Subrogation

Every once in a while I get a case that illustrates how this country got into the mess we're in (in my opinion). Anyone who knows me knows that I lay the blame at the feet of the banks and insurance companies (and the lawmakers who permitted them to purchase laws tailor made to increase their profits).

This case deals with insurance subrogation. Years ago, subrogation was not permitted. If you purchased an insurance policy and your insurer had to pay a claim, your insurer bore the loss. After all, they had issued the policy and collected the premiums. They took the risk.

Beginning in the 70's state legislatures began to listen to the insurance company lobbyists and to change the law to permit subrogation. That permitted the insurer to collect premiums but, if they had to pay a claim, their risk was reduced - they might be able to collect the amount they paid from a third party. Most people thought that was OK, since the third party most likely had insurance (after all, the insurance companies lobbied to get laws passed that required motor vehicle insurance - even making it a crime to drive without it).

But the insurance companies didn't want to stop there. They wanted protection even if the third party was uninsured and unable to pay. So, back to the legislatures they went to obtain passage of laws that permitted them to notify the appropriate state authority and obtain suspension of a driver's license if they made demand upon him for some sum they believed they were due.

What's wrong with this? Well, the case I am handling started with an auto accident in which it appears that my client was not at fault. At least not entirely at fault. The other driver filed a claim with his own insurer and was paid. That insurer then assigned their right of subrogation to a third party and that party made a naked demand for payment against my client.

At this point, there has been no determination by a court or other authority that establishes my client is at fault. He just gets a letter that says "you were at fault. Pay us." When he declined, the third party filed with the Department of Safety saying "we have determined that he is at fault, he owes us $x, please suspend his license."

My client then gets a letter from the Department of Safety saying, please deposit with us the sum of $x or your license will be suspended. He contacts me and we file an appeal. The matter will be heard in January. We intend to make them prove that my client was at fault (and Tennessee is a comparative negligence state, meaning that the fault of the other guy has to be factored in here).

I suspect most people either pay up or lose their licenses, though.

What a country.

~Tim