In this episode of our educational video series on subrogation process and law, Rathbone Group partner and subrogation-focused attorney Jason Sullivan explains the concept of contribution between carriers. An often problematic and convoluted aspect of subrogation law, contribution between carriers refers to when a carrier pursuing subrogation recovery may be able to recover from another carrier that also covers the loss.
The concept of contribution between carriers in subrogation claims cases is sometimes difficult to understand. In this episode of On Subrogation, Jason poses a hypothetical to help illustrate this subrogation topic clearly:
Med Pay Subrogation Claims & Dual Coverage: a Hypothetical
Say you own a car and are covered as a driver under an insurance policy. You let your friend borrow your car. Whilst driving your car, your friend gets into an accident and causes damage to a third party. Your friend also has an insurance policy that covers them as a driver.
Even though only one incident of loss has occurred, there are two carriers who cover the incident: yours (the owner) and your friend’s (the driver).
Let’s assume in this scenario that your insurance carrier decides to step up and pay the claim in its entirety. Is that really fair, though? Their insured (you) is not the one who caused the damages.
How Carriers Decide Who is Responsible for Which Portion of the Insurance Claim
In cases like these, often both carriers will come to an agreement about who covers which portions of the loss before the claim is paid out. Other times, the other carrier will either dispute any responsibility for the claim, or they may even refuse to respond at all. If the other carrier is unwilling to cooperate, there may be an opportunity to subrogate against the other carrier to recover partial losses from the claim.
The possibility of recovering from that other carrier depends on a few factors. Policy language is often the framework for how to proceed with a subrogation claim against a concurrent carrier. In an insurance policy, these are referred to as a concurrent coverage case, a dual coverage case, or a primary, secondary or excess policy issue.
Included in most insurance policies, primary, secondary or excess policy issue clauses address what happens if there is other insurance for a single loss. The wording often states that a carrier is primary unless other insurance, in which case they become secondary.
In the example of your friend who wrecked your car, what can your carrier do if both you and your friend’s policy have that same clause? In effect, those clauses cancel each other out, and neither carrier is left with responsibility to pay out the claim. The end result isn’t fair, so many states have case law or statutes defining how this situation should be handled.
Subrogation laws regarding concurrent coverage vary by state. Courts look at the policy language for each carrier to determine whether they cancel each other out. From a public policy perspective, courts do not want this to happen. As a result, much of the time, courts will order both carriers to share the loss pro rata.
For Carriers who think there is an Opportunity to Recover from Another Carrier
If a carrier paid the entire loss in a dual coverage case, there may still be opportunities to pursue subrogation recovery via pre-suit claims resolution, mediation, arbitration or litigation. Look at:
- What the other carrier’s policy language says
- Whether or not it sets forth a primary, secondary or excess policy clause
This is where circumstances can become muddled. Some insurance policies have conditions for coverage in cases like these, which say they cover certain circumstances, but not others. Both policies may share similar language, but that does not always mean they cancel each other out. If the policies do not cancel each other out, the possibility of a pro rata outcome is less likely.
But what if the at-fault party has no insurance, or their insurance policy has an exclusionary clause that applies? In effect, this is now an uninsured motorist subrogation case. Even if the subrogated carrier covers the incident under their policy, the adverse carrier may have a valid argument that there is no coverage under their policy.
Another complication arises if the at-fault party is technically covered under the subrogated insurer’s policy. Going after that driver is not a viable route to subrogation recovery because they were already covered under your policy. Most states have laws that bar subrogation against your own insured.
Difficult Subrogation Cases: More Carriers, Less Responsibility
As a skilled litigator active in the industry of insurance subrogation and subrogation laws by state, Jason is able to explain this complicated concept in a clear way. With such a tricky circumstance as concurrent coverage, an attorney adept at the details of subrogation case law and varying state statutes is vital to achieving recovery through subrogation against another carrier.
Where there are two carriers and each wants to avoid carrying responsibility for paying out a claim, subrogation attorneys like Jason, and RG’s team of subrogation-focused lawyers, claims adjusters and specialists are uniquely poised to hold adverse carriers accountable so everyone pays their fair share.