Insurance policies routinely include a condition prohibiting an insured from compromising the insurer’s rights of recovery against third parties that may have caused the damages claimed. Such conditions impose an obligation on an insured not to compromise the insurer’s rights of recovery / subrogation rights against an at fault party. Subrogation is the means by which an insured’s legal causes of action against those responsible for causing damage to the insured property are transferred to the insurer of that property to the extent payment is made to the insured.
For example, if a vehicle strikes a building and causes damage, the owner of the building can submit a claim to its property insurer, but may also seek recovery from the owner and driver of the vehicle. In doing so, an insured may materially breach an insurance policy that prohibits the policyholder from prejudicing the insurer’s rights of recovery. This is especially true where an insured executes a release in favor of the at fault party prejudicing the property insurer’s right of recovery against the party responsible for the loss.
In Culinary Consulting Management, Inc. v. Old Dominion Insurance Company, 10th Judicial Circuit, Highlands County, Case No.: 2015-GC246, the insured filed suit alleging breach of contract following a denial of coverage premised upon the insured’s violation of the insurance policy’s Transfer of Rights of Recovery condition. Specifically, the insured’s building was struck by a vehicle. The insured submitted a claim to Old Dominion. Before Old Dominion resolved the claim, the insured accepted payment from the automobile liability insurer of the vehicle involved in the accident, and in exchange executed a settlement agreement releasing the owner and driver of the vehicle from any and all liability. Once the insured released its rights against the vehicle owner and driver, the insured no longer held any rights of recovery that could be conveyed to Old Dominion. Therefore, had Old Dominion paid the claim it would not have been able to seek recovery of the monies paid from the vehicle owner and driver.
The insured filed suit alleging breach of contract. In response, Old Dominion raised as an affirmative defense the insured’s material breach of the policy’s Transfer of Rights of Recovery condition. Old Dominion moved for summary judgment after conducting requisite discovery. On February 13, 2017, the trial court granted summary judgment in favor of Old Dominion with a relatively lengthy opinion providing analysis agreeing with Defendant’s objections regarding the affidavit filed by Plaintiff in opposition to the Motion for Summary Judgment because of the inadmissible statements contained therein.
Congratulations to Old Dominion Insurance Company on the favorable Summary Judgment. Roland Bernal, Esq. of the firm’s Vero Beach office represented Old Dominion in this matter and argued the Motion for Summary Judgment, with significant drafting assistance from Sergio Muniz, Esq.