The opinion of the court was delivered by: MARSH
The plaintiffs, Richard C. Brown and Edith P. Brown, his wife, were the owners of certain poultry and poultry houses situated in East Mahoning Township, Indiana County, Pennsylvania, which were destroyed by fire on June 22, 1947. Under policies of fire insurance entered into between the plaintiffs and certain insurance carriers the plaintiffs received the following amounts:
Travelers Fire Insurance Company . . . $ 3,854.41
Franklin Fire Insurance Company . . . $ 3,854.41
Piedmont Fire Insurance Company . . . $ 3,853.41
Plaintiffs claimed that T. W. Phillips Gas & Oil Company was a tort-feasor and liable for the fire loss and, as a result of an action in this court, recovered a verdict of $ 38,000 later reduced to $ 32,000 by the trial judge.
The plaintiffs pursued their action against the tort-feasor in good faith. It is alleged that they entered into a contingent fee contract with their attorneys to pay to them 40% of the amount recovered.
On December 4, 1950, on motion of the insurance carriers above named, a rule was issued upon the plaintiffs and the defendant to show cause why these insurance carriers should not be subrogated to the extent of the amounts paid by them to plaintiffs under the policies of insurance.
The plaintiffs do not contest the fact that the insurance carriers are entitled to enforce their subrogation rights.
The issue before the court is whether in the enforcement of their subrogation rights the insurance carriers are entitled to recover the full amounts paid by them to the plaintiffs or whether they should be required to contribute a proportionate share of plaintiffs' expenses incurred in the litigation against the tort-feasor.
The contention of counsel for the insurance carriers is that they are entitled to recover the full amount paid under their respective policies without deduction for fees or costs. To sustain their contention they have cited, inter alia, the cases of Ellis v. Atlantic Refining Co., 1932, 309 Pa. 287, 163 A. 531; Kratsas v. Guest, 1950, 166 Pa.Super. 233, 70 A.2d 672. These decisions are not apposite to this case for the reason that they involve interpretations of Section 319 of the Pennsylvania Workmen's Compensation Act.
In our opinion the other cases cited by petitioners do not directly adjudicate the question under consideration.
In absence of a statute such as the former Pennsylvania Workmen's Compensation Act, or a contract by insured
assigning a definite amount to the insurer, we think equitable principles should govern in enforcing the rights of subrogation of the insurance carriers against the fund recovered by the insured from the tort-feasor. In 46 C.J.S.,Insurance, § 1215(a), it is stated: 'Where an action against the third person is prosecuted in good faith by insured for the benefit either wholly or in part of insurer, the latter may be required to contribute to the payment of the expenses of prosecuting the action by which a judgment was obtained for its benefit.'
There is a paucity of authority upon the issue involved in the instant case.
It is our opinion that in a situation where fire insurance carriers attempt to recoup by way of subrogation the amounts which they have paid, it is appropriate to follow the principles of equity applied in class actions and decedents' estates, where those who benefit from the action of a stockholder or of a single beneficiary must contribute to his compensation and expenses.
In the case of Davis v. Gemmell, 1891, 73 Md. 530, 21 A. 712, 715, attorneys were employed by a stockholder who sued in his own name and recovered a judgment which was determined to belong to the North Branch Coal Company. Some of the stockholders objected to the allowance of the contingent fee to the attorneys, but the Court of Appeals of Maryland stated '(they) stood by and saw the work done; they neither interfered nor objected; and they cannot now be heard in a court of equity to except to that work being paid for out of the fund realized by the ...