Yesterday I had the pleasure of attending the National Association of Subrogation Professionals, Eastern PA Chapter Meeting on behalf of WWR. The Conference was attended by both Legal and Insurance professionals and topics included Waiver of Subrogation Rights, Filing a Claim in Arbitration Forums and Fire Loss Investigation.
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Archive for the 'Casualty' Category
Colorado – House Bill 10-1168. The Colorado House has proposed a bill that would dramatically alter the subrogation landscape in the state. The bill essentially codifies the “made whole” and “common funds” doctrines which is a disturbing trend being witnessed in the courts and the legislatures throughout the country. As stated in Section 3(a):
Reimbursement or subrogation pursuant to a provision in an insurance policy, contract or benefit plan is permitted only if the injured party has first been fully compensated for all damages arising out of the claim. Any provision in a policy, contract or benefit plan allowing or requiring reimbursement or subrogation in circumstances in which the injured party has not been fully compensated is void against public policy.
The proposed Act also seeks to preclude the right of the carrier to bring their own cause of action against the tortfeasor for benefits paid to their insured. Section 6(a) provides:
A payer of benefits shall not bring a direct action for subrogation or reimbursement of benefits against a third party allegedly at fault for the injury to the injured party or an insurer providing uninsured motorist coverage.
Additionally, if an insurer obtains reimbursement of benefits paid, the insurer must apply the amount of the reimbursement as a credit against any applicable lifetime cap on benefits contained in the applicable policy or plan.
South Dakota – Senate Bill 169. A recent amendment to the Insurance Code in South Dakota looks to continue the “made whole “ activist trend in subrogation legislation. The amendment is one sentence long and provides, “No insurer under this chapter is entitled to participate in any recovery from any tortfeasor on account of bodily injury or death or damage to property unless and until it’s insured has first been made whole.” This amendment to the Insurance Code would apply to health, worker’s compensation, auto and property insurers. Due to the brevity of this proposed amendment there will be many questions left unanswered if this bill passes. The first that comes to mind is what is meant by “has first been made whole”. Such a broad use of words is open to much interpretation, much of which can be construed negatively against the insurer, which the South Dakota courts will need to interpret as time goes by if this amendment is passed.
The South Dakota amendment and Colorado bill continue the recent trend in the legislatures to limit an insurers’ right to subrogation. As with the just passed New York act and the recently tabled Ohio bill, the nations’ legislatures are becoming increasingly more active in attempting to invalidate at worst and cripple at best an insurers’ right to subrogation. Feel free to contact us for additional updates on these issues and to determine what actions you can take to help stem the recent tide of legislative enactments designed to reduce the right of subrogation.
The federal District Court for the Eastern District of Wisconsin recently addressed the issue of whether an insurer may be subject to a “mere volunteer” defense if it pays a claim when coverage is in dispute. The City of Green Bay hired a contractor to complete a major reconstruction of Lambeau Field, home of the NFL’s Green Bay Packers. A subcontractor, Spirtas Wrecking, accidentally damaged the stadium during the project.
At the time of the loss, the City was insured under multiple policies. Westchester Insurance underwrote a builder’s risk policy, in which both the City and Spirtas were named insureds. The City also maintained a policy through The Local Government Property Insurance Fund (“the Fund”). Eventually, Westchester paid the City $400,000 in exchange for a release agreement. As part of the agreement, the City assigned to Westchester its rights to collect under the Fund’s policy.
The Fund’s policy included an “other insurance” provision:
“If there is other insurance cover loss to the property…the Fund will not be liable under this policy until such other insurance has been exhausted…”
However, Westchester disputed the applicability of this provision. To resolve the coverage dispute, the Fund reimbursed Westchester $200,000 on the City’s behalf, in return for a commensurate assignment of Westchester’s subrogation rights.
In the Fund’s ensuing subrogation suit, Defendant Spirtas Wrecking moved for summary judgment, asserting that the Fund was not entitled to proceed in subrogation because it paid the $200,000 as a “mere volunteer.” Under Wisconsin law, subrogation arises only “when a person other than a mere volunteer pays a debt which in equity and good conscience should be satisfied by another.”[1] Spirtas argued that Westchester’s policy was the primary coverage for the loss, and that therefore the Fund voluntary paid Westchester.
The court examined the mere-volunteer defense, noting that “it is a narrow exception to the principles of subrogation,” and expressed skepticism that an entity would pay another’s debt without an obligation to do so. The court was also persuaded by outside authority:
“The payor must have acted on compulsion, and it is only in cases where the person paying the debt of another…is compelled to pay in order to protect his own interests…that equity [subrogates him to the creditor]; in other cases the debt is absolutely extinguished.”[2]
The court concluded that “the definition of a ‘volunteer’ is necessarily limited to those rare cases where payment is truly voluntary…” and therefore, “one is not deemed a ‘mere volunteer’ even if he pays pursuant to a legal obligation that is not crystal clear.”
Spirtas’ theory would effectively require insurers to assert defenses against their insureds, thereby removing the incentive for insurers to settle claims promptly and encouraging additional litigation. Faced with a coverage dispute, the Fund elected to reimburse Westchester for half of the amount paid as a result of Spirtas’ conduct. Under these circumstances, the court held that the Fund’s payment was not truly voluntary
[1] Citing Millers Nat’l Ins. Co. v. City of Milwaukee, 184 Wis.2d 155, 168-69, 516 N.W.2d 376 (Wis. 1994).
[2] Citing Home Owners’ Loan Corp v. Crouse, 151 Pa. Super. 259, 30 A.2d, 330, 331 (Pa. 1943).
The Local Gov’t. Property Ins. Fund v. Spirtas Wrecking Co., 2009 U.S. Dist LEXIS 67212 (E.D. Wisc. 2009).
NASP educates the insurance industry and legal professionals on the latest trends and changes in subrogation.The National Association of Subrogation Professionals (NASP) educates the insurance industry and legal professionals on the latest trends and changes in subrogation. One of the most important goals of NASP is to increase the stature of professionals working in the field of subrogation in order to attract and retain the best and brightest talent to the field. They strive to promote safer products and workplaces, cleaner environments and quality health care. Currently, the WWR Subrogation department is attending the 2009 NASP Annual Conference in Colorado Springs, which takes place each year to help educate those in the subrogation field.
Learn more about NASP here.