This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
The case arises from a July 6, 1990, automobile accident involving the insured party (Harrell) and a City of Albuquerque bus driver. Harrell sustained injuries, and his medical expenses, totaling $21,141.63, were paid by his insurer, Health Plus. Harrell later settled with the City for $150,000 without notifying or including Health Plus in the settlement. Health Plus sought reimbursement for the medical expenses it had paid, asserting its subrogation rights under the insurance contract (paras 2-5).
Procedural History
- District Court of Bernalillo County: Held that Harrell had a contractual and legal duty to hold settlement funds for Health Plus but dismissed Health Plus' subrogation claim against the City, finding it barred by the two-year statute of limitations under the Tort Claims Act (para 1).
Parties' Submissions
- Defendant-Appellant (Harrell): Argued that Health Plus had no contractual or legal right of subrogation against him and that he had no duty to hold funds in trust for Health Plus. He also contended that Health Plus' failure to intervene in the settlement negotiations precluded its recovery (paras 6-9).
- Plaintiff-Appellee/Cross-Appellant (Health Plus): Asserted that Harrell had a contractual duty to reimburse it for medical expenses paid and that it had a valid subrogation claim against the City. Health Plus also argued that the statute of limitations did not bar its claim against the City and that the City was liable for constructive fraud (paras 6, 11-18).
- Defendant/Cross-Appellee (City of Albuquerque): Maintained that Health Plus' subrogation claim was barred by the two-year statute of limitations under the Tort Claims Act and that it was immune from the constructive fraud claim (paras 14, 17).
Legal Issues
- Did Harrell have a contractual and legal duty to reimburse Health Plus for medical expenses paid under the insurance policy?
- Was Health Plus' subrogation claim against the City barred by the two-year statute of limitations under the Tort Claims Act?
- Could Health Plus recover from the City on a claim of constructive fraud?
Disposition
- Harrell was found to have a contractual and legal duty to reimburse Health Plus for medical expenses paid (para 19).
- The trial court's dismissal of Health Plus' subrogation claim against the City was reversed, and the case was remanded for further proceedings (para 19).
- The City was found immune from Health Plus' constructive fraud claim (para 19).
Reasons
Per Alarid J. (Apodaca and Wechsler JJ. concurring):
Harrell's Duty to Reimburse: The court found that the insurance contract unambiguously imposed a duty on Harrell to reimburse Health Plus for medical expenses paid. The contract's language created a subrogation right for Health Plus and required Harrell to safeguard funds recovered from third parties. The court relied on precedent from Amica Mutual Insurance Co. v. Maloney, which held that an insured must protect the insurer's interests when pursuing claims against third parties (paras 6-10).
Subrogation Claim Against the City: The court held that Health Plus' subrogation claim was not barred by the statute of limitations. Although the Tort Claims Act imposes a two-year limitation period, Health Plus' rights were preserved because it gave timely notice of its subrogation claim and Harrell filed suit against the City within the statutory period. The court emphasized that settlement between Harrell and the City did not extinguish Health Plus' subrogation rights, as the City was aware of those rights and Health Plus did not consent to the settlement (paras 11-16).
Constructive Fraud Claim Against the City: The court concluded that the City was immune from the constructive fraud claim under the Tort Claims Act, as constructive fraud is not among the exceptions to sovereign immunity. Even if the City were not immune, the evidence did not support a finding of constructive fraud (paras 17-18).
Remedy: Health Plus was permitted to recover either from Harrell or the City but not both, to avoid double recovery. If Health Plus chose to recover from the City, the City could seek indemnification from Harrell under their settlement agreement (para 16).