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Skiles v. Farmers Insurance Co.

as corrected.: April 29, 1991.


Grosse, C.j. Scholfield and Forrest, JJ., concur.

Author: Grosse

Safeco Insurance Company (Safeco) seeks review of the trial court's order granting summary judgment to Alan and Lori Skiles (Skiles) and David and Mary Ann Yamashita*fn1 (Yamashita).

Alan Skiles was severely injured in an automobile/pedestrian accident in 1985. He will never fully recover from the injuries suffered in this accident. Skiles' insurance policy was with Farmers Insurance Company, Inc. (Farmers) which provided personal injury protection (PIP) benefits and underinsured motorist coverage (UIM). Farmers paid Skiles the UIM policy limits of $25,000 and also paid $20,000 in PIP benefits. Skiles was represented by attorney David Yamashita. Skiles sued Cleave, the tortfeasor/driver of the auto which hit him. Cleave maintained liability insurance with Safeco.

The personal injury lawsuit between Skiles and Cleave was settled under an agreement in which Safeco paid Skiles $150,000 in cash and provided an annuity or structured settlement to be paid to Skiles over a term of years, or to his estate if he dies. Cleave's liability policy through Safeco had a limit of $300,000.*fn2

As part of the settlement with Skiles, Safeco obtained a release and hold harmless agreement signed by Mr. and Mrs. Skiles and their attorney Mr. Yamashita. The agreement provided, in pertinent part:

[W]e agree to see to it that all subrogation claims arising out of the accident involved in this case, including . . . liens or subrogation rights in favor of any insurance company who has paid benefits on our behalf . . . are satisfied or paid to the end that you and your principals . . . [and] Safeco Insurance Company . . . are held harmless, indemnified and defended against any and all such claims[.]

Following the settlement, Farmers sought reimbursement from Safeco of the $20,000 in PIP benefits it had paid to Skiles pursuant to its claimed subrogation rights.*fn3 Although Yamashita indicated in an affidavit that he and Skiles had no notice of the letters between Farmers and Safeco regarding the PIP subrogation rights, he knew what payments had been made to Skiles pursuant to the PIP coverage under the Farmers policy.

In connection with its claim against Safeco, Farmers sought and obtained intercompany arbitration with Safeco. While Safeco and Yamashita believed that arbitration was the improper forum for settling the claim, the case proceeded to arbitration. Neither Safeco nor Yamashita took steps to prevent the arbitration from going forth. Safeco tendered the defense of this matter to Skiles and Yamashita. Tender of defense was accepted by Yamashita under protest, but he did represent Safeco in the arbitration. Safeco lost the arbitration proceeding and for whatever reason Yamashita/Safeco decided not to challenge the decision. As pointed out by the trial court, the arbitration award was most likely erroneous as a matter of law under

the Thiringer doctrine.*fn4 However, Safeco paid Farmers the $20,000 pursuant to the arbitration, did not challenge the arbitration determination, and sought reimbursement of the $20,000 from Skiles and Yamashita under the hold harmless agreement. Safeco's contention throughout this case has been that once the hold harmless agreement was signed, if it lost to Farmers in arbitration, Skiles and Yamashita would be liable under the hold harmless agreement. Safeco argues it is indemnified from further claims.

On summary judgment, the trial court denied Safeco's claim. The reasoning behind the court's decision was that Safeco paid Farmers in connection with Farmers' subrogation claim, and now "stands in the shoes" of Farmers as a subrogee of any subrogation claim Farmers may have had against its insured, Skiles. Thus, any claim of Safeco against Skiles and Yamashita, which is specifically a subrogation claim, is subject to the same legal rules concerning subrogation that would apply in a dispute between Farmers and Skiles. Because the record shows Skiles has not been fully compensated for his loss,*fn5 the court indicated that Farmers would not be entitled to any recovery against its insured, Skiles,*fn6 and therefore neither would Safeco.

Safeco claims the trial court erred in determining that as a matter of law Safeco stood in the shoes of Farmers and under the Thiringer doctrine was therefore precluded from obtaining reimbursement. Safeco claims the trial court was incorrect and confused Safeco's right to ...

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