In recent months, the Northern District of Mississippi has grappled with how to interpret waivers of subrogation in American Institute of Architects (AIA) construction industry contracts and, specifically, how they apply to work versus non-work property. The distinction between work and non-work property has been commonly litigated and remains a hotly debated topic when handling subrogation claims involving construction defects. Continue reading
On June 19, 2018, the Pennsylvania Supreme Court decided Whitmoyer v. WCAB (Mountain Country Meats), No. 52 MAP 2017, 2018 Pa. Lexis 2995. The decision reversed longstanding Pennsylvania law and the Commonwealth Court’s decision. The net result of this decision: an insurer can no longer assert a future credit on projected medical benefit payments when settling a third-party case. However, insurers may continue to assert a future credit on indemnity payments. Continue reading
In Amica Mutual Insurance Company v. Muldowney, 328 Conn. 428 (2018), the Connecticut Supreme Court considered whether a landlord’s insurance carrier could subrogate against the landlord’s tenants for property damage when the lease did not specifically authorize subrogation. The court held that, while subrogation was not expressly allowed, the language in the lease requiring the tenants to have liability insurance and holding them liable for damage was sufficient to overcome Connecticut’s common law presumption that a landlord’s carrier cannot subrogate against a tenant. This case emphasizes the importance of analyzing every aspect of a lease when determining the true intent of the parties with respect to subrogation. Continue reading
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. Continue reading
When an insurer files a subrogation suit in the insured’s name, questions often arise with respect to whether, by doing so, the insurer has to respond to discovery issued to the insured. In Aquatherm, LLC v. Centimark Corporation, 2017 U.S. Dist. LEXIS 85173 (C.D. Utah June 2, 2017), a case in which the insurer at issue made the insured whole, the District Court for the District of Utah answered the question in the negative. Continue reading
There has been a growing trend among states to enact statutes that impose specific notice requirements when bringing claims against construction professionals. These notice requirements may apply to the subrogated carrier bringing a claim against a construction professional for certain types of damages. Failure to comply with the notice requirements can result in a dismissal of the subrogation action. Accordingly, caution must be exercised when notifying construction professionals of certain claims, and not just claims for construction defects.
In subrogation actions, the insurer, as subrogee, steps into the shoes of its insured. However, problems can arise when an insured has uninsured losses. In this situation, both the insurer and the insured have a right to file suit against the tortfeasor. The possibility of two different lawsuits raises a number of issues, such as whether: 1) proceeding separately impermissibly splits the cause of action; 2) the insured’s attorney is entitled to attorney’s fees under the common fund doctrine; and 3) the insurer can proceed before the insured is made whole. In light of these issues, subrogating insurers should proceed with caution before filing suit separately from the insured.
For subrogation professionals, it is important to limit the liability exposure of your insured. In cases where the insurer, as subrogee, is proceeding as the plaintiff, this means limiting any direct claims against the insured – whether for contribution or indemnity – to affirmative defenses as opposed to third-party claims. Limiting direct claims against insureds not only keeps captions clean, but avoids strategic maneuvering by the defense that could negatively impact your case. In Ohio, when a defendant tries to pursue direct claims against the insured for contribution or indemnification, practitioners should, consistent with the analysis set forth in Continental Casualty Company v. Equity Indus. Maple Heights, LLC, 2017 U.S. Dist. LEXIS 54440 (N.D. Ohio, April 10, 2017), argue that defendants can no longer attempt this maneuver and that they are limited to raising affirmative defenses against the plaintiff’s subrogor.
In Franklin Mut. Ins. Co. v. Castle Restoration & Constr., Inc., 2016 N.J. Super. Unpub. LEXIS 2300 (App. Div. Oct. 20, 2016), the Appellate Division of the Superior Court affirmed the dismissal of a subrogating property insurer’s claim based on New Jersey’s entire controversy doctrine, a doctrine that requires a party to litigate all aspects of a controversy in a single legal proceeding. Although the decision is unpublished and based on the specific factual circumstances of the case, the decision sends a cautionary reminder to insurers involved in a declaratory judgment action that they should not wait for the declaratory judgment action to be decided before taking action to protect their subrogation rights.
In Melrose Gates, LLC v. Chor Moua, et al., 875 N.W.2d 814 (Minn. 2016), the Supreme Court of Minnesota, applying the factors the court first articulated in RAM Mutual Insurance Company v. Rohde, 820 N.W.2d 1 (Minn. 2012), analyzed whether the parties to an apartment lease reasonably expected that the tenants would be liable in subrogation for fire damage caused by the tenants’ negligence. The Melrose Gates court held that, based on the language of the lease, the type of insurance the parties purchased, and the fact that the building was a multi-unit structure, the parties intended that the tenants would be responsible for damage to their leased unit but not for damage to other property. Thus, while the landlord’s insurer could recover the amount it paid to repair the damage to the tenants’ unit, it could not recover the amount it paid to repair other units or common areas of the building.