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REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 1259 SEPTEMBER TERM, 1998

DEXTER STANCIL v. ERIE INSURANCE COMPANY, ET AL.

Moylan, Bishop, John J., Jr. (Retired, specially assigned) Leasure, Diane O. (specially assigned) JJ. Opinion by Bishop, J.

Filed: November 1, 1999

Dexter Stancil appeals the judgment of the Circuit Court for Prince George's County, by which Appellant's request for summary judgment in his Declaratory Judgment action was denied in favor of Erie Insurance Company, et al., Appellees. Appellant presents the following issue: Stancil suffered a $275,000.00 fire loss as a result of a motor vehicle accident. He was paid $195,000.00 by his homeowner's insurance carrier, Erie. Can Erie assert a claim of subrogation against the at-fault driver before Stancil has fully recovered his damages? The parties have agreed to the following facts, which we have edited: On December 15, 1994, Sylvia Tayag ran a stop sign, and her vehicle collided with Gloria Janey's vehicle. Janey lost control

of her car, which collided with Stancil's house and burst into flames. sustained insurance Stancil's house and its contents were destroyed. Stancil damages carrier, of $275,000.00. its Erie, Stancil's of homeowner's --

paid

policy

limits

$194,345.79

$80,00.00 less than Stancil's loss. Government Employees Insurance Company (GEICO) insured both drivers. It tendered Tayag's policy limits ($50,000.00) to Stancil. Erie expressed its intention to claim, under its subrogation Stancil filed an a Bill for

rights, any sums received by Stancil from GEICO. action against Tayag and Janey, and then

filed

Declaratory Relief against Erie to resolve the subrogation priority issue. Tayag and Janey were named as Interested Persons. Summary

judgment was granted in favor of Erie. We must determine whether the trial judge was legally correct. Lynx, Inc. v. Ordnance Products, Inc., 273 Md. 1, 7 (1974); Wills v. Baltimore County, 120 Md. App. 281, 288 (1998), rev'd on other grounds, 352 Md. 620 (1999). alia: (e) Entry of judgment.- The court shall enter judgment in favor of or against the moving party if the motion and response show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law. Appellant does not dispute the issue of whether the policy gives Erie the right to subrogation. Rather, he asks what is the Md. Rule 2-501(e) provides, inter

priority of that right against a third party tortfeasor when the insured has not recovered the full amount of his loss. He cites Bachmann v. Glazer & Glazer, Inc., 316 Md. 405 (1989) and quotes the following from page 416: Recovery on a theory of conventional subrogation is based on contract but it is nevertheless subject to principles of equity. A conventional subrogee is not necessarily entitled to subrogation as a matter of legal right; the relative equities of the parties are still to be balanced. In Roberts v. Total Health Care, Inc., 109 Md. App. 635, 648 (1996), aff'd, 349 Md. 499 (1998)(citations and footnotes omitted), we said: Maryland courts recognize three types of subrogation claims: (1) legal subrogation; (2) - 2 -

conventional subrogation; and (3) statutory subrogation. These three categories exist independently of each other. The nonexistence of one does not per se exclude a finding of the other. Roberts teaches that "conventional subrogation," the type that is before us, requires proof (1) that Stancil assigned the right of subrogation to Erie, and (2) that Erie paid the amount it was obligated to pay for the benefit of Stancil. 109 Md. App. at 650. Erie is entitled to subrogate its claim unless it would be

inequitable to do so. Stancil assigned the right of subrogation to Erie, and Erie paid the amount it was obligated to pay under the policy. The only disputed issue is whether, under the facts, it

would be inequitable to permit Erie to exercise its subrogation rights under the policy. Appellant argues that it would be inequitable to do so until he is made whole. He cites Esparza v. Scott and White Health Plan, 909 S.W.2d 548 (Tex.App. 1995) and quotes the following from page 551 (emphasis in original): While an insurance contract providing expressly for subrogation may remove from the realm of equity the question of whether the insurer has a right to subrogation, it cannot answer the question of when the insurer is actually entitled to subrogation or how much it should receive. In Esparza, a health insurance case, the appellate court observed that the Esparzas were not made whole by their settlement and they contended that this finding and the "made whole" doctrine

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precluded the subrogee from recovering. The Court went on to state: Although it is entitled to great weight, this rule of equitable subrogation is not absolute, and must be considered within the factual context of the parties' dispute. Here, the Esparzas acted without regard for the subrogation rights of Scott & White by settling with Dr. Orrick for less than his insurance policy limits, releasing him from all claims, and nonsuiting their claim for past medical expenses. This Court will not condone a party's acting to wholly compromise the rights of a subrogee and then hiding disingenuously behind the "made whole" doctrine. 909 S.W.2d 548, 552 Appellant also cites Powell v. Blue Cross and Blue Shield, 581 So.2d 772 (Ala. 1990), and quotes from page 777: "The very heart of the bargain when the insured purchases insurance is that if there is a loss he or she will be made whole." The Powell court had earlier quoted the following from Rimes v. State Farm Mut. Auto. Ins. Co., 106 Wis.2d 263, 271-2; 316 N.W.2d 348, 353 (1982): [E]ven though an insured has recovered from a tort-feasor a sum more than sufficient to equal the subrogated amount claimed by the insurer, the insurer is not entitled to subrogation unless the insured has been made whole for his loss. The purpose of subrogation is to prevent a double recovery by the insured. Under circumstances where an insured has received full damages from the tort-feasor and has also been paid for a portion of those damages by the insurer, he receives double payment--he has been made more than whole. Only under those circumstances is the insurer, under principles of equity, entitled to subrogation. Subrogation is to be allowed only when the insured is compensated in full by recovery from the tort-feasor. - 4 -

581 So.2d at 776-77. Both of these cases involved health care insurers who were, by their contracts, given the right of subrogation for recovery of the amounts of their payments for medical expenses on behalf of their insureds. Health insurance policies differ from the policy

involved sub judice which has a precise policy limit, a maximum amount that the insurer is required to pay. Health insurance

policies do not require the insured to select a maximum overall limit. The limits are set by the company depending on the medical Here, Stancil decided on the limit and chose one

service provided.

that was less than the real value of his property. Appellant suggests that Md. Code, Art. 27,

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