FIRST COURT OF APPEALS OF TEXAS HOLDS INSURER HAS NO CLAIM FOR EQUITABLE SUBROGATION TO EXTENT PAYMENTS EXCEED AMOUNTS OWED IN PROPORTION TO FAULT OF INSURED.
The Houston Court of Appeals recently held that an insurer could not bringing an equitable-subrogation claim against a third party to the extent that the insurer sought recovery of payments in excess of amounts owed in proportion to the fault of its insured. Allstate Ins. Co. v. Spellings, --- S.W.3d ---, 2012 WL2452051, No. 01–11–01065–CV (Tex. App.—Houston [1st Dist.] June 28, 2012).
Scott Jeffrey, the father of seventeen-year-old motorist who was killed in two-car automobile accident, filed wrongful death action against the Spellings, parents of his daughter’s best friend, alleging the Spellings allowed his daughter to be provided with alcoholic beverages. Jeffrey’s automobile insurer, Allstate Insurance Company, filed plea in intervention, asserting a claim for equitable subrogation to recover amounts it paid to settle claims of Helen and Jim Haywood, the other motorists who died as a result of injuries they sustained in the automobile accident with Jeffrey’s intoxicated, daughter. Allstate contended that it was entitled to “step into the shoes” of the Haywoods to pursue reimbursement from the Spellings for the monies paid out for medical, bodily injury, property damage and collision claims. Allstate also argued that it was entitled to take on the claims and defenses of the Haywoods because it paid for the Haywoods’ damages and that it should be allowed to proceed on its claims against the Spellings because they were primarily responsible for the accident.
The Spellings filed motion for summary judgment arguing that Allstate was precluded from seeking reimbursement for payments it had made to the Haywoods under any legal theory or type of subrogation because Allstate “stands in the shoes of its insured(s) for subrogation purposes” and a “settling tortfeasor” like Allstate “has no right to contribution.” The 281st District Court of Harris County granted Spellings’ motion and severed Allstate’s equitable-subrogation claim. Allstate appealed.
On appeal, the Houston Court of Appeals stated that equitable subrogation allows the insurer to stand in the shoes of the insured, and thus obtains only those rights held by the insured against a third party, subject to any defenses held by the third party against the insured. In this case, however, Allstate sought to stand in the shoes of the Haywoods, not its insureds, in attempt to recover from the Spellings amounts that it paid as the liability insurer of the Jeffreys.
The Court of Appeals determined that, to the extent Allstate’s issued payments in excess of the amounts owed in proportion to fault of insured (i.e., Jeffrey’s daughter), such payments were voluntary. The Court affirmed the trial court’s decisions concluding that Allstate was not entitled to recoup the payments it made to the Haywoods by intervening in Scott’s wrongful-death suit and bringing an equitable- subrogation claim against the Spellings.