A Proper, Classical Subrogration Clause

When will the law surrounding PIP, Medpay, Uninsured Motorist claims, and responsibility for a Plaintiff’s Attorney’s fees become settled?  When will it become “cooked” as one of my law school professors liked to say?  The short answer is that debates on those issues are alive and well and that the law is frequently changing.

Most automobile insurance policies contain an automatic benefit for the people in the insured’s vehicle: PIP and Medpay coverage (“PIP money”) will provide an automatic $5,000 or $10,000 (or whatever the policy limits are) of coverage for medical and other expenses (PIP only) for the people in the policyholder’s vehicle regardless of who was at fault.  Is that the end of the story though?  Does the insurance company take that hit, make those payments, and not pursue reimbursement?  Absolutely not.


The insurance company will consider its prospects for a “subrogation” claim against the party who was at fault.  If the at-fault party was its own insured, then, the insurance company will not pursue a claim against its own insured, but, it may raise the premiums paid by the insured.


In subrogation cases, the insurance company “steps into the shoes” of the insured driver and can prosecute a lawsuit against the at-fault party in the name of the insured driver.  The transfer of the driver’s legal claim is done by virtue of the contract for insurance that exists between the insurance company and the driver.  But, what if the driver is prosecuting its own claim against the at-fault party? Can the insurance company maintain a second additional claim against the at-fault party just for the Medpay (after all, what other damage has the insurance company suffered?)?  That depends. If the money paid out for PIP and Medpay is being pursued by or has been settled between the not-at-fault party and the at-fault party, then, no, the insurance company may not pursue a contemporaneous lawsuit against the at fault party.  If the PIP money is recovered by the private individual, the private individual must pay back the insurance company.


This brings up an interesting question: if the private individual/driver is pursuing its own claim against the at-fault driver and recovers the PIP money, then giving that money to the insurance company to make the insurance company whole, who paid for the driver’s costs of collection and attorney?  This issue is decided by the Washington spring court in the case of Mahler v. Szucs, 957 P.2d 632, 135 Wn.2d 398 (Wash. 1998), where the Court determined that under the contract for insurance’s own wording (sub d. If the insured recovers from the party at fault and we share in the recovery, we will pay our share of the legal expenses. Our share is that percent of the legal expenses that the amount we recover bears to the total recovery.), that the driver can be paid back for the cost of collection and attorney fee, and efforts invested in obtaining the reimbursement for the PIP payment.[i]  This was the rule that was announced in this 1998 case.


[i] Mahler v. Szucs, 957 P.2d 632, 135 Wn.2d 398 (Wash. 1998).


Please Note: The information in this blog/website is provided to further the reader’s research only, and, is not a substitute for consulting with an attorney licensed in your jurisdiction. No attorney-client relationship is formed by virtue of this blog or website nor should any such relationship be implied.


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