Deductible « WWR Subrogation

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.

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.

Tag Archive for 'Deductible'

Amicus Briefs filed in PA Subro cases

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