Issue: The insured received $743 from his Collision carrier after an auto accident, and then signed a subrogation agreement covering that payment. Three months later, he brought an action against the tortfeasor to recover "damages for personal injuries, damages to automobile (and) medical expenses…" He recovered a judgment of $800 which was paid by the defendant’s Liability carrier. The insured’s carrier then brought this breach of contract action against its insured after he refused to reimburse it, on the grounds that its right to enforce the subrogation interest had been barred by the insured’s action.

Judgment: The trial court found that the company was entitled to recover, but ruled that any recovery should be apportioned between the vehicle damage and personal injuries. It then entered judgment in favor of the insured’s company for $150.

On appeal, the insured contended that his attorney had announced at the trial that the suit was for personal injuries only and, therefore, no part of the judgment for $800 represented recovery for damage to the car.

The higher court pointed out that the suit brought by the insured, if brought for personal injuries only, constituted a splitting of the cause of action and would bar another suit for property damage, whether brought by the insured or by his insurance carrier. It added that the rule against the splitting of a cause of action is for the benefit of the tortfeasor and only he can waive or relinquish this defense.

The evidence showed that the insurance company was not notified of the filing of the suit by its insured, although both the insured and his attorney knew of the existence of the subrogation agreement. Had the insurance company been told, it could have intervened in the action and asserted its claim to subrogation. However, its right to intervene was lost since it did not know of the action until after the judgment had been paid.

The higher court held that the trial court was correct in its finding that the company’s right of action for the enforcement of its subrogation claim was cut off, and its only recourse was against the insured.

However, it also found that the trial court erred in finding that the company was entitled only to recover a "prorated share" of the property damage. It ruled that the insured held that part of the judgment recovered which represented damages to the car as a trustee for the company’s benefit. Moreover, in the absence of any finding by the trial court as to the amount of that damage, the insured was bound to account to the company for the amount received from the company less the proportionate amount of the attorneys’ fees.

Calvert Fire Insurance Co. vs. Chamberlain – Tennessee Court of Appeals, Western Section – August 29, 1969 (Rough Notes Magazine, July 1970)