Court Crier: Subrogation
In Bunker Hill Insurance Company v. G.A. Williams & Sons, Inc., the Appeals Court of Massachusetts held that a prior payment from the defendant’s insurer should offset a subrogation judgment. The subrogor/homeowner had filed a claim with her insurer after her heating oil tank leaked and contaminated her property. Her insurer paid for remediation of the property and received 50% of the cost from the tank installer’s insurer. The homeowner’s insurer then filed, as subrogee of the homeowner, a negligence action against the tank installer, and won a judgment for the entire remediation cost. The court reasoned that the judgment should be offset because the source of the prior payment from the installer’s insurer should be considered the same and not collateral to the judgment against the installer. (December 13, 2018)
In New Jersey Transit Corporation v. Sanchez, the Superior Court of New Jersey, Appellate Division, addressed whether a workers’ compensation carrier may obtain reimbursement of medical expenses and wage loss benefits it paid from a tortfeasor who negligently caused injuries to an employee in a work-related motor vehicle accident. The court held that a workers’ compensation carrier has an independent right to seek reimbursement from the tortfeasor pursuant to Section 40 of the Workers’ Compensation Act, and the carrier’s pursuit of such reimbursement does not conflict with the Automobile Insurance Cost Reduction Act’s collateral source rule. (December 4, 2018)
In Pacific Indemnity Company v. Deming, the United States Court of Appeals for the First Circuit addressed whether an insurer was subject to a waiver of subrogation where, pursuant to its issued policy, its insured “may waive . . . [their] right to recovery” and the insured’s condominium bylaws required the insured to procure insurance with “waivers of subrogation.” Holding that the insurer was not subject to a waiver of subrogation, the court reasoned that the plain language of these two documents did not require a waiver of subrogation; rather, they merely gave the insured the option to waive his subrogation rights. (July 5, 2016)
In Liberty Mutual Insurance Company v. Excalibur Management Services, the Commonwealth Court of Pennsylvania addressed personal injury protection (PIP) subrogation rights for medical expenses paid as a result of a work-related automobile accident. The court held that in order to establish its subrogation interest, the PIP carrier had to do so during the pendency of the workers’ compensation proceedings. (November 8, 2013)
In Markel Ins. Co. v. American Guar. & Liab. Ins. Co., the New York Supreme Court, Appellate Division, Second Department, addressed whether a complaint seeking common-law indemnification should be dismissed for failure to state a cause of action. The court found dismissal appropriate since common-law indemnification was based on the plaintiff’s participation in and contribution to the settlement in the underlying action, to which the plaintiff was not a party. (November 13, 2013)
In Plotch v Kapco Industries, Inc., the New York Supreme Court, Appellate Division, First Department addressed the issue of whether a plaintiff condominium winner at a foreclosure sale purchased the property subject to the defendant’s prior mortgage lien on the property. The court found that the plaintiff explicitly agreed to assume the defendant’s mortgage lien. Thus, the court held that the plaintiff is bound by the provisions of the previous owner’s mortgage. (September 27, 2013)
In Jones v. Nationwide Property & Casualty Insurance, the Supreme Court of Pennsylvania addressed the applicability of the made-whole doctrine in the context of pro rata reimbursement of an insured’s deductible from the insurer’s subrogation recovery in a collision coverage case. The made-whole doctrine generally provides that an insurance company cannot exercise its right of subrogation until its insured has been fully compensated. The court held that the made-whole doctrine does not apply in cases involving collision coverage policies. Thus, the practice of pro rata reimbursement of the insured’s deductible from the insurer’s subrogation recovery does not violate the made-whole doctrine. (December 21, 2011)
In Jones v. Nationwide Prop. and Cas. Ins. Co., the Supreme Court of Pennsylvania granted a Petition for Allowance of Appeal, agreeing to consider the following questions:
- Does Pennsylvania law require that a party suffering damages be made whole before an insurer is entitled to subrogation?
- Does the Pennsylvania Insurance Commissioner have the authority to promulgate a regulation regarding allocation of subrogation proceeds between an insurance company and its insured following subrogation recovery?
- Is the Pennsylvania Insurance Commissioner's regulation allowing insurers to allocate subrogation proceeds on a pro rata basis void because it violates Pennsylvania substantive common law, the "made whole" doctrine? (November 17, 2010)
In John L. Mattingly Construction Co., Inc., v. Hartford Underwriters Insurance Company a/s/o Wilma L. Phoebus, the Court of Appeals of Maryland (Maryland's highest appellate court) considered whether the waiver of a subrogation provision in an American Institute of Architects (AIA) form contract-form number A107-1997-was applicable to a post-construction loss and an insurance policy purchased after substantial completion of the project. Partner Edward A. Jaeger, Jr., and associate Matthew I. Ferrie, of our Subrogation Department, exhaustively researched, briefed and argued the case. The Court of Appeals agreed with their position that the A107 contract is distinguishable from other AIA contracts that contain an additional contractual provision for insurance purchased on the completed project. Accordingly, the court ruled that the language of the A107 contract, taken as a whole, was ambiguous regarding the applicability of the waiver of subrogation provision to the post-construction loss in question and remanded the case to the Circuit Court. In successfully distinguishing the A107 contract from other AIA contracts with more specific language regarding the waiver of subrogation, White and Williams prevailed in one of very few cases nationwide to hold that an AIA waiver of subrogation provision is not applicable to a post-construction loss. (July 27, 2010)
In Ario v. Reliance Insurance Company, the Supreme Court of Pennsylvania addressed the level of priority to be given to a subrogation claim held by an insurance company against an insolvent insurer under the Insurance Department Act. The Commonwealth Court held that such a claim fit into the higher prioritized subsection (b) of Section 533 of the Act, rather than the catch-all subsection, subsection (g). The Supreme Court reversed, holding that a claim for which the loss to the policy-holding party has already been compensated must receive the low, subsection (g) classification. Only claims under policies for which the loss has not been compensated are categorized under subsection (b). (October 5, 2009)