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Showing posts with label subrogation. Show all posts
Showing posts with label subrogation. Show all posts
Tuesday, November 3, 2015
Appeals Court affirms that subrogation agreement does not transfer ownership
About a year and a half ago I wrote about a Superior Court decision in Apthorp v. OneBeacon Ins. Group, LLC. In that case an insurer had paid a claim of $25,000 for a stolen painting. Decades later the painting was found and had increased in value to between $400,000 and $800,000. The insurer claimed ownership of the painting, because the insured subrogated to the insurer all its right, title and interest in the property. Judge Garsh disagreed, stating that subrogation of rights and transfer of ownership are not the same.
The Massachusetts Appeals Court has affirmed the decision in 78 Mass. App. Ct. 115 (2010), adopting the reasoning of Judge Garsh.
Monday, June 8, 2015
Superior Court explains difference between "subrogate" and "assign"
Apthorp v. OneBeacon Ins. Group, LLC concerns a painting that was stolen in 1976. The owner was paid for the loss by her insurer, OneBeacon. The painting was recently found and is worth significantly more than its appraised value in 1976.
Both the insurer and the estate of the insured claimed ownership of the painting. Judge Garsh found that ownership had not been transferred to the insurer.
In the agreement between the insured and the insurer, the insured "subrogate[d] all right, title and interest" in the painting to the insurer. The insurer contended that by this language title to the painting was transferred to it.
Judge Garsh disagreed. She wrote that the insurer "erroneously equates 'subrogate' with 'assign.' Subrogation means substitution, not assignment or transfer. Conflating 'subrogation' and 'assignment' as if these words are interchangeable is inconsistent with the usual and ordinary meaning of the term 'subrogate.' The general rule is well established that upon the payment of a loss the insurer is entitled to be subrogated pro tanto to any right of action which the insured may have against a third person whose negligence or wrong caused the loss.' The Latin phrase 'pro tanto' means 'to that extent.' Subrogation refers to an insurer's succession to any right of action that the insured may have against the party or parties responsible for the loss after the insurer has paid the insured's claim."
Saturday, May 16, 2015
U.S. District Court holds no bad faith sanctions in subrogation action where insured spoliated evidence
Fireman's Fund Insurance Company brought a products liability subrogation action against Bradford-White Corporation. It alleged that a design defect in a water heater manufactured by Bradford White caused a leak that damaged the property of its insured, Bell Partners, Inc.
After the leak was discovered, Fireman's requested that Bell retain the subject water heater. However, Bell disposed of the water heater without contacting Fireman's and before Bradford-White had an opportunity to inspect or test it.
Fireman's expert asserted that other water heaters in the same building were similar to the subject water heater. Bradford-White contested that, arguing that they were manufactured earlier and kept in outside closets instead of inside closets.
Bradford-White moved that the case against it be dismissed on the ground of spoliation of evidence, or, at the least, that the court preclude Fireman's from arguing at trial that any evidence or test results obtained from the other supposedly similar water heaters is relevant to the condition of the subject heater.
In Fireman's Fund Ins. Co. v. Bradford-White Corp., 2014 WL 1515266 (D. Mass.), the United States District Court for the District of Massachusetts held that Fireman's Fund did not act in bad faith. It had asked Bell to retain the heaters and Bell did not contact it before removing the heater. Fireman's failure to take additional steps to secure the heater was at most negligent. The court held that the appropriate spoliation sanction is an instruction to the jury that it may draw a spoliation inference against Fireman's Fund.
The court utilized a straightforward spoliation analysis. I was surprised that it did not address an argument that an inference can be drawn against Fireman's Fund because as the subrogee of Bell it stands in Bell's shoes. If Bell had brought its own claim against Bradford-White, would the court have analyzed the sanctions differently? I don't know offhand if there are any Massachusetts decisions on the issue, but it is certainly where I would have started.
Sunday, March 15, 2015
U.S. Court of Appeals affirms that implied coinsurance doctrine applies to resident of retirement home
I posted last year about a decision of the United States District Court for the District of Massachusetts in Fed. Ins. Co. v. Commerce Ins. Co., 2008 WL 4873959 (D. Mass.), in which the court held that the doctrine of implied coinsurance barred an insurer of the owner of a retirement community from bringing a subrogation action against a resident who negligently started a fire.
The implied coinsurance doctrine states that a residential tenant is an insured on a landlord's insurance even if the policy does not state that the tenant is an insured. Under that doctrine, a landlord's insurer is barred by the anti-subrogation rule from seeking reimbursement from a tenant for damages caused by the tenant. (The anti-subrogation rule bars an insurer from seeking from its own insured reimbursement of funds the insurer paid on a loss.)
The United States Court of Appeals for the First Circuit has affirmed the District Court's decision in Fed. Ins. Co. v. Commerce Ins. Co., __ F.3d ___, 2010 WL 716412 (1st Cir.)
The court first held that the lease was a residential lease so that, absent an exception, the implied coinsurance doctrine would apply.
The court then held that an exception to the implied coinsured doctrine where a lease has an express provision establishing a tenant's liability for loss from a negligently started fire did not apply. The court held that if the landlord intended to include such a provision in the lease, "it needed to be crystal clear in requiring that the tenants maintain fire insurance."
Although the lease at issue mentioned a tenant's liability for damages caused by the resident, it had no express language establishing liability for fire damages. The lease mentioned insurance, but could interpreted as making tenants liable only for losses to their personal property. Neither of the clauses explicitly mentioned fire liability.