Subrogation & Recovery Law Blog
Filing Suit in the Name of the Carrier Versus the Insured
Most attorneys in voir dire in a subrogation jury trial will ask some variation of the following question: "Ladies and gentlemen of the jury, please raise your hand if any of you do not believe you can be fair and impartial to my client XYZ Insurance Company because they are an insurance company and not an individual plaintiff."
We ask this question to jurors because it is common knowledge that some people hold prejudices against a party when they know insurance coverage is involved. See e.g. Staples v. Hoefke (1987) 189 Cal.App.3d 1397 (recognizing that prejudice is inherent in the admission of evidence of insurance coverage). That is one of the very reasons the Evidence Code does not allow evidence of a defendant’s liability insurance into evidence. See F.R.E. 411. Since it is common knowledge that a party could be prejudiced by the jurors knowing it has insurance, should a subrogating carrier consider reaching an agreement with the insured to file suit in the name of the insured rather than in the name of the carrier to avoid any juror prejudice? If the state where you are filing suit allows for flexibility in who is properly named, following should be considered in this analysis:
Who is Being Sued? - It is important to keep in mind that a subrogating insurance carrier plaintiff is not necessarily going to be viewed negatively by the jurors. Most jurors have had positive experiences with their own insurance carrier or otherwise feel no reason to view the subrogating carrier negatively. One important factor to consider, however, is who is being sued. If the case is against a large corporation, then often jurors will see the parties on equal footings. However, if the case is against an individual or a very small local company, then some jurors may view the case as the large insurance carrier picking on the small individual/business (even though unbeknownst to the jurors the defendant has its own insurance carrier funding the litigation/judgment). In these types of litigations it may be worthwhile to consider filing suit in the name of the insured to avoid any "large company" prejudices from the jury.
Full Cooperation of Insured Required - When the subrogating carrier is only pursuing damages in its own name, in many instances the insured will not be required to be involved in the litigation. Discovery verifications are signed by the insurance carrier only. Settlement releases are signed by the insurance carrier only. In many cases the insurance carrier is only required to provide discovery responses based on what information they have in their knowledge/possession, and not information in its insured's knowledge/possession since the insured is not a party to the case. However, when suit is filed in the name of the insured, the insured often must play a more active role in the litigation - signing off on discovery and release agreements, and cooperating with discovery responses and disclosures. Whether the insured is on board with this active role should be considered as well as discussed with the insured in advance.
Pursuing Insured’s Deductible – In situations where the insured has incurred a deductible, it is important to review the rules of your particular state regarding pursuing the insured’s deductible. If the litigation is in the name of the insurance carrier, oftentimes the insurance carrier cannot demand the insured’s deductible because the insurance carrier does not have legal standing to pursue damages incurred by a non-party insured. However, some states require a subrogating carrier to demand the insured’s deductible as part of any pre-suit demand to the defendant. If the insured has a large deductible, and if the carrier cannot recoup this in the litigation due to the lack of standing, then it may be worthwhile for the insured to be named in the litigation to allow recovery of the deductible.
Pro-Rata Agreement – If the subrogating carrier does enter into an agreement with the insured that litigation will be filed in the name of the insured, it is essential that the agreement be in writing. The agreement should state which damages are being pursued by the carrier and which damages are being pursued the insured (including whether the insured’s damages are just a deductible or a specific uninsured claim). The agreement should also state how any settlement funds will be distributed (typically on a pro-rata basis reflecting the insurer and insured’s portion of the total claim) as well as how costs of litigation will be paid (pro-rata or upfront by the carrier and reimbursed in any settlement funds). In addition, the agreement should clarify who has decision making authority throughout the litigation and settlement negotiations.
While filing suit in the name of the insured may appear to be a simple way to avoid any prejudice concerns, all of these factors must be considered to determine the best option for your particular case.