Court Denies Subrogating Carrier’s Attempt to “Sever” Its Claim from Its Insured’s Personal Injury Action

In the early morning hours of December 2005, a horrible explosion occurred at a house in the Village of Horseheads in Chemung County.  The explosion caused serious injuries to the family living at the house.  Additionally, several nearby buildings were destroyed, including Pete’s Garage.  Pete’s submitted a claim to its carrier and the carrier paid approximately $50,000.

The family filed a personal injury lawsuit against New York Electric and Gas (“NYSEG”) in October 2006.  Shortly before trial, Erie filed a motion to “sever” what it considered to be its subrogation claim from the personal injury action.  Erie had not filed a separate subrogation lawsuit.  Nor had Erie moved to “intervene” in the personal injury lawsuit.  Presumably, the subrogation action should have been filed prior to December 2008 (i.e., three years from date of loss).

The personal injury suit settled before trial.  The Court denied Erie’s motion to “sever.”  The appellate court affirmed. [1]   The Court noted that a carrier which has paid damages and wishes to pursue a wrongdoer/tortfeasor generally has two options: (a) file a lawsuit against the tortfeasor; or (b) file a motion to intervene in an existing lawsuit that an insured has already filed against the tortfeasor.  The family’s complaint against the gas and electric company made no mention of damage to “Pete’s Garage,” so there was no subrogation claim to “sever” (i.e., separate) from the family’s lawsuit. [2]

As an aside, note that in New York a carrier who has paid Additional Personal Injury Protection (“APIP”) payments in an auto case must file a separate lawsuit against the wrongful driver within three years of the date of the accident. [3]  The APIP carrier does not have a statutory right to assert a “lien” on its insured’s personal injury case, but depending on the wording of the personal injury complaint, the APIP carrier may be able to assert that it is entitled to a portion of any personal injury settlement.  Workers compensation carriers have a statutory lien and need not file a separate lawsuit; they merely need to assert their lien in any pending personal injury case.]

Bottom Line:   Whether it is a property damage claim or an APIP claim, the subrogating carrier must file a lawsuit against the tortfeasor/wrongdoer prior to the running of the statute of limitations.  Generally, the statute of limitations is three years from the date of loss, but there are important exceptions, such as when work is done by a contractor or where there are warranty claims that run from date of purchase of the product.  You cannot assume that a three-year-from-date-of-loss statute of limitations applies.  When in doubt, refer the matter to counsel to file suit as soon as possible to toll any statutes of limitations.

[1] Peterson v. NYSEG; Erie a/s/o Peterson, Third Department March 6, 2014
[2] Arguably, had the family included language in its complaint seeking to recover for property damage, including to Pete’s Garage, then Erie might have been able to assert its right to a portion of the personal injury settlement.
[3] Allstate a/s/o Walker v. Stein, 1 NY3d 416 (2004)