Judge rules suit against insured’s business does not violate anti-subrogation rule

AUGUST 2020 NEW YORK SUBROGATION ALERT

"ANTI-SUBROGATION" RULE DOES NOT PROHIBIT ONE CARRIER FROM SEEKING TO COLLECT FROM DEFENDANT'S BUSINESS INSURANCE POLICY

The "anti-subrogation rule" prohibits an insurance company from pursuing its own insured in subrogation. The two primary purposes of the anti-subrogation rule are to: (a) avoid a conflict of interest that would undercut the insurer's incentive to provide an insured with a vigorous defense; and (b) to prohibit an insurer from passing its loss to its own insured.1 However, as New York's highest court noted: "the anti-subrogation rule is an exception to the right of subrogation ... subrogation is typically permissible where the third party [to be sued] is not a named or additional insured [under the subrogating carrier's policy]."2

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Default Judgment Vacated By Court in Subro Action

In New York State practice, a lawsuit is started when a Summons and Complaint is filed with the Clerk of the Court.  You generally have 120 days (i.e., approximately four months) to serve the defendant with the Summons and Complaint after it has been filed.  It is the act of filing that stops any applicable statute of limitations from running.  For example, let’s say a fire occurred August 1, 2012 and an Electrolux clothes dryer is the suspected cause. Strict products liability and negligence claims generally run three years from the date of the loss. [1]   I file suit with the Albany County Clerk on July 30, 2015.  I serve Electrolux via the New York State Secretary of State on November 15, 2015.   In this hypothetical, everything should be ok.  The act of filing (not serving) stops the statute of limitations from running, and so long as defendant is served within 120 days of the filing, then the lawsuit was properly initiated.

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Carrier Must Produce Its Underwriting File in Subro Litigation

Our last two newsletters discussed a Travelers Insurance subrogation action, involving an allegedly defective Daimler truck which caused a fire.  [1]    This month, we’ll talk about a third issue which the Court dealt with in that litigation. 

Daimler demanded that Travelers turn over its underwriting file.   An “underwriting file” is different from a “claims file.”   When a new customer applies for insurance, he/she usually submits an application.  The carrier may or may not obtain an inspection report and photographs of the property to be insured.  The carrier then decides whether or not it wants to insure the risk.  The material generated during this period is considered to be the “underwriting file,” although in my experience most carriers don’t actually maintain a written “file” in a file drawer.  Today, most records are electronically-stored, including the insured’s application.

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