Articles Posted in Subrogation

The United States Southern District of Texas, Houston Division, issued an opinion on July 3, 2018, that is not usually relevant to most claims but in case a situation arises where it is relevant, it is good to know.  The opinion is styled, Zurich American Insurance Company a/s/o Precision Castparts Corp. v. Rajwant Kaur d/b/a Lifetime Cargo, et al.

This case is before the Court on a Motion to Dismiss for Lack of Subject Matter Jurisdiction.  The motion was denied.

Precision Castparts (PCC) manufactures structural castings and forged components and owned a Behringer HBM-540A automatic horizontal bandsaw machine used in its business.

Many situations involving insurance claims also involve issues dealing with subrogation and liens.  Here is a little information for insurance lawyers who might have to deal with subrogation.

Subrogation is an element of insurance law.  In 1944, the United States Supreme Court in the case styled, United States v. South-Eastern Underwriters Association, determined that insurance is a form of interstate commerce subject to federal regulation.  Shortly thereafter, Congress passed the McCarran-Ferguson Act, which is found in U.S.C.S., Section 1011.  The McCarran-Ferguson Act granted authority to the states to regulate the “business of insurance.”  Various federal laws continued to govern the “peripherals of the industry”  These peripherals included labor, tax, and securities.  State laws which regulated the core nature of the insurance business thereafter overrode most federal laws to the contrary.  There are numerous papers written designed to analyze the myriad of state and federal statutes and cases on the subject of subrogation, from the standpoint of lawyers and in particular lawyers handling cases involving personal injury.

In an attempt to harmonize the proliferation of insurance policies and laws to protect workers, Congress passed the Employee Retirement and Income Security Act, commonly known as ERISA, in 1974.  ERISA did not vitiate the McCarran-Ferguson’s grant of state regulation; it did spawn a spate of lawsuits trying to determine which state laws qualify as state regulation, which is not pre-empted by ERISA, and which laws deal with peripheral issues, which are preempted by ERISA.  ERISA also recognized that some health plans are self-funded, not funded by insurance premiums, and those plans are exempt from state regulation.

What is subrogation?  This is discussed in a Claims Journal Article.  The Article is titled, Navigating the Anti-Subrogation Rule.

Subrogation is the legal doctrine which allows one party, usually an insurance company, that pays a loss by its insured which was caused by a third party, to take over the rights of its insured against the third party and recover its claim payments.  It wouldn’t make much sense if, after paying a first-party insurance claim that its insured was partly responsible for, an insurance company could sue its insured to get their money back.  It would defeat the purpose of insurance.  Preventing precisely that sort of inequitable scenario is the purpose of the anti-subrogation rule (ASR).  Sometimes known as the “suing your own insured” defense, the ASR was originally developed based on the logical premise that because the carrier stands in the shoes of it’s insured, it would essentially be suing itself.  Therefore, no right of subrogation can arise in favor of an insurance company against its own insured.

The public policy behind the ASR is two-fold: (1) the insurer should not be able to pass its loss on to its own insured, avoiding coverage which the insured has paid for; and (2) the insurance company should not be placed in a situation where there is a potential conflict of interest.  However, this seemingly simple concept has many tentacles and each state has developed their own body of law with regard to how and when the ASR will be applied, setting forth numerous exceptions and rules regarding its application.

Insurance lawyers understand subrogation policies.  Courthouse News Service published an article on April 18, 2017, that should be read.  It is titled, Justices Back Insurance Subrogation Policies.

Reinforcing insurance subrogation provisions, the U.S. Supreme Court was unanimous Tuesday that federal regulations clearly put state laws second to such policies.

The case stems from efforts by Missouri postal worker Jodie Nevils to keep the proceeds of his car-crash settlement out of the hands of the insurance company that already paid him $6,000.00.

Subrogation is a big issue to be dealt with by Dallas insurance attorneys. The efforts to collect on subrogation rights is discussed in an article published by Bloomberg News in June 2015. It tells of a lawyer instrumental in the collection efforts, George Rawlings.

The article tells us George Rawlings grabs a stack of computer printouts and stretches them six feet across his office, admiring data from police reports of Florida auto accidents: the names of those hurt and the severity of their injuries.

For Rawlings, this information is gold. It’s his job to track these injured people down and collect money from them.

Lawyers and attorneys handling insurance claims in the Dallas and Fort Worth areas need to be able to discuss subrogation issues with clients who have been injured by third parties. Bloomberg Businessweek published an article on April 7, 2015, that discusses this issue. It is titled, “How An Insurer Is Taking Money From The Fan Beaten At Dodger Stadium.” Here is some of what it tells us.

First he was assaulted for wearing the wrong team’s clothes. Then he was sucker-punched by the insurance system.

Four years ago, Bryan Stow was a strapping paramedic who spent his days off biking with his son and daughter. That was before March 31, 2011, when he and three friends made the mistake of wearing San Francisco Giants garb to an Opening Day game against the rival Los Angeles Dodgers at Dodger Stadium. They were harassed and threatened in the stands. Afterwards, two Dodgers fans beat Stow so savagely in a parking lot that doctors had to induce a coma to save him. He was hospitalized for seven months.

Dallas insurance attorneys will sometimes run across semi-complicated subrogation issues. One of these situations arose in a 1998, Dallas Court of Appeals case styled, Universal Underwriters of Texas v. Transamerica Insurance Group, et al. Here is some of the relevant information from that case.

The case is a subrogation case between two insurance companies who settled a case. Morris was an employee of Race Promotions Management, Inc. d/b/a the Dallas Grand Prix. The Grand Prix had borrowed a 1988 Corvette owned by Young Chevrolet for promotions. Morris was involved in a single car accident which killed his passenger, Bradshaw. Morris was legally intoxicated. Bradshaw’s parents sued Morris and Young Chevrolet alleging negligence and negligence per se against Morris, and negligent entrustment and strict liability against Young Chevrolet. Young Chevrolet brought a third party action against Grand Prix as Morris’ employer. Universal insured Young Chevrolet and Transamerica insured Grand Prix. Transamerica, Universal and others settled with the Bradshaws for $695,000. Universal paid $275,000 on behalf of Young Chevrolet. Allstate paid $20,000 on behalf of Morris under his personal auto policy. Transamerica paid $400,000 in return for which the Bradshaws released Morris, Race Promotions Management, Southway Management Corporation, Grand Prix, Ronald Scott Wheeler, Darryl Snaden, Southern Sports Management, Allstate, Transamerica, and the adjuster. In all, the Bradshaws released ten individuals and entities.

After settling with the Bradshaws, Transamerica brought a declaratory judgment action against Universal asserting that Morris was insured under Universal’s policy. Transamerica’s policy provided that it was excess over any other collectable insurance. The trial court concluded that Transamerica proved that Morris was an insured under Universal’s garage policy, granted Transamerica judgment for the remainder of Universal’s policy limits of $225,000, as well as $30,000 in attorney’s fees. Universal filed this appeal.

Arlington insurance attorneys will run across situations where a person, on purpose or by accident, has two insurance policies covering the same property. So what are some of the possible outcomes of this situation? A 2005, Fort Worth Court of Appeals opinion had this issue. The style of the opinion is, Harris v. American Protection Insurance Company. Here is some of the relevant information from that case.

This case arises from two insurance claims for successive casualty losses to the roof of a shopping mall.

On May 5, 1995, a severe hail storm damaged the roof of a vacant building known as Westridge Mall. At the time, the shopping mall was covered by two insurance policies, one issued by American and the other by Aetna Life & Casualty. Each policy effectively covered fifty percent of the loss and named Southwest Portfolio as the insured. On September 6, 1995, roofing contractor Gary Boyd discovered the hail damage during a warranty-related roof inspection. Southwest made a claim for the hail damage under the Aetna policy on October 6, 1995. Because it was unaware of the American policy, Aetna agreed to cover one hundred percent of the loss and settled the claim for $712,612.50. In accordance with the settlement agreement, Aetna paid Southwest $268,445 for the actual cash value of the loss (“ACV”) and retained $444,167.50 as the replacement cost holdback, which would be paid out as repair costs were incurred.

Tarrant County Insurance Attorneys need to understand how insurance claims work with subrogation issues. The Texas Supreme Court, in 2006, issued an opinion as it relates to subrogation and Personal Injury Protection (PIP) benefits. The style of the case is Allstate Indemnity Company v. Forth. Here is what the opinion says.

In this breach of contract suit, the Court considered whether an insured has standing to sue her insurance company for settling her medical bills in what the insured considered to be an arbitrary and unreasonable manner. In reversing the trial court and remanding the case for trial, the court of appeals concluded that the insured had standing even though the insured had no out-of-pocket expenses, and her health care providers had not, and now could not, collect any additional sum from her.

Because there are no allegations that the insured suffered damages or that the manner in which the insurance company settled the insured’s medical expenses caused her any injury, this Court concluded that the trial court was correct to dismiss her suit, and accordingly reversed the court of appeals’ judgment.

Dealing with hospital liens is a common experience for attorneys dealing with insurance companies. This recent Texas Supreme Court is a must read. It is styled McAllen Hospitals v. State Farm. Here is what the case tells us.

To assist hospitals with securing payment for medical services provided to accident victims, Texas Property Code chapter 55 (the Hospital Lien Statute) allows a hospital to file a lien on a patient’s cause of action against a person whose negligence caused the injury that necessitated the patient’s treatment. If the hospital’s charges secured by a proper lien are not “paid” within the meaning of the statute, any release of the patient’s cause of action is invalid. In this case, two patients treated at the petitioner’s hospital settled with the negligent third party. That party’s liability insurer made the settlement checks jointly payable to the patients and the hospital and delivered the checks to the patients, who deposited them without the hospital’s endorsement. The issue presented is whether the hospital’s charges were “paid” under the Hospital Lien Statute and the Uniform Commercial Code even though the hospital never received notice that the settlement funds had been delivered to the patients and were never reimbursed for the treatment costs. This court said no.

Gil and Hernandez settled with Benavidez for $5,200 and $2,100, respectively, and released their claims against him. The Hospital was not a party to the releases, nor was it informed the parties had settled. State Farm, aware of the Hospital’s liens, informed Gil that he was responsible for paying the Hospital for its services out of the settlement funds. State Farm issued Gil’s settlement check payable to “Jose Antonio Gil & Rafaela Balderas, Individually and as husband and wife & McAllen Medical Center,” and issued Hernandez’s check payable to “Melinda De La Garza Hernandez, a Single Individual & McAllen Medical Center.” State Farm sent the checks to Gil and Hernandez without notifying the Hospital. Both Gil and Hernandez deposited their settlement checks without the Hospital’s endorsement. The Hospital’s charges for treating Gil and Hernandez remain outstanding.