Martine v. Hertz Corp ( 1996 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
ALBERT A. MARTINE,
Plaintiff-Appellant,
and
GINA MARIE MARTINE, individually
and as parent, guardian and
custodian on behalf of Christian
Martine, an infant,
Plaintiff,
v.
THE HERTZ CORPORATION,
No. 95-2648
Defendant-Appellee,
and
US BENEFIT & RISK MANAGEMENT,
INCORPORATED, a/k/a Public
Employees Insurance Agency,
Defendant-Appellee,
and
PAUL SWINTON, a/k/a Gilliam C.
Swinton,
Defendant.
ALBERT A. MARTINE,
Plaintiff-Appellee,
and
GINA MARIE MARTINE, individually
and as parent, guardian and
custodian on behalf of Christian
Martine, an infant,
Plaintiff,
v. No. 96-1225
US BENEFIT & RISK MANAGEMENT,
INCORPORATED, a/k/a Public
Employees Insurance Agency,
Intervenor-Appellant,
and
THE HERTZ CORPORATION; PAUL
SWINTON, a/k/a Gilliam C. Swinton,
Defendants.
Appeals from the United States District Court
for the Southern District of West Virginia, at Charleston.
John T. Copenhaver, Jr., District Judge.
(CA-94-592-2)
Submitted: September 20, 1996
Decided: December 5, 1996
Before WILKINSON, Chief Judge, HAMILTON, Circuit Judge,
and PHILLIPS, Senior Circuit Judge.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
_________________________________________________________________
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COUNSEL
Richard Kranis, RICHARD KRANIS, P.C., Roslyn Heights, New
York, for Appellant. Charles R. Hurt, Charleston, West Virginia, for
Appellee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
In these consolidated appeals, Albert Martine challenges the dis-
missal by summary judgment of his claim against The Hertz Corpora-
tion (Hertz) for personal injuries received by Martine in a collision
with an automobile rented to its operator by Hertz, and US Benefit &
Risk Management, Incorporated (USB) appeals the dismissal of its
subrogation claim arising from the payment of medical expenses
incurred by Martine. We conclude that the district court did not err
in dismissing either claim and affirm in both appeals.
I.
Albert Martine and Gina Maria Martine, individually and as parent,
guardian and custodian on behalf of Christian Martine, an infant, filed
this action in the Circuit Court of Kanawha County, West Virginia,
against Paul Swinton and the Hertz Corporation to recover compensa-
tory and punitive damages for injuries suffered in an automobile acci-
dent that occurred in Kanawha County on September 5, 1993. The
accident occurred when the vehicle in which the Martines were travel-
ling collided head-on with a vehicle driven by Swinton, an English
tourist who had rented the vehicle from Hertz. The defendants
removed the case to federal court on diversity grounds.
USB moved to intervene in this action after learning that Gina and
Christian Martine had settled their tort actions, leaving only Albert's
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claim for trial. USB is the legal administrator of Equifax Health Care
Information Services, Inc., which is the health claims administrator
for the West Virginia Public Employees Insurance Agency (PEIA).
All of the members of the Martine family are beneficiaries under the
PEIA health insurance plan, and USB submitted a subrogation claim
in excess of $124,000 for medical benefits paid by PEIA on behalf of
Albert Martine. The district court granted USB's motion to intervene.
Before trial, the district court granted summary judgment in favor of
Defendant Hertz Corporation on all claims of negligence and negli-
gent entrustment, leaving only Albert Martine's claim against Swin-
ton for trial.
The district court held a four-day trial by jury solely on the issue
of Albert Martine's damages, Swinton having conceded liability.
Before the jury announced its verdict, Martine moved to dismiss
USB's complaint on the ground that he would not be"made whole"
because Swinton had insufficient funds to satisfy the probable judg-
ment. The only asset Swinton possessed to satisfy the judgment was
a $100,000 insurance policy provided when he rented the automobile.
The jury returned a verdict in favor of Martine in the amount of
$650,000, specifically including $36,800 for past medical expenses
and $5,000 for future medical bills. The jury awarded these amounts
despite evidence presented at trial that PEIA had paid in excess of
$124,000 in medical benefits to Martine related to the accident and
that Martine would require further medical care.
After the jury returned its verdict, the district court granted Mar-
tine's motion to dismiss USB's complaint as intervenor. Relying on
the West Virginia Supreme Court's decision in Kittle v. Icard, 405
S.E.2d 456 (W. Va. 1991), the court concluded that USB was not
entitled by subrogation to recover any portion of Martine's judgment
because Martine would not be "made whole" by the amount he would
be able to collect. On that basis, the district court determined that in
equity Martine should not be further undercompensated by apportion-
ing any part of his judgment to USB despite PEIA's medical pay-
ments to him.
Martine appeals in No. 95-2648 from the grant of summary judg-
ment to Hertz, and USB appeals in No. 96-1225 from the district
court's dismissal of its subrogation claim.
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II.
No. 95-2648
On Martine's appeal, we conclude that the district court did not err
in granting summary judgment to Hertz.
The court first rejected Martine's negligent entrustment theory as
a matter of law. The court reasoned that on the undisputed facts of
record a finder of fact could not properly find that in renting its vehi-
cle to Swinton Hertz could have known that he was likely to cause
an unreasonable risk of harm to others. That is an essential element
of the tort of negligent entrustment under West Virginia law. See
Huggins v. Tri-County Bonding Co., 337 S.E.2d 12, 17 (W. Va.
1985). The mere fact that Swinton was known to be a citizen of Great
Britain where motorists drive on the left of roadways would not suf-
fice to support such a finding. It was undisputed that Swinton had a
valid operator's license that was presented to Hertz before the vehicle
was entrusted to him by rental. There is no forecast of evidence in the
record that Swinton had any discernible physical or mental disabilities
when he obtained the car from Hertz.
We affirm the grant of summary judgment rejecting the negligent
entrustment claim on the reasoning of the district court.
The district court then rejected, as a matter of law, Martine's
claims of negligence by Hertz in failing, through its employees, to
inquire of Swinton whether he was familiar with applicable local rules
of the road and in failing specifically to warn him of the rule of right-
side driving, and in failing to train and supervise their employees to
make such inquiries and give that warning. The district court con-
cluded that on the undisputed facts of record, such failures could not
rationally be found to have been the proximate causes of the accident
and its consequences. It was undisputed, indeed conceded by Swin-
ton, that he was aware of the local rules of the road, and specifically
of the right-side driving rule, and had in fact observed those rules in
driving in other countries when they also obtained.
We affirm the grant of summary judgment rejecting these negli-
gence claims on the reasoning of the district court.
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III.
No. 96-1225
USB makes several arguments in its effort to overturn or alter the
district court's judgment dismissing its subrogation claim. The first
contention is that the "made-whole" rule announced in Kittle v. Icard,
supra, does not apply when a jury has rendered a verdict determining
the plaintiff's damages. Alternatively, USB contends that if the made-
whole rule does apply, equitable principles demanded that it neverthe-
less receive a partial recovery of the amount it paid as medical
expenses measured in either of two proposed mathematical methods.
A.
As a preliminary matter, we note that the West Virginia legislature
has provided PEIA with a statutory right to subrogation. See W. Va.
Code § 5-16-3(c) (1990). The legislative rules specifying an insured's
rights under the Public Employees Insurance Act provide: "In the
event that benefits are paid to any insured for bodily injury caused by
a third party, the Public Employees Insurance Board shall be and is
hereby subrogated (substituted) with respect to any insured's right (to
the extent of the value of the benefits paid) to any such claim against
such third party causing such bodily injury." W. Va. Code State R. tit.
151, § 1-11.1 (1985). In addition, the PEIA plan agreement providing
Martine's insurance contract includes a statement that reads, "To the
extent of the value of benefits paid, the [PEIA] shall be subrogated
and succeed to all rights of an insured to recover from any person or
entity which may be liable for expenses incurred for covered ser-
vices." JA at 4. The West Virginia Supreme Court has held that sub-
rogation clauses in insurance contracts are valid and enforceable.
Nationwide Mutual Ins. Co. v. Dairyland Ins. Co., 445 S.E.2d 184,
186 (W. Va. 1994); Federal Kemper Ins. Co. v. Arnold, 393 S.E.2d
669, 671 (W. Va. 1990).
The seminal case defining West Virginia's law of subrogation is
Kittle v. Icard, 405 S.E.2d 456 (W. Va. 1991). In that case the West
Virginia Supreme Court considered the right of the state's Depart-
ment of Human Resources (DHS) to subrogation in the amount paid
in medical expenses of a settlement payment made by an insurer that
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did not adequately compensate the injured party for his damages. The
case involved a twenty-three month-old child who was struck by a car
and dragged 70 feet on a concrete road. The child's mother was
receiving assistance from DHS, and the mother executed an assign-
ment of benefits form in favor of DHS in exchange for eligibility for
DHS's assistance with the child's medical expenses. The child's ini-
tial medical expenses totalled $27,317, and the car driver's insurance
company paid a settlement of $100,000, the limit of the policy. How-
ever, the child's guardian ad litem testified that the value of the
child's claim was between $200,000 and $250,000, and the trial court
found the driver to be judgment proof.
DHS sought subrogation of the award in the amount of the child's
medical expenses that it had paid; the child's mother claimed that
subrogation was inappropriate because the settlement payment had
not "made her whole." As does USB in this case, DHS argued that the
trial court erred in applying common law subrogation principles such
as the "made-whole rule" instead of a statutory provision that specifi-
cally provided for subrogation. As part of the Medicaid program, the
West Virginia Code stated, "[DHS] shall be legally subrogated to the
rights of the recipient against the person so liable, but only to the
extent of the reasonable value of the medical assistance paid . . . ."
W. Va. Code § 9-11-5(a) (1990). The West Virginia Supreme Court
began by noting, "`Absent a clearly expressed legislative intent
requiring otherwise, "subrogated" is to be given its usual, ordinary
meaning.'" Kittle, 405 S.E.2d at 460 (quoting White v. Sutherland,
585 P.2d 331, 334 (N.M. 1978)). Because the legislature did not
evince an intent to vary the ordinary meaning of the concept, the court
then noted that "subrogation gives the payor the right to collect what
it has paid from the party who caused the damage. However, because
this right to collect is an equitable remedy, it is subject to equitable
principles." Id.After canvassing the decisions in a number of other states that held
that a legislature's use of the term "subrogation" demonstrated an
intent to import the equitable consequences of that remedy, the West
Virginia court stated that "`the right of subrogation depends upon the
facts and circumstances of each particular case.'" Id. at 463 (quoting
Huggins v. Fitzpatrick, 135 S.E. 19, 20 (W. Va. 1926)). Continuing,
the court held that "`[s]ubrogation, being a creature of equity, will not
7
be allowed except where the subrogee has a clear case of right and
no injustice will be done to another.'" Id. (quoting Buskirk v. State-
Planters' Bank Trust Co., 169 S.E. 738, 738 (W. Va. 1933)). Because
the legislature did not alter the usual and ordinary meaning of the con-
cept of subrogation in the applicable statute, the Court held that equity
should be considered. And, on that basis, the Court then held that the
trial court properly had considered the equities in deciding not to per-
mit subrogation when the child had been unable to collect the full
value of the claim. "[W]e conclude that the lower court did not err
when it ruled that the DHS was not entitled to be subrogated to [the
child's] settlement proceeds because the settlement had not made him
`whole.'" Id. at 464.*
USB cites Bell v. Federal Kemper Ins. Co., 693 F. Supp. 446 (S.D.
W. Va. 1988), for the proposition that the existence of a jury verdict
in this case precludes Martine from arguing that he was not "made
whole." In Bell, the federal district court interpreted West Virginia
law to prevent plaintiffs from avoiding subrogation claims based on
the "not made whole" theory when they have obtained a jury verdict
and collected on the award. Citing a case from Washington, the court
noted, "`[T]he jury determined the money necessary to make [the
defendant] "whole." The fact [that defendant] has placed a greater
value on his damage than the jury did does not allow him to relitigate
the issue in a subsequent proceeding.'" Bell , 693 F. Supp. at 450(quoting United Pacific Ins. Co. v. Boyd, 661 P.2d 987, 990 (Wash.
1983)).
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*The West Virginia Supreme Court more recently upheld the equitable
doctrines of subrogation in the context of uninsured and underinsured
motorists. The West Virginia legislature has provided, "An insurer pay-
ing a claim under the endorsement or provisions . . . shall be subrogated
to the rights of the insured to whom such claim was paid against the per-
son causing such injury . . . to the extent that payment was made." W.
Va. Code § 33-6-31(f) (1990). However, in State ex rel. Allstate Ins. Co.
v. Karl, 437 S.E.2d 749 (W. Va. 1993), the court held "that the right of
subrogation [under section 33-6-31(f)] is not available where the policy-
holder has not been fully compensated for the injuries received and still
has the right to recover from other sources. Subrogation is permitted only
to the extent necessary to avoid a double recovery by such policyholder."
Karl, 437 S.E.2d at 757.
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USB's reliance upon Bell is unavailing. In both Bell and Boyd,
supra, the plaintiff obtained a jury verdict or a settlement and then
collected its full value. The plaintiffs in those cases then sought to
avoid their insurers' subrogation rights by claiming their damages
were greater than the awards, but the courts recognized that a jury
verdict defines the full value of a plaintiff's damages. In this case, by
contrast, Martine does not contend that the jury verdict does not rep-
resent the full value of his damages, but rather that he is unable to col-
lect the full value of the verdict. For this reason, Bell is inapposite.
USB also argues that Kittle is distinguishable from this case
because USB has a contractual right to subrogation while the insurer
in Kittle only had a statutory right to the plaintiff's settlement pro-
ceeds. In support of its theory USB cites Fields v. Farmers Ins. Co.,
Inc., 18 F.3d 831 (10th Cir. 1994). In that case, involving Oklahoma
state law, the Tenth Circuit held that a "not made whole" rule should
not apply when an insurance contract has unambiguously provided
the insurance company with subrogation rights in the event an insured
obtains a verdict or a settlement. Though the Oklahoma Supreme
Court had not expressly ruled on the issue of whether a plaintiff must
submit to subrogation when he has not been fully compensated, the
federal appellate court there distinguished between"equitable subro-
gation" and subrogation provided by contract. Id. at 835. Where the
contract provided, "Subrogation means the Plan's right to recover any
of its payments . . . which you or your dependent later recover from
the third party or the third party's insurer," the court held that the "not
made whole" rule should not apply. Id."`Without discounting the
equitable properties of subrogation, we can conceive of no sound rea-
son why broad principles of equity should be imbued with dominance
over clear and specific provisions of a contract agreed to by the par-
ties, at least where public policy considerations are wanting.'" Id. at
836 (quoting Higginbotham v. Arkansas Blue Cross & Blue Shield,
849 S.W.2d 464, 466 (Ark. 1993)).
USB claims that despite Kittle's application to cases of equity, the
logic of Fields requires that West Virginia law enforce subrogation
rights when an insurance contract specifically provides for them.
However, Kittle defines subrogation in such a way as to require that
equity be considered whenever an insurer invokes its right. "`Whether
legal or conventional, subrogation is an equitable remedy. The rem-
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edy is for the benefit of one secondarily liable who has paid the debt
of another and to whom in equity and good conscience should be
assigned the rights and remedies of the original creditor.'" Kittle, 405
S.E.2d at 460 (quoting State Farm Mut. Auto Ins. Co. v. Foundation
R. Ins. Co., 431 P.2d 737, 741 (N.M. 1967)). Completing that idea,
the West Virginia court noted, "`"Subrogation" is a term of legal art
which we assume would not be employed by the drafters . . . unless
they intended it to be construed in its normal sense.'" Id. (quoting
United States v. Greene, 266 F. Supp. 976, 979 (N.D. Ill. 1967)). The
district court therefore properly utilized equitable principles in con-
struing PEIA's contract in this case.
B.
Assuming Kittle's application to this case, USB contends that the
district court should have employed equitable principles to allow it
subrogation at least in the amount the jury awarded specifically for
medical expenses. The district court determined that the West Vir-
ginia Supreme Court's pronouncements in Kittle and Karl, supra,defined equity as per se denying insurers any recovery when insureds
were not fully compensated by a settlement or judgment. And, noting
that Martine received less than one-sixth of the amount to which he
was entitled and would be further undercompensated for his injuries
if USB were entitled to subrogation the district court held that even
aside from any per se rule, the equities favor Martine over USB. We
find no abuse of discretion or legal error in that conclusion.
In No. 95-2648 - AFFIRMED
In No. 96-1225 - AFFIRMED
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