In December we reported on the anti-subrogation climate in Missouri and the Court of Appeals decision in Thomas v. Ramushi, which held that, absent a “direct assignment”, an insurer has no authority to seek a property subrogation payment from the tortfeasor without the insured’s consent.[1] That decision highlighted the important distinction between a subrogation clause contained in an insurance policy and a direct assignment of a cause of action. Without an assignment, an auto insurer has no authority to seek a subrogation payment from the tortfeasor without the insured’s consent. When an insurer pays a property loss, its right to maintain a subrogation suit against the tortfeasor depends upon whether it receives from the insured an assignment of the whole claim as compared with merely rights of subrogation via the policy terms. If the insurer receives such an assignment, then it has the exclusive right to maintain the suit against the tortfeasor for the entire claim including any deductible, but if the insurer’s rights are simply those of subrogation, then legal title remains in the insured, as does the exclusive right to bring the suit.
While an assignment is necessary in order to pursue property subrogation claims in Missouri, a Court of Appeals decision in 2024, in a case of first impression, confirmed that an allocation of a third-recovery to the subrogated property insurer when the insured’s cause of action included both property damage and personal injuries did not violate Missouri’s public policy generally forbidding subrogation of personal injury claims to insurer.[2] In Megown v. Auto Club Family Ins. Co., the insured was paid $722,433.56 by Auto Club after a fire in his home caused by the electric company. The insured sued the electric company alleging both property damage and personal injuries, and then appealed after the trial court allocated $722,433.56 of a $1 million recovery to the subrogated insurance company. The insureds claimed the trial court erred because the coexistence of claims for personal injury and property damage in a cause of action against a tortfeasor, when settled and released without specific allocation, defeats the subrogation right of the property insurer with respect to their interest in the property damage claim, because public policy forbids the assignment of subrogation of personal injury claims. The Court of Appeals disagreed, stating that there was no precedent for such an anti-subrogation policy and that if this was allowed in such a scenario, simply pleading personal injuries would prevent any potential subrogation claim since an assignment of rights is not possible for personal injury claims. The court found that such a situation would be an unintended consequence of Missouri’s subrogation laws and, thus, against public policy.
The Megown decision revealed that Missouri is a potential minefield for subrogation professionals because it is, in fact, the only jurisdiction in America which follows the established rule that when an insurer pays a property loss, its right to maintain a subrogation suit against the tortfeasor depends upon whether it receives from the insured an assignment of the whole claim as compared with merely rights of subrogation. As you can see, the precise terms of the insurance policy matter greatly, and simply assuming you have a right of subrogation could be disastrous. If the insurer receives such an assignment, then it has the exclusive right to maintain the suit against the tortfeasor for the entire claim including any deductible item. On the other hand, if the insurer’s rights are simply those of subrogation, then legal title remains in the insured, and he retains the exclusive right to bring the suit.
At the same time, an “assignment” of a personal injury claim is not possible because it is against Missouri public policy for some reason.[3] The Megown decision reveals what happens when the immovable object meets the unstoppable force—when an insured suffers property damage, is paid for that damage by its insurance company, and then also claims some sort of personal injury claim which is unassignable. The Megown decision, a case of first impression, shows a glimmer of sanity still exists in Missouri. The court looked behind the curtain and realized that if it did not affirm he trial court’s decision allowing property subrogation under those facts, simply pleading personal injuries would prevent any potential subrogation claim since an assignment of rights is not possible for personal injury claims. The court found that such a situation would be an unintended consequence of Missouri’s subrogation laws and, thus, against public policy.
So, there is hope.
[1] Thomas v. Ramushi, 674 S.W.3d 112 (Mo. App. 2023), reh’g and/or transfer denied (July 24, 2023), transfer denied (Sept. 26, 2023).
[2] Megown v. Auto Club Fam. Ins. Co., 2024 WL 675550 (Mo. App. 2024), reh’g and/or transfer denied (Mar. 25, 2024).
[3] The reason is readily apparent. Trial lawyers in Missouri are anti-subrogation because it takes money out of their pockets. It would be easy for Missouri to carve an exception to the prohibition against assigning a personal injury claim when the assignee is an insurance company looking to enforce its vital rights of subrogation. Subrogation holds down premiums for all insured, and it is both archaic and short-sighted for Missouri to enforce such a blanket prohibition without looking behind the curtains at its effect.
