What is Subrogation?
Subrogation reflects apportionment of fault for an automobile accident, allowing an insurer of a fault-free party to recover from the insurer of the at-fault party, while also promoting full compensation of the injured claimant. The logistics can be complex:
Initially, the claimant’s own insurer pays Personal Injury Protection (PIP) medical benefits to the claimant.
- Then, the tortfeasor’s insurance company pays for the claimant’s damages, up to the tortfeasor’s limits.
- If the tortfeasor’s tender of his liability limits do not fully reimburse the claimant for her damages, the claimant must then also make a UIM/UM claim against her own insurer for the remainder of the claimant’s damages, up to the UIM/UM limits.
- Once the claimant is compensated, the claimant’s PIP insurer then may make a claim directly against the tortfeasor. This is the subrogated claim.
- If the claim is successful, the tortfeasor’s insurance company must reimburse the claimant-insurer for the PIP payments.
This outline suggests best practices for insurers and attorneys involved in UM/UIM subrogation claims in Washington State.
Pre-Subrogation Liability and UIM Claims
An insurer is not entitled to pursue subrogation until the claimant has been made whole. That is, the claimant will make her claim first against her own insurer for PIP benefits, then against the tortfeasor’s insurer, and finally against her own insurer again for UM/UIM benefits. Only after the claimant makes and resolves all three claims can the claimant’s insurer make its subrogation claim.
- If/when you receive the tender of limits from the tortfeasor’s insurer, notify your client’s carrier and copy the tortfeasor’s insurer. This alerts both carriers that you intend to pursue a UIM claim. The tortfeasor’s insurer’s tender triggers the UIM carrier’s right to pay benefits while also preserving the UIM carrier’s right of subrogation against the tortfeasor. Failing to document the tortfeasor’s insurer’s tender of limits could bar the claimant’s right to pursue an UIM claim.
- Before settling with the tortfeasor’s insurer, send a letter to the tortfeasor’s insurer to notify it that you intend to pursue a UIM claim. In the letter, state that, as part of the settlement, you are not able to sign a full release but, rather, a covenant not to enforce judgment. If you accidentally sign a full release, the claimant could be barred from filing her UIM claim and you might be exposed to a malpractice complaint.
- Document any and all settlement negotiations with the claimant. Specifically, if a claimant is settling for less than the liability limits, note the claimant’s rationale for accepting that amount. Recording the rationale for settlement can save you from a claimant who later attempts to argue that she has not been made whole. A claimant’s acceptance of a settlement from the tortfeasor in an amount less than the limits of the tortfeasor’s liability insurance is considered evidence, although not irrefutable evidence, that the settlement fully compensated the claimant. Truong v. Allstate, 151 Wn. App. 195, 201, 211 P.3d 430 (2009); Peterson v. Safeco Insurance Co. of Illinois, 95 Wn. App. 254, 259-60, 976 P.2d 632 (1999).
Litigating the Subrogation Claim
- Send regular status reports. The insurer must regularly inform the claimant of subrogation efforts (within 60 days of subrogation efforts starting, and a minimum every 180 days thereafter). WAC 284-30-393.
File suit timely. The limitations period for a subrogated action is the same as if the insured had filed the action in her own name, g., three years for personal injury. RCW 4.16.080(2).
- In your complaint, clearly detail the amount of recovery sought, including the cost of the insured’s deductible. WAC 284-30-393.
- Double-check that the complaint does not seek overpayment or double-dipping (such as vehicle depreciation in addition to vehicle repair costs).
Settling the Subrogation Claim
- Make sure you correctly apply Mahler/Winters. A subrogee insurer is prohibited from requiring a PIP waiver or attorney fees waiver in order to finalize a UIM settlement. WAC 284-30-330(12).
- Calculate the division of settlement proceeds correctly. The insured recovers her deductible first from any settlement money received, reduced by any comparative fault. WAC 284-30-393. The subrogee insurer may not deduct its expenses from a settlement unless an outside attorney was retained to collect. If so, the attorney’s fee may be made only as a pro rata share of the allocated loss adjustment expense. WAC 284-30-393.
- Consider requiring proof of the subrogee’s policy, release(s) and/or subrogation authorization before paying the supposed subrogee. You might have a signed release from the subrogee on behalf of the claimant, only to be faced later with a direct suit by the claimant against your client.
 Note that subrogation in non-automobile contexts (such as ERISA, Labor and Industries, Medicaid or Medicare) may be different than under the PIP context.
 The claimant may simultaneously claim against any medpay benefits available under the tortfeasor’s policy. (This money is “no-fault” and is paid in addition to any liability determination against the tortfeasor.)
 These cases hold that a PIP insurer can take PIP reimbursement only if it paid its share of the claimant’s attorney fees (incurred in recovering against the at-fault party). The only difference in the cases is that in Mahler the liability and PIP policies were with different carriers, and in Winters they were with the same carrier. It doesn’t matter, say the cases – the same rule applies. Cited as Mahler v. Szucs, 135 Wn.2d 398, 957 P.2d 632, 966 P.2d 305 (1998); Winters v. State Farm Mutual Automobile Insurance Co., 144 Wn.2d 869, 885, 31 P.3d 1164 (2001).