Wimberly v. American Casualty Company Of Reading, Pennsylvania (Cna)

584 S.W.2d 200 (1979)

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Nature of the Case

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Facts

P's restaurant was destroyed by fire. The undisputed loss amounted to $44,619.10. The fire was caused by Shelia McLemore's driving her automobile into the restaurant. Her insurance carrier paid the policy limits of $25,000. P had a total of $15,000 in fire insurance coverage with Ds. The single question for determination is what are the subrogation rights of Ds when the total recovery of the insured from the tortfeasor and the fire insurance policies is less than the casualty loss. The fire insurance policies that P had with Ds both contained the standard subrogation clause, which read: 'This company may require from the insured an assignment of all rights to property against any party for loss to the extent that payment therefor is made by this company.' On February 18, 1975, P signed a proof of loss and subrogation receipt, by which they subrogated their insurers 'to all of the rights, claims, and interests which the undersigned may have against any person or corporation liable for the loss' and agreed to cooperate with their insurers in litigating or compromising their claims. Ds issued checks for $7,000 and $8,000, the full amount of the respective policies, for a total of $15,000. The Hartford Insurance Company, the insurer of McLemore, issued a check for $25,000, payable to P and Ds. A joint release on the $25,000 check was executed and The American Casualty Company (D) received $3,921.53 and the New Hampshire Insurance Company (D) received $4,482.94, for a total of $8,404.47 as a pro rata share, and P received $16,595.53 of the settlement payment. P had to bear an uninsured loss of $13,023.57. P sued to recover the $8,404.47 received by their insurers, with interest from April 16, 1975, and attorney's fees. The chancellor ruled that P must be paid in full for their loss before subrogation rights arose in favor of Ds. The Court of Appeals reversed and held that both the insured and the insurers were entitled to a pro rata share of the sum recovered from the third-party tortfeasor.