In Wilson v. Educators Mut. Ins. Ass’n, 2017 UT 69, the Supreme Court of Utah considered whether an insurer had the right to bring a subrogation action in its own name despite the fact that its insured had not yet been made whole. The court held that, although the common law made whole doctrine generally bars an insurer from proceeding in its own name until after the insured has been made whole, the terms of an insured’s insurance policy can change the made whole doctrine. The Wilson case highlights the importance of reviewing the applicable insurance policy, in conjunction with the law of the applicable jurisdiction, to determine an insurer’s subrogation rights.
The Wilson case involved, initially, a wrongful death action brought by the parents of the decedent, Jessica Wilson, who was fatally struck by a car while crossing the street. The driver of the other vehicle had insurance limits of $100,000. Educators Mutual Insurance Association (EMIA), the healthcare insurer for Ms. Wilson, paid medical benefits as result of the accident in the amount of $78,692.34. Before the Wilsons finally resolved their wrongful death action against the driver, EMIA filed a separate subrogation suit in its own name against the driver, seeking to recover the money it paid in medical expenses. In light of the competing lawsuits, the driver’s insurer interpleaded the $100,000 policy limits into the court. The district court awarded portions of the driver’s policy limits to both the Wilsons and EMIA. Both parties appealed their awards.
On appeal, the Wilsons argued that Utah law, specifically Utah Code section 31A-21-108, prohibited EMIA from bringing an action in its own name. The Wilsons also argued that the common law gave them the right of first recovery (or to be made whole) before the carrier could recover. Lastly, the Wilsons claimed that EMIA’s action was barred because of the common law rule against claim-splitting. EMIA argued that it was not subject to these limitations because the insurance policy between EMIA and Jessica Wilson expressly gave EMIA authority “to pursue its own right of Subrogation against a third party” regardless of whether the insured “is made whole by any recovery.”
The Wilson court disagreed with the insured’s interpretation of Utah Code section 31A-21-108, holding that the statute gives an insurer the option to bring an action in the name of its insured, but does not necessarily prohibit an insurer from bringing an action in its own name. Furthermore, while the Wilson court acknowledged Utah’s common law made-whole principle, as well as the rule against claim-splitting, the court noted that these principles applied to the common law, equitable right of subrogation and not to the right of subrogation established by contract. Effectively, the court held that the common law limitations on an insurer’s right to subrogation can be modified by contract. The court found that the policy language clearly and unambiguously established that EMIA had right to bring an action in its own name irrespective of whether the insured was made-whole.
The Wilson case plainly establishes that, in Utah, insurers can bring a subrogation action in their own names or in the names of their insureds. This case also reminds us that, to fully determine an insurer’s subrogation rights, it is essential that subrogation professionals review the terms of the insured’s insurance policy as the express terms of the policy may impact the insurer’s subrogation rights.