This article is a companion piece to this video.
What do you do if the adverse carrier refuses to pay a subrogation settlement in full? Take what you can get, or hold out and hold them responsible? In the above episode of On Subrogation: Depositing a Check for Less than Full Balance, RG Founding Partner and subrogation attorney Kim Rathbone discusses how to pursue the full amount of a subrogation claim in a case where the responsible party sends a short check.
In Insurance and Subrogation Law, What does a Receiving a Short Check Mean?
Kim discusses the implications that come with receiving a check short of the full amount of awarded subrogation claim damages. In insurance subrogation, sending a check short of the claim amount with restrictive language indicating that the short amount represents full payment to the payee means two things:
- The check represents the total amount they expect will resolve the subrogation case.
- By accepting the check, you as the payee agree that this resolves the entire payout.
These inferred meanings of receiving a less-than-full-balance check from the responsible party mean that you should choose your next steps carefully if you want to recover the entire amount of the subrogation claim. Simply depositing that short check with restrictive language on it can waive the remainder of subrogation recovery rights.
The legal term for this is accord and satisfaction, and it is an unfortunately common strategy responsible parties use to skirt a subrogation agreement.
Accord and Satisfaction: Why You Might not Want to Take the Money
The law typically holds the payee responsible for understanding the principle of accord and satisfaction, especially with regard to subrogation departments and attorneys, who should be well-apprised of these types of nuances in insurance disputes. Namely, courts weigh intent and sophistication:
- What was the intent of the check, and how was that made clear to the payee?
- Did the payee know enough to be responsible for understanding implied intent?
In subrogation litigation, the courts are not kind to many excuses when weighing these two questions. The general expectation is that professionals working in the legal realm of insurance subrogation understand the implicit meaning of accepting a short check.
Subrogation Claims Resolution that Avoids the Accord and Satisfaction Pitfall
A common question Kim Rathbone discusses in this episode of On Subrogation is how to keep the short check and still be allowed to pursue the full amount. She discusses five common arguments payees use to plead courts to void Accord and Satisfaction in their subrogation lawsuits:
- “We accidentally deposited it. Sorry!”
The vast majority of the time, the courts also say no to this argument. However, there are cases in 3 states where the court has accepted this argument and waived accord and satisfaction. - “We’ll keep the shorted check in a lock box.”
No. The 90-day period is enough time to have resolved the dispute and return the check; you should have just returned the check if the intent was to pursue the full claim amount. - “My company has an automatic depositing process I have no control over.”
No. As the payee, you have a reasonable time to return the check (usually 90 days), which was ample time to reverse and correct any automatic deposit. - “We wrote ‘under protest’ or ‘partial payment’ on the check before we deposited it.”
No. This avenue used to be a valid way to deposit a short check and not invoke accord and satisfaction, but now the 90-day window to return a check applies. - “We didn’t understand they were trying to pay in full by sending a short check.”
Most of the time, this argument will fall on deaf ears, as the at-fault party often sends a letter of intent explaining the short check is meant as full payment or writes language on the check restricting the party from pursuing the remaining amount. However, this argument has been accepted by courts across several states, especially in cases where a short check was sent with no documentation to explain its intent.
Subrogation Claims Resolution that Avoids the Accord and Satisfaction Pitfall
In most courts, these arguments don’t add up to much more than the-dog-ate-my-homework excuse. The sticker is almost always the reasonable time period (90-day) rule. Courts expect that, between inferred intent, expected sophistication, and a 90-day window to notify the other party the short check is unacceptable, there’s really no reason any payee should keep a short check unless they’re fine with that being the new amount of the settlement.
Kim Rathbone’s best advice as an experienced subrogation attorney is to cover all your bases; if you want to pursue the full amount of the subrogation claim, send the check back with a detailed note explaining why it wasn’t acceptable payment. Oftentimes, a savvy subrogation attorney can maximize subrogation recovery from adverse carriers simply by being persistent, if not relentless.
Want to learn more subrogation strategies? As a staunch advocate for insurers’ subrogation rights, Rathbone Group provides free educational resources to industry professionals and the public on subrogation law and procedure. Watch our YouTube show, listen to our podcast: On Subrogation, and visit our Subrogation Blog for more. Have a question we haven’t yet covered or want to know more about what we do? Inquire at info@rathbonegroup.com.