Subrogation

Fort Worth insurance attorneys and those in Grapevine, Haslet, Rhome, Newark, and other places around Tarrant County need to have an understanding of subrogation issues when handling insurance cases.
The Eastland Court of Appeals issued an opinion in 2006, that dealt with subrogation. The style of the case is, State Farm Mutual Automobile Insurance Company v. Perkins. Here is some relevant background:
Shannon Perkins was involved in an automobile accident with Eddie Mike Cooper Jr. on May 22, 2003. At the time of the accident, Cooper was driving a dump truck owned by Harold Oaks. Perkins had an automobile insurance policy with State Farm. Cooper did not have automobile liability insurance. As a result of the accident, State Farm paid $25,000 in uninsured/underinsured motorist benefits (UM) to Perkins for her injuries under the terms of her policy.
Perkins filed a negligence suit against Cooper and Oaks for personal injury damages arising from the accident. She alleged that Cooper was extremely intoxicated and driving in the wrong lane of traffic at the time of the accident. Perkins further alleged that Oaks had been negligent in failing to take steps to prevent Cooper from driving the dump truck. Oaks had an automobile liability insurance policy with State Farm.
State Farm intervened in the suit seeking reimbursement for the UM benefits that it had paid to Perkins under her policy. In response, Perkins filed a motion to strike State Farm’s subrogation claim. In the motion, Perkins asserted that State Farm could not proceed against its own insured, Oaks, in a subrogation action.
At the trial, the jury found that Oaks was negligent and awarded Perkins $53,000 in personal injury damages. Oaks’s policy covered the judgment amount. State Farm’s subrogation claim involved the UM payment that it had made to Perkins for her injuries. The trial court ordered State Farm to pay $25,000 of the proceeds of the judgment amount into the registry of the court pending determination of State Farm’s subrogation claim.
The trial court held a hearing on Perkins’s motion to strike State Farm’s subrogation claim and ruled against State Farm.
This appeals court began an analysis of Texas law regarding subrogation and how it works and then said:
This case, however, involves different insureds and separate and distinct insurance policies. State Farm paid UM benefits to Perkins under her policy, and State Farm seeks subrogation and reimbursement for those UM benefits from the proceeds paid under Oaks’s liability policy. The policy concerns behind the antisubrogation rule are not present in this case. Permitting State Farm to seek subrogation and reimbursement does not allow it to escape coverage under Oaks’s policy, nor does it subject Oaks to any personal liability not covered by the policy. State Farm already has paid the entire judgment amount from the proceeds of Oaks’s policy, with $25,000 of the judgment amount remaining in the registry of the trial court. Thus, a subrogation action does not pass the risk of loss back to Oaks or create a conflict of interest between State Farm and Oaks. Further, State Farm did nothing to breach its insurance policy with Oaks. Perkins initiated the suit against Oaks, and State Farm merely attempted to intervene to protect its subrogation interests. The antisubrogation rule should not apply under these circumstances.
State Farm’s recovery of subrogation or reimbursement does not allow it to avoid policy obligations to Perkins. By providing UM coverage to Perkins, State Farm insured the risk that Perkins would be injured by an UM vehicle. Oaks’s policy covered the dump truck involved in the accident, and State Farm paid Perkins’s judgment against Oaks under his policy. Because Oaks’s policy covered the full judgment amount, the dump truck was not an UM vehicle as that term was defined in Perkins’s policy. Therefore, the risk covered by Perkins’s policy did not occur, and State Farm had no obligation to pay UM benefits. Because the insured risk did not occur, State Farm’s recovery of subrogation or reimbursement will not result in an avoidance of coverage under Perkins’s policy.
Allowing State Farm to recover subrogation or reimbursement does not lead to inequitable results in this case.
Perkins asserts that the jury award of $53,000 in her case against Oaks did not fully compensate her for her injuries. She claims that her injuries far exceeded the amount of compensation awarded by the jury. Other courts have explained that a jury verdict on the issue of damages determines the amount of money necessary to make an insured whole. When the issue of damages has been fully litigated before a jury, an insured is collaterally estopped from denying that he was made whole by the jury verdict.
The object of subrogation is to prevent the insured from receiving a double recovery. The trial court’s judgment awarded the amount of $53,000 in personal injury damages to Perkins. Perkins has already received the entire judgment amount from State Farm. First, State Farm paid $25,000 in UM benefits to Perkins. Later, State Farm paid the balance of the judgment to Perkins from the proceeds of Oaks’s liability policy. Pursuant to a trial court order, State Farm deposited $25,000 into the registry of the court pending determination of State Farm’s subrogation claim. If State Farm is denied subrogation or reimbursement, Perkins will receive a double recovery of some of her damages — $78,000 instead of the $53,000 awarded in the judgment.
The Court’s final ruling said, “State Farm is entitled to receive subrogation or reimbursement for the UM benefits it paid to Perkins under her policy from the proceeds of Oaks’s liability policy. Therefore, the trial court abused its discretion in striking State Farm’s plea in intervention. We sustain State Farm’s issues. We reverse the trial court’s order striking State Farm’s intervention and remand this cause to the trial court for proceedings consistent with this opinion.”