3d 903.
But in a case such as this, where the expenses paid by the insurer
were not connected to a workers’ compensation claim, “in the
absence of express terms to the contrary, the insured must be
made whole before the insurer is entitled to be reimbursed from
a recovery from the third-party tort-feasor.” Hill v. State Farm
Mut. Auto. Ins. Co., 765 P.2d 864, 866 (Utah 1988).

Wilson v. Educators Mutual Insurance
20150150-CA 	8 	2016 UT App 38
against the wrongdoer. Id. General damages include damages
for the insured’s pain and suffering, Balderas v. Starks, 2006 UT
App 218, ¶ 16 n.5, 138 P.3d 75, which would have been separate
from the medical expenses paid by EMIA on Jessica’s behalf.
Since Jessica’s estate would presumably have been entitled to at
least some portion of the damages recoverable in a personal
injury action, EMIA should have brought its personal injury
action in the name of the estate or intervened in the Wilsons’
action against Krueger.6 Instead, it filed an action in its own
name, which Utah law does not permit. Because EMIA lacked
standing to pursue a claim against Krueger in its own name, the
trial court erred in awarding EMIA a portion of the interpleaded
funds.
CONCLUSION
¶13 	We conclude that EMIA lacked standing to pursue a
subrogation action against Krueger in its own name. Thus, the
trial court erred in dividing the Wilsons’ settlement with EMIA.
Accordingly, we reverse the trial court’s order and remand with
instructions for the trial court to dismiss EMIA’s claims and
award all of the interpleaded funds to the Wilsons.
6. EMIA asserts that the correct approach would be to allow the
insurer and the heirs to pursue separate claims to recover their
respective shares of damages arising from a personal injury
claim. 	Such 	an 	approach 	would 	unnecessarily 	subject 	the
defendant to multiple suits for the same conduct, see Johanson,
152 P.2d at 103, and potentially compromise the heirs’ superior
right to recover their share of the personal injury claim, see Hill,
765 P.2d at 866. See Cederloff v. Whited, 169 P.2d 777, 780 (Utah
1946).