The Rogak Report: 19 Oct 2007 ** APIP - Subrogation **
INSURED WHO RELEASED TORTFEASOR CUT OFF HIS INSURER'S APIP SUBROGATION RIGHTS
Progressive Ins. Co. a/s/o Arye Weiner v. Sheri Torah, Inc. 2007 NY Slip Op 07829 Decided on October 16, 2007 Appellate Division, Second Department Edited by Lawrence N. Rogak
The Appellate Division has held that an insured who executed a general release in favor of a tortfeasor, cut off his auto insurer's APIP subrogation rights, even though the insurer previously informed the tortfeasors of those rights.
In 2004 Progressive Insurance Company was the auto insurer for Arye Weiner. On December 31, 2004, Arye Weiner's son, the infant Moshe Weiner, was severely injured after alighting from a school bus owned by defendant Sheri Torah, Inc., and driven by the defendant Chaim Kohn ("defendants"), when Kohn drove the bus over Moshe's torso and legs. As a result of the accident, Progressive paid, on behalf of its insured, approximately $85,000 to medical and health care providers in APIP benefits. Progressive orally notified the defendants' insurance carrier of its right of subrogation for that payment.
In 2005 Arye Weiner tentatively settled his and Moshe's underlying personal injury claims against the defendants. On September 13, 2005, Progressive was notified that Ayre Weiner had submitted an infant compromise application to the Supreme Court. On November 30, 2005, Progressive was notified that the Supreme Court scheduled a hearing on the proposed infant compromise order. After the court approved the infant compromise order, Arye Weiner executed a settlement agreement and general release on January 19, 2006.
On January 23, 2006, Progressive, as subrogee of Arye Weiner, commenced the instant action against the defendants to recover the APIP benefits it had paid, claiming lack of notice and an improper waiver. The defendants moved to dismiss the complaint pursuant to CPLR 3211(a)(1), (3), and (7), primarily on the ground that the general release executed by Arye Weiner barred the action. Progressive, in response, asserted that the general release was not a bar to its cause of action because, at the time the general release was executed, the defendants knew of its subrogation rights with respect to the APIP payments. The Supreme Court agreed, and denied the defendants' motion to dismiss the complaint. The Appellate Division reversed.
"When an insured executes a general release in favor of a tortfeasor without reserving the rights of his or her insurer, the insured impairs the insurer's right of subrogation (see Weinberg v Transamerica Ins. Co., 62 NY2d 379, 381-382; State Farm Mut. Auto. Ins. Co. v Hertz Corp., 28 AD3d 643, 644; Ziegler v Raskin, 100 AD2d 814; Aetna Cas. & Sur. Co. v Schulman, 70 AD2d 792, 793). Arye Weiner, upon his execution of the unrestricted settlement agreement and release, released forever the defendants from any past and future liability to him arising from the underlying accident. Since Progressive, as Arye Weiner's subrogee, stands in the shoes of Arye Weiner, Progressive has no greater rights than he does (see Allstate Ins. Co. v Stein, 1 NY3d 416, 423). Hence, that release shields the defendants from any liability to Progressive as subrogee of Arye Wiener."
"Progressive's plight here appears to have resulted from its own failure to participate in, or object to, the duly-noticed infant compromise hearing and to insist on the resolution of its subrogation claim against the tortfeasor for APIP payments as part of a global settlement of the personal injury claims. Insofar as the defendants are concerned, Arye Weiner fatally impaired Progressive's right of subrogation against them. In such a case, Progressive's remedy is against its subrogor for any conduct which may have prejudiced its subrogation rights. Accordingly, the defendants' motion to dismiss the complaint should have been granted."
Comment: And this isn't the end of the mess in this case. Progressive now has the right to sue its insured for impairing its subrogation rights, but because the personal injury suit was resolved with an infant compromise order, none of the settlement money can be touched to pay anything to Progressive. It is possible that the father might be forced to pay back Progressive out of his own pocket, but that kind of case would not make for good public relations for Progressive.
Should Progressive have taken a role in the infant compromise hearing? Yes. I doubt that the court would have allocated any of the settlement money for Progressive, in view of the reality of a seriously injured infant, but Progressive might have ensured that its subrogation rights were preserved. The lesson to be learned here for any carrier with a subrogation right at stake is: maintain an active presence in your insured's suit against a tortfeasor so your rights don't get "forgotten."