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Amicus Briefs filed in PA Subro cases

Published by August Ober on February 7, 2011 in Auto and PIP/MedPay | 0 Comments

The National Association of  Subrogation Professionals (NASP) has filed Amicus Briefs on the issues of Pro-Rata Reimbursement of Insured’s Deductibles and PIP Subrogation.  WWR has long been a member of NASP.  The following information has been provided by NASP.

The NASP Amicus Committee has been extremely busy and filed two briefs in January 2011.  Both briefs addressed the importance of subrogation and the public policy advantages emanating from subrogation.  The Amicus briefs were filed in the Commonwealth of Pennsylvania.  

I.  Jones v. Nationwide

The first brief was in the case of Jones v. Nationwide on appeal to the Supreme Court of Pennsylvania, Docket No. 61 EAP 2010.  The brief addressed pro rating deductibles in accordance with Pennsylvania Insurance Regulation, 31 Pa.Code, Section 146.8(c).  Appellant (Jones) argues she was not reimbursed her full deductible, or rather “made whole,” by Nationwide.  Jones carried a five-hundred dollar ($500.00) collision deductible on her automobile insurance policy.  Nationwide reimbursed Jones four-hundred and fifty dollars ($450.00) from the subrogation recovery.  In addition to the above “made whole” argument, Jones advocates (1) the Insurance Commissioner does not have authority to promulgate an insurance regulation allowing pro ration of deductibles and (2) the Insurance Regulation is void because it violates the common law “made whole” doctrine.  

II.  State Farm a/s/o Lenoir v. Soxman

The second brief was filed in the case, State Farm a/s/o Lenoir v. Soxman, on appeal to the Superior Court of Pennsylvania.  Mr. Lenoir was insured for PIP benefits with State Farm Mutual Automobile Insurance Company through a policy written and executed in the state of Delaware.  Mr. Lenoir was involved in an auto accident in Pennsylvania with a Pennsylvania licensed driver.  State Farm subrogated for Delaware PIP payments in a Pennsylvania court.  Soxman argued the subrogation claim was barred in accordance with Pennsylvania law, 75 P.C.S., Section 1720.

The appeal addresses three issues:  (1) a Pennsylvania “made whole” issue, (2) an interpretation of a Pennsylvania subrogation restriction and (3) a conflict of laws.  

The results of these appeals are pending.

New Jersey Senate Bill 191/Assembly Bill 793

Published by August Ober on February 7, 2011 in Auto | 0 Comments

The National Association of Subrogation Professionals (NASP) reported the following information below.  WWR has long been a member of NASP.

NASP Opposes New Jersey Senate Bill 191/Assembly Bill 793
An anti-subrogation bill recently swept through New Jersey’s Assembly and Senate, receiving the requisite number of votes.  The bill was presented to the Governor for his signature.  Governor Christie did not sign the bill.  However, the bill became law after forty-five (45) days of “no action” being taken.

The New Jersey law amends “Statute 39:6A-9.1 Recovery from Tortfeasor,” by adding the following language:

Any recovery by an insurer, health maintenance organization or governmental agency pursuant to this subsection shall be subject to any claim against the insured tortfeasor’s insurer by the injured party and shall be paid only after satisfaction of that claim, up to the limits of the insured tortfeasor’s motor vehicle or other liability insurance policy.

Two main issues are apparent in the bill.  First, the amended language appears to give priority to the personal injury victim before the medical benefits provider, whether they are an insurer, HMO or governmental agency.  Second, the amendment limits the responsibility of the tortfeasor up to the limits of his/her liability policy.

As we have seen repeatedly, the law lacks clarity and precision.  First and foremost the “made whole” or priority language is confusing.  The subrogation provider shall only be paid after the injured party’s claim is “satisfied.”  This standard is subjective as opposed to objective.  It is anticipated there will be many questions as to when an injured party is “satisfied.”  Additionally, the law limits the responsible party’s payment to the limits of their liability policy.  The result is to discourage one from purchasing large limits or even sufficient limits of liability coverage.  

NASP wrote a letter to the Governor of New Jersey in opposition to this bill.  The Governor’s Office contacted NASP to gain information on subrogation and the effects of this bill.  Although NASP was able to provide beneficial information regarding subrogation and the public policy reasons that favor allowing subrogation, the bill had the momentum to become new law.

Proposed Change to PA Comparative Negligence Law

Published by August Ober on February 2, 2011 in Auto, Property and UM/UIM | 0 Comments

On January 27, 2011, changes to the PA Comparative Negligence law (42 Pa.C.S. § 7102) were proposed to the PA General Assembly under House Bill No. 1.

As the law currently stands, when liability is apportioned among multiple Defendants, all Defendants are deemed jointly and severally liable, regardless of their percentage of apportioned fault.  This has long been referred to in Pennsylvania as the 1% rule. 

For example, suppose a motor vehicle accident occurs and a Jury determines that Plaintiff is awarded $10,000.00.  The Jury determines that liability is apportioned as follows: 70% to Defendant A; 29% to Defendant B; and 1% to Defendant C.  Now further suppose that Defendant A and Defendant B are individuals that are not insured, but Defendant C is a large corporation with insurance.  As the law currently stands, Plaintiff may rightfully seek the full $10,000.00 verdict from Defendant C only.  This often occurs when one Defendant has “deeper pockets”, when compared to their Co-Defendants.

The opposite of PA’s current law is a pure several liability theory.  Under several (rather than joint and several),Plaintiff could only recover 1% of the $10,000.00 verdict from Defendant C.House Bill No. 1 proposes somewhere in between.  Here, if Defendant A is found 60% liable or more, they can be on the  hook for the full verdict.  But, any Defendant that is found less than 60% liable, only owes Plaintiff according to their apportioned percentage of liability.

It is important to note that House Bill No. 1 has yet to be approved, and will not likely be voted on for a few more months.  Until then, the 1% rule is still in effect.

A.J. Ober, Esq.

Ohio Supreme Court Limits the Application of the Doctrine of Equitable Subrogation

Published by August Ober on August 24, 2010 in Uncategorized | 0 Comments

 

In Ohio, mortgages are generally entitled to priority based on the dates they are filed for record. In other words, a properly recorded mortgage is entitled to priority over a subsequently recorded mortgage.  However, there are exceptions to this rule.  The common law doctrine of equitable subrogation is one such exception.  It has often been invoked by mortgage holders seeking relief from their mistakes or oversights, with regard to prior mortgages. 

On August 19, 2010, the Ohio Supreme Court issued its decision in ABN AMRO Mortg. Group v. Kangah (2010 Ohio 3779), substantially limiting the application of equitable subrogation in Ohio.
 
The case presented a common fact pattern.  Lender 1 had a first mortgage and Lender 2 had a second mortgage.  Lender 3 made a loan to pay off Lender 1’s mortgage, but due to Lender 3’s own negligence or that of its title searcher, it overlooked Lender 2’s mortgage.   When Lender 3 subsequently commenced a foreclosure, Lender 2 claimed priority based on its mortgage having been filed prior to Lender 3’s. Lender 3 argued that because its funds were used to pay off Lender 1, it was entitled based on equitable subrogation, to “step into the shoes of Lender 1,” and was, therefore, entitled to priority.

Earlier cases blocked the application of equitable subrogation where the party asserting it was negligent.  However, in recent years, some Ohio courts started a trend whereby equitable subrogation was applied more liberally to allow a lender in Lender 3’s position to jump ahead of Lender 2, even where Lender 3 or its title searcher had been negligent.  These courts focused on the facts that Lender 2 expected to be in second position when it made its loan, and Lender 3 expected to be in first position when it made its loan.  

However, in the Kangah case, the Ohio Supreme Court stopped the trend and re-established the more stringent standard, stating that “equitable subrogation is an equitable remedy that is appropriate only when the equities clearly favor the party asserting it.”  Because Lender 3’s overlooking of Lender 2’s mortgage was the result of Lender 3’s own negligence or that of its title searcher, it was not entitled to equitable subrogation, and therefore, its mortgage was not entitled to priority over Lender 2’s mortgage.  .

This case, which is now controlling authority in Ohio, will limit the application of equitable subrogation throughout the state, especially in cases where a lender or its title searcher have negligently overlooked a properly recorded mortgage.  As a practical matter, the decision will provide competing mortgage holders with more consistency and predictability in the outcome of these cases. 

The case underscores the critical importance for mortgage lenders to obtain not only a title search, but title insurance to cover their expected priority of their mortgage.  Without title insurance, the lender risks a loss due to prior liens of which it might not have been aware. 

Thoroughbred Title Agency, Inc. offers both loan policies of title insurance for new loans and owners policies of title insurance in connection with the sales of REO’s throughout Ohio, as well as Kentucky, Indiana, and Michigan. 

Weltman, Weinberg & Reis Co., LPA (WWR) regularly handles mortgage litigation, and will continue to follow developments as the courts continue to refine the application of equitable subrogation.

If you have any questions on this matter, please contact Michael F. Schmitz, Esq. Mr. Schmitz is an associate in Litigation & Defense, working with the Real Estate Default Group of Weltman, Weinberg & Reis Co., L.P.A. (WWR), located in the Cleveland office.  Mr. Schmitz can be reached at (216) 685-1106 or via e-mail at mschmitz@weltman.com.

CLASS ACTION FOR DEDUCTIBLE, Brenda Jones v. Nationwide, 2010 PA Super 90

Published by August Ober on August 23, 2010 in Auto, Bad Faith and Property | 0 Comments

This matter was a Class Action filed in the Pennsylvania Court of Common Pleas Philadelphia County by Insured Brenda Jones (and those similarly situated) against her Insurer, Nationwide Property and Casualty Insurance Company. 

 The basis of the claim was the Insurer did not reimburse the full $500.00 deductible, and instead reimbursed the Insured a pro-rata amount of the recovery, namely $450.00. 

 Insured’s suit claimed a breach of contract, bad faith, conversion and unjust enrichment by the Insurer.  Insurer filed Preliminary Objections to the complaint asserting the complaint failed to state a cause of action. 

 The Common Pleas Court granted Insurer’s Preliminary Objections, without issuing an opinion.  The Insured appealed the Court of Common Pleas decision. 

 The Superior Court of Pennsylvania affirmed the Court of Common Pleas, finding the pro-rata pay out was consistent with the Insured’s policy language and the insurance practices outlined in 31 Pa. Code § 146.8(c).

Insurers shall, upon the request of the claimant, include the first-party claimant’s deductible, if any, in subrogation demands. Subrogation recoveries shall be shared on a proportionate basis with the first-party claimant, unless the deductible amount has been otherwise recovered. A deduction for expenses can not be made from the deductible recovery unless an outside attorney is retained to collect the recovery. The deduction may then be for only a pro rata share of the allocated loss adjustment expense.

 Said practices were created by the Pennsylvania Insurance Department, under the authority granted by the Pennsylvania General Assembly.  See 40 P.S.A. § 1171, et seq. (Unfair Insurance Practices Act (UIPA)).

The Superior Court held the Insured’s remedy for alleged violations under the UIPA was to file a grievance requesting an investigation by the Insurance Commissioner.  Thereafter the Commissioner may impose sanctions and seek civil penalties.

 Lastly, the Superior Court reasoned that since the practices created by the Pennsylvania Insurance Commission “fits squarely within the scope of authority delegated by the General Assembly”, the ‘made whole doctrine’ was not violated (assuming arguendo that it was applicable). 

 The Court adopted the reasoning of Harnick v. State Farm Mutual Ins. Co., 2009 U.S. Dist. LEXIS 43126 (E.D. Pa., March 6, 2009).  Harnick is a federal case and thus not binding upon the Pennsylvania Superior Court however, the Court found Harnick’s reasoning to be sound and directly on point.

To summarize, Pennsylvania Insurers may reimburse their Insureds deductible pro-rata, without fear of running aground of State or Federal law.