- A Checklist to Increase Recoveries in Insurance Subrogation Cases in Michigan
- March 25, 2015 | Author: Jeffrey Bearss
- Law Firm: Weltman, Weinberg & Reis Co., L.P.A. - Troy Office
- There are a number of effective ways to maximize your recovery in Michigan insurance subrogation matters that can be done before referral of the matter to counsel. The following is a discussion of procedures you can follow to increase your bottom line.
Has the Insured Filed any Previous Lawsuits Involving the Same Matter? Advice to Give the Insureds.
On occasion the insureds will file suit on their own without advising their insurance company that they are doing so, or that they have already done so. In some cases, the insureds will have already obtained judgments in small claims court or general civil court and not advised their insurance company about a pre-existing judgment. The judgment amount will be for a deductible, or some other small amount not covered by insurance, which quite often is a small fraction of the total loss incurred by the insurance company. The insurance company refers the case to counsel for subrogation, unaware of the pre-existing judgment obtained by the insured. Suit is then filed by counsel, which, unbeknownst to both counsel and the insurance company, is actually the second suit filed arising out of the same matter. The adverse party retains counsel, and files an answer to the subrogation suit, exerting the affirmative defense of res judicata.1 The court then dismisses the case under the doctrine of res judicata. The insurance company loses the opportunity to recover its loss, due to the insured filing a prior suit and not disclosing it to the insurance company. The remedy here is to have your claims representatives advise your insureds in the initial call not to file suit for their deductibles or other non-covered losses until you as the insurance company have the chance to file your subrogation suit first. You may also consider putting language to this effect in the policies. The insureds should also be asked if they have filed suit on their own, before referring to counsel for subrogation.
Has the Insured Signed any Releases with the Adverse Party?
An action for subrogation by definition means that the insurance company steps into the shoes of the insured, and their action derives from whatever action the insured may have.2 If a party has signed a release with the adverse party, this can remove your subrogation rights, and bar a subrogation suit to recover monies paid out on a claim.
One remedy is to have your claims representatives advise the insureds in the initial call not to sign any releases with anyone until you as the insurance company have had the chance to file your subrogation suit first. You may also want to ask the insureds if they have already signed any releases before referring to counsel for subrogation.
Personal Knowledge of Witnesses
The Michigan Rules of Evidence require at trial that the witness's testimony be based on his/her own personal knowledge. What the witness testifies to at trial must be based on the personal knowledge of the witness.3 Did the adjuster personally inspect the loss, write the estimate himself, and does he have personal knowledge of the loss and estimate? Or at least, if the adjuster did not personally inspect the loss, did the company who prepared the estimate for the adjuster visually inspect the loss? What we are trying to avoid here is a situation where an adjuster phones a third party contractor to prepare an estimate, and the third party estimator in turn contacts the insured by phone, and neither the adjuster nor the third party estimator have ever visually inspected the loss. Instead, there is only a hearsay description of the loss by the insured to the estimator via a phone conversation, which is in turn is relayed to the adjuster by phone, fax or email. In this instance, the damages will not be provable in court, as there is no witness available who has personal knowledge of and who had visually inspected the loss. The remedy is to establish a procedure to make sure that either the adjuster or the third party preparing the estimate visually inspects the loss, so that he/she can testify with personal knowledge of the loss at trial as to liability and damages, so that these can be proven at trial.
1 Res Judicata is the doctrine which states that you cannot be sued twice for the same claim. This constitutes an absolute bar to a subsequent action involving the same demand. Perron v. State, 155 Mich. App. 759; 400 N.W.2d 709; (1986)
2 Truck Ins. Exchange v. Board of County Road Comm'rs, 244 F. Supp. 782 (W.D. Mich. 1965)
3 33 Michigan Law & Practice 2d Trial, Part 2, Witnesses § 251