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Landmark Subrogation Decision in Oklahoma

Landmark Subrogation Decision in Oklahoma

Subrogation recovery and claims are a constant concern for insurers and the companies they insure. A recent case in Oklahoma addressed subrogation rights, with the Oklahoma Supreme Court weighing in with their opinion.

In Raymond v. Taylor, 2017 OK 80, 2017 Okla. LEXIS 82 (2017), the facts of the case are as follows.

Mark Raymond and William Taylor were employees of Guy’s Seed, driving a vehicle owned and insured by their employers, when hit by Larry Bedell driving a BlueKnight Energy Partner’s oil tanker truck. Taylor was killed from the collision and subsequent explosion, and Raymond was incapacitated by significant and permanent injuries.

At the time of the collision, Guy’s Seed provided uninsured/under-insured motorist (UM) coverage of $1,000,000 per accident through American Mercury Insurance Company (Mercury). BlueKnight carried a $1,000,000 automobile liability policy and a $40,000,000 excess liability policy.

Raymond qualified as insured under Mercury’s UM coverage, and the UM claim was reported to Mercury. Mercury investigated and offered the UM policy limits of $500,000 each to Raymond and Taylor.

During proceedings at the District Court, Mercury filed and was granted a motion to intervene for subrogation from Defendants. Raymond disputed Mercury’s right to subrogation in the proceeds of Raymond’s settlement, and Defendants refused to settle unless the amount was inclusive of Mercury’s disputed subrogation claim.

Defendants agreed to pay Raymond the amount of the settlement minus the $500,000 claimed by Mercury. District Court held that Mercury was entitled to the right of subrogation for the full $500,000; Raymond appealed. The Court of Civil Appeals affirmed the District Court.

Was this correct? Is an uninsured motorist insurance carrier entitled to subrogation against the underinsured tortfeasor’s assets in amount previously paid to the injured party?

The Oklahoma Supreme Court said no. In Title 36, Section 3636(F) (36 O.S. 2011 § 3636), Mercury pointed to the first line as support for the right to subrogate.

The Court has previously stated that the intent of UM insurance is “to provide the same protection for an insured person who is injured by an uninsured motorist as he or she would have if the uninsured motorist carried liability insurance.”

It is also stated that legislature intended provisions to apply to all primary auto insurance policies, but not supplemental, excess or umbrella policies.

Here is an analysis breakdown:

  • Standard of Review: Statutory interpretation is de novo
  • Mercury points to first sentence of Title 36, Section 3636(F) (36 O.S. 2011 § 3636), as support for its right to subrogate
    • Court looks to language of statute, legislative intent
      • Court has previously stated that the intent of UM insurance is “to provide the same protection for an insured person who is injured by an uninsured motorist as he or she would have if the uninsured motorist carried liability insurance”
        • Also stated that legislature intended provisions to apply to all primary auto insurance policies, but not supplemental, excess or umbrella policies
    • First sentence is general rule, but rest of paragraph is exceptions: second sentence limits UM carrier right to subrogation to recover from tortfeasor’s primary auto insurer only, prohibits recovery in excess of proceeds recovered from primary insurer or their assets
      • Exception only applies to subsection (C)—tortfeasors with insolvent insurers, does not contemplate excess policies in determining liability limits for whether vehicle is underinsured
    • Legislators gave explicit instruction that UM insurers are not entitled to any right of recovery against tortfeasor in excess of recovery from insurer of tortfeasor
      • Mercury argues superfluous language, Court disagrees
      • Law amended in 1979 to include underinsured vehicles as well as insolvent carriers
      • Intent was for (F) to apply to all of (C), which makes clear that insurer referred to is same primary insurer who is either insolvent or with whom tortfeasor is under-insured
        • If this was not case, half of (C) is superfluous and violate legislative intent

The takeaway here is that there is no right to subrogation by UM carrier against under-insured tortfeasor’s assets.

The Dissent:

  • Majority interpretation of first sentence makes the reference to “insolvent insurer” in second sentence of (F) superfluous
  • Purpose of statute was to put entire burden for loss on party ultimately responsible, this is in line with argument on interpretation of (F)
    • Tortfeasor’s liability insurer being unable to pay due to insolvency is not tortfeasor’s fault
  • Prior case law supports this interpretation, the statute amendment does not change this

For more information on subrogation recovery, protecting your subrogation rights, and subrogation law, please contact the legal team of Parker Straus, LLP. We can answer your questions and help protect your subrogation recovery rights.

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