A Weatherford man suffers a property damage loss. Or maybe he is from Grand Prairie, Dallas, Arlington, or Fort Worth. His own insurance pays his losses then he makes a claim against the insurance company of the person who caused the loss. How does that work?
The doctrine of equitable subrogation is applied liberally and is broad enough to include every instance in which one person, not acting voluntarily, has paid a debt for which another was primarily liable and which in equity and good conscience should have been discharged by the latter. This was stated in the case, Matagorda County v. Texas Association of Counties Government Risk Management Pool, a 1998, Corpus Christi Court of Appeals case.
The purpose of equitable subrogation is to allow the insurance company to recover the monies it has paid out, only after the insured injured person is fully compensated. The Texas Supreme Court explains how this works in, Ortiz v. Great Southern Fire & Casualty Ins. Co. This is a 1980 case, wherein the Ortiz home and contents were damaged in a fire caused by the negligence of a third party. The home was insured, but the contents were not. The money damages recovered from a settlement with the third party (a carpet cleaner) were less than the amount of damages that Ortiz suffered. The insurance company, Great Southern Fire & Casualty Ins. Co., was only entitiled to subrogate to the extent that the sum of the insurance collected, plus the amount allocated in the settlement agreement to real property damage, exceeded Ortiz real property loss. Because Great Southern could not show at trial what amount, if any, of the settlement agreement was allocated to Ortizs’ real property loss, it was not entitled to seek the amount it paid to Ortiz from Ortiz settlement.
The court noted in this case that one reason the right of equitable subrogation is granted is to prevent the insured person from receiving a double recovery.
Lots of people do not like to get attorneys involved. Some reasons are they believe attorneys are too expensive. Others don’t feel their case is important enough or big enough, and others just don’t like to be thought of as “sue happy.” But without an experienced Insurance Law Attorney, this person will find themselves being sued by their own insurance company under this equitable subrogation theory unless they get an attorney involved to help them. Often times an attorney can lawfully prevent any money having to be paid back to the insurance company, like in the Ortiz case.
The court in Ortiz did not hold that the amount recovered by Ortiz from Great Southern and the third party must exceed the damages to both insured and uninsured property before Great Southern is entitled to subrogation. Rather, the court said, if any portion of the $10,000 settlement was intended as compensation for damage to the insured property. then Great Southern, after a deduction of its share of the cost of collection, would be entitled to subrogation to the extent that the sum of insurance collected plus the amount allocated in the settlement agreement to real property damage exceeded the Ortizs’ loss to their home. The court pointed out, in this case the record did not reflect how much of the $10,000 settlement was intended for damages to the insured real property. If a portion of the setttlement was intended to be compensation for real property damages, Great Southern should have made sure the settlement agreement so specified.
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