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Test Your Subrogation Knowledge!

By David H. Maybank, Jr., J.D.

A, B and C are involved in a three-car accident on January 1, 2000. There is no dispute that A & B both contributed to the accident, which caused C to suffer property damages and bodily injuries. The carrier for A pays the claim made by C because B refused to contribute to the settlement and A was concerned with the exposure and costs to defend. A makes sure to have the liability of B fully extinguished by the release signed by C on March 23, 2004 in consideration of the $10,000.00 settlement proceeds tendered.

What is the best recourse for A’s carrier?

  1. Can they file a claim for indemnity and/or contribution against C; are there any SOL issues?
  2. What amount can A’s carrier expect to receive from B if they institute suit?
  3. When must A institute suit in order to beat the SOL?
  4. What elements of the claim must be satisfied in order to recover against B?

Answer:

  1. There is no indemnity claim because there is no special relationship – further, there is no right to equitable indemnification because A was a joint tortfeasor. There is a claim for contribution provided that the action is commenced within one year after the common liability was extinguished by the release.
  2. $5,000.00 if the $10,000.00 settlement is determined to be reasonable under the circumstances prevailing (i.e. exposure, costs to defend etc.)
  3. On or before March 22, 2004.
  4. a. That B was a joint tortfeasor;

    b. That B’s liability was extinguished by the release with the third-party;

    c. That the settlement paid was reasonable.

A is the general contractor for the construction of a new home for C. A subcontracts with B to install the synthetic stucco. A few years later C finds water intrusion due to the faulty installation of the synthetic stucco by B. C sues A who pays the claim in full with no contribution from B. A makes sure to have the liability of B fully extinguished by the release signed by C on March 23, 2004 in consideration of the $100,000.00 settlement proceeds tendered.

What is the best recourse for A’s carrier?

  1. Can they file a claim for indemnity and/or contribution against C; are there any SOL issues?
  2. What amount can A’s carrier expect to receive from B if they institute suit?
  3. When must A institute suit in order to beat the SOL for the claim(s) asserted?
  4. What elements of the claim(s) must be satisfied in order to recover against B?

Answer:

  1. Both indemnity and contribution should be pled.
  2. If successful in proving the indemnity action, $100,000.00, plus costs and expenses and attorney fees incurred in defending the underlying claim; otherwise, can recover $50,000.00 if successful in proving the contribution action.
  3. Three years from the date of settlement for the indemnity action; 1 year from the date of the settlement for the contribution action. Thus, it is best to commence both actions together within one year of the settlement.
  4. Indemnity:
    1. special relationship existed due to contractor-subcontractor relationship;
    2. B was liable for causing the third party’s damages;
    3. A was exonerated from causing any liability for those damages (i.e. no negligence); and
    4. A suffered damages as a result of the third-party’s claims against it which were eventually proven to be the fault of the indemnitor.
    Contribution:
    1. That B was a joint tortfeasor;
    2. that B’s liability was extinguished by the release with the third-party; and
    3. that the settlement paid was reasonable.

A operates a trucking company and one of their drivers is permitted to use a weight scale on property owned by B who also leases a radio communication tower to C located on the same property. When A’s driver attempts to turn around on the property owned by B, he comes into contact with a guy wire supporting the radio tower which causes the radio tower to collapse resulting in significant property damages to C. There is no dispute that A’s driver was negligent for failing to keep a proper lookout and that B was negligent for failing to warn A’s driver about the location of the guy wire. A’s carrier settles with C for $400,000.00 but fails to obtain a general release of all persons or otherwise extinguish the liability of B to C. It is found that the $400,000.00 settlement was a compromise and it did not fully satisfy all damages that could have been claimed by C. A’s carrier wants to sue B for indemnity and contribution.

What is the best recourse for A’s carrier?

  1. Can they file a claim for indemnity and/or contribution against C; are there any SOL issues?
  2. What amount can A’s carrier expect to receive from B if they institute suit?
  3. When must A institute suit in order to beat the SOL for the claim(s) asserted?
  4. What elements of the claim(s) must be satisfied in order to recover against B?

Answer:

  1. Neither is applicable; no indemnity because both are joint tortfeasors; no contribution because A failed to extinguish B’s liability to C in the settlement.
  2. Had the release been prepared properly, $200,000.00 in a contribution action.
  3. Within one year of the settlementor contribution action;
  4. Contribution:
    1. That B was a joint tortfeasor;
    2. that B’s liability was extinguished by the release with the third-party; and
    3. that the settlement paid was reasonable.

David Maybank is a partner in the law firm of Hennessy & Walker Group, P.C. and Capers Owings as an associate. Both practice law in the Charleston, South Carolina. Hennessy & Walker handles only subrogation cases. For questions or comments feel free to call toll free (877) 723-0412 or e-mail them directly – David Maybank dmaybank@subrogation.net or Capers Owings cowings@subrogation.net.

Posted: Friday, January 14, 2005 12:00:00 AM. Modified: Wednesday, September 07, 2005 3:28:13 PM.

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