2002-453, DIANA WOLTERS v. AMERICAN REPUBLIC INSURANCE COMPANY

The defendant, American Republic Insurance Company, appeals a decision of t he Superior Court (Coffey, J.) granting summary judgment to the plaintiff, Diana W olters, on her declaratory judgment claim. We affirm.

The relevant facts are as follows. On January 16, 1997, the plaintiff was injured in an a utomobile accident. She incurred approximately $77,392 in medical expenses. The plaintiff w as insured by the defendant under a group health insurance policy, which covered her m edical expenses. She sued the driver of the other vehicle and the defendant did not i ntervene. In March 2001, the plaintiff settled her claim for $625,000.

On March 16, 2001, after settlement, the defendant notified the plaintiff that it had pl aced a lien upon her settlement proceeds. It is undisputed that the plaintiff’s i nsurance contract with the defendant contains no clause providing for reimbursement or s ubrogation lien rights to the defendant for the payment of medical expenses. The pl aintiff filed a declaratory judgment action in superior court to determine the pa rties’ rights. Both sides filed motions for summary judgment as to whether the de fendant is entitled to reimbursement from or equitable subrogation of the pl aintiff’s settlement proceeds.

The court granted the plaintiff’s motion for summary judgment, ruling that, absent a n express contractual or statutory provision, the defendant has no right to equitable r eimbursement or subrogation of the plaintiff’s settlement proceeds. This appeal f ollowed.

"Summary judgment is an appropriate means of avoiding the expense and time of a f ull trial, and thus the trial court must grant summary judgment when it finds no genuine i ssue of material fact, after considering the affidavits and other evidence p. 2 presented in a l ight most favorable to the non-moving party, and when the moving party is entitled to a j udgment as a matter of law." Hudon v. City of Manchester, 141 N.H. 420, 423 ( 1996) (brackets, citations and quotations omitted). We review the trial court’s a pplication of the law to facts de novo. Morse v. Goduti, 146 N.H. 697, 698 ( 2001).

The sole issue on appeal is whether a health insurance carrier has an equitable right t o reimbursement or subrogation of its insured’s settlement proceeds for medical e xpenses paid under a policy that contains no reimbursement or subrogation clause.

The doctrine of subrogation has its origins in equity. See Dimick v. Lewis, 127 N.H. 141, 145 (1985). A party’s right to subrogation can arise either by c ontract, statute, or common law or equitable principles. Moulton v. Groveton Papers Co., 114 N.H. 505, 510 (1974); see also 16 L. Russ & T. Segalla, Couch on Insurance 3d § 222:6, at 222-27 (2000).

DeLellis v. Burke, 134 N.H. 607, 611 (1991) (quotation omitted). The purpose behind s ubrogation "is to place the responsibility where it ultimately should rest by c ompelling payment by the one who in good conscience ought to pay it." Security F ence Co. v. Association, 101 N.H. 190, 192 (1957) (quotation omitted). "It also pr events the insured from recouping a windfall double recovery." Cunningham v. M etropolitan Life Ins. Co., 360 N.W.2d 33, 36 (Wis. 1985). "In any subrogation c ase, the burden of proving entitlement is on [the] subrogee, which generally includes pr oof of: [t]he existence and applicability of equitable principles or contractual pr ovisions as to subrogation and reimbursement." Russ & Segalla, supra § 222: 7.

It is undisputed that the plaintiff’s health insurance policy contains no pr ovision allowing for reimbursement or subrogation. Nor does the defendant contend that i t is entitled to reimbursement or subrogation by the operation of a statute. Rather, it c ontends that under New Hampshire law, it is entitled to reimbursement and subrogation t hrough equitable principles. The issue of whether an insurer can be equitably subrogated t o its insured’s rights, absent a contractual provision, is a question of first i mpression in this State.

Rights of subrogation do not arise automatically upon payment of benefits under any c ontract of insurance, but instead depend upon the type of coverage involved. Frost v. P orter Leasing Corp., 436 N.E.2d 387, 389 (Mass. 1982). Courts have generally found an i mplied right of subrogation to exist in policies, such as those for fire insurance, c overing property damage. See id.; see also Perreira v. R ediger, 778 A.2d 429, 437 (N.J. 2001); Gatzweiler v. Milwaukee Electric & Ry. L ight Co., 116 N.W. 633, 633-34 (Wis. 1908). Such policies are characterized as i ndemnity insurance, since the insurer is under a duty to indemnify the insured for an a ctual loss. Frost, 436 N.E.2d at 389.

Where, however, a contract is one of personal insurance, such as a policy providing be nefits for medical or hospital expenses, equitable subrogation is not applicable; there m ust be a contractual or statutory right for the insurer to be entitled to subrogate. See Cunningham, 360 N.W.2d at 36; see also Russ & Segalla, supra § 222: 25. We have recognized this distinction in prior cases. Holland v. Company, 83 N.H. 482, 485 (1929) (superseded by statute) ("subrogation not contracted for in c ases of death or accident is not given the insurer as it is in the cases of fire and liability"). The overwhelming majority of cases that have considered equitable s ubrogation in the health insurance context have held that an insurer has no right to s ubrogation absent an express contractual provision. See, e.g., Schultz v. Gotlund, 561 N.E.2d 652, 654 (Ill. 1990); Frost, 436 N.E.2d at 390-91; McCain F oods, Inc. v. Gerard, 489 A.2d 503, 504-05 (Me. 1985); Perreira, 778 A.2d at 437; Shumpert v. Time Ins. Co., 496 S.E.2d 653, 656-58 (S.C. Ct. App. 1998); Russ & Segalla, supra § 222:26 (citing cases); Annotation, Right of "Blue C ross" or "Blue Shield," or Similar Hospital or Medical Service O rganization, to be Subrogated to Certificate Holder’s Claims Against Tortfeasor, p. 3 73 A.L.R.3d 1140, 1147-48 (1976). The rationale behind denying equitable subrogation in t he personal insurance context is as follows:

Perreira, 778 A.2d at 438 (quotation omitted).

As the Arkansas Supreme Court has explained:

American Pioneer Life Insurance Co. v. Rogers, 753 S.W.2d 530, 532-33 (1988); see Frost, 436 N.E.2d at 390-91.

We find these cases persuasive. Granting health insurance companies a right, absent an e xpress clause in an insurance policy, to recoup expenditures from a settlement or j udgment for a plaintiff for whom it paid medical expenses, does not advance the purpose of equitable subrogation. We have noted that subrogation is generally not allowed where t he insured’s total recovery is less than the insured’s actual loss. Dimick, 127 N.H. at 144. Settlements in particular "usually involve[] a reduced r ecovery," thereby militating against an implied right of subrogation. See id. C onsequently, the plaintiff is generally not receiving a windfall if he or she receives bot h medical insurance benefits and settlement proceeds or damages against the tortfeasor i n a personal injury case.

Nonetheless, we agree with the trial court that even if the plaintiff received a du plicative benefit of medical expenses for the same injury through the settlement, " the more equitable result is to permit [her] to recover because [s]he has paid for the benefits in the form... of insurance premiums." Merchants Mut. Ins. Group v. Orthopedic Prof. Ass’n, 124 N.H. 648, 658-59 (1984) (superseded by statute).

The defendant argues that the trial court erred in finding that the subject policy was a n investment policy, for which subrogation is generally denied absent an express c ontractual agreement, rather than an indemnity policy. It argues that the court erred in c haracterizing all medical or healthcare policies as investment policies rather than i ndemnity policies, and that a review of the subject policy establishes that it is of an i ndemnity nature. We agree with the plaintiff that the label attached to the insurance pol icy is inconsequential to our holding. It is the equitable principles involved that c ontrol our decision. See, e.g., American Pioneer Life Ins. Co., 753 S.W.2d at 532-33; Schultz, 561 N.E.2d at 654; Frost, 436 N.E.2d at 390. M oreover, even if we were to consider the issue, the defendant failed to present the s ubject policy p. 4 to either the trial court or this court for review. It therefore failed to c arry its burden of creating a sufficient record for review on appeal. Appeal of M ontplaisir, 147 N.H. 297, 304 (2001).

We hold that a health insurance company has no common law or equitable right to s ubrogation, and that "[i]f such a company desires protection against loss caused by t he wrongs of third persons who would ordinarily be liable they must do so by the c ontracts they make." Gatzweiler, 116 N.W. at 634.