Automobile Insurance SubrogationAutomobile Total Loss ThresholdsDeductible ReimbursementDiminution of ValueFirst Come, First Served: Subrogating Multiple Claims in Excess of Policy LimitsFuneral Procession Traffic LawsImputing Contributory Negligence of Driver to Vehicle OwnerLaws Regarding Using Cell Phones/Headphones/Texting While DrivingLoss Of UseMed Pay/PIP SubrogationOwner Liability For Stolen VehiclesPayment of Sales Tax After Vehicle Total LossPedestrian and Crosswalk LawsRental Car Company Physical Damage and Loss of Use ClaimsRental Car Company’s Liability Insurance Primary or ExcessSlower Traffic Keep RightSudden Medical Emergencies While DrivingSuspension of Drivers’ LicensesUse of Non-Original Equipment Manufacturer (OEM) Aftermarket Crash Parts in Repair of Damaged Vehicles
Federal , State, and Local Governmental EntitiesMunicipal/County/Local Government Immunity and Tort LiabilityState Sovereign Immunity And Tort Liability
General Tort Laws/StatutesAnti-Indemnity StatutesContribution ActionsContributory Negligence/Comparative FaultDog Bite LawsEconomic Loss DoctrineParental ResponsibilitySpoliationStatute of LimitationsStatute of Limitations Exceptions
Health Insurance SubrogationHealth and Disability Insurance
InvestigationAdmissibility of Expert TestimonyPre-Suit Disclosure of Liability Policy Limits in Third-Party ClaimsRecording Conversations
Product Liability SubrogationProduct Liability Law
Property Subrogation“Matching Regulations” And Laws Affecting Homeowners Property ClaimsCondominium/Co-Op Waiver of Subrogation LawsDamage to Property Without Market ValueGeneral Contractor Overhead And Profit Payments In First-Party ACV Property Damage ClaimsLandlord/Tenant Subrogation
Subrogation GenerallyAnti-Subrogation RuleCriminal RestitutionExculpatory Agreements And Liability WaiversMade Whole DoctrineMedical Expenses, Insurance Write-Offs, and The Collateral Source Rule
Workers’ CompensationEmployee Leasing LawsHospital Lien LawsOCIP/CCIP Subrogation In Workers’ Compensation Construction CasesRecovery Of Increased Workers’ Compensation Premiums By EmployerWhich Workers’ Compensation “Benefits” Can Be Subrogated?Workers’ CompensationWorkers’ Compensation Subrogation Waiver EndorsementsWorkers’ Compensation Claims by Undocumented Employees
Automobile Insurance Subrogation
Automobile Total Loss Thresholds
Percentage of Value: 75%. For both first-party insurance claim and salvage vehicles. A salvage, also known as total loss, vehicle is when a total loss occurs and an insurance company pays a claim for a vehicle that is damaged more than 75% of FMV.
A salvage vehicle (total loss) occurs when an insurance company or any other person pays or makes other monetary settlement to a person when a vehicle is damaged and the damage to the vehicle is greater than or equal to 75% of the fair market value of the vehicle prior to the damage. Vehicle is “salvage” when (1) frame or engine removed and not immediately replaced, or (2) when insurer has paid a total loss on vehicle. Insurer buys the vehicle from insured for the FMV of the salvage and then applies to the state for salvage title. Ala. Stat. § 32-8-87(d).
Automobile and Property: No applicable statute, Administrative Code provision or case law exists. Alabama’s Department of Insurance orally advises this issue is generally governed by contract law to extent provided in the policy. Policy language can modify the Made Whole Doctrine. Ex parte State Farm & Cas. Co., 764 So.2d 543 (Ala. 2000). The insured can’t claim it’s not made whole merely because of a deductible it paid.
Diminution of Value
First Party: An insurer may not be required to compensate the insured for the difference in the vehicle’s value before the collision and the vehicle’s value after the damage caused by the collision have been repaired. Pritchett v. State Farm Mut. Auto. Ins. Co., 834 So.2d 785 (Ala. App. 2002). Where a policy of insurance provides that the insurer’s liability for loss or damage to the property insured shall not exceed “what it would cost to repair or replace the auto or parts thereof with others of like kind and quality” the insured is entitled to recover only the cost of such repairs or replacements. Home Ins. Co. of New York v. Tumlin, 2 So.2d 435, 437 (Ala. 1941).
Third Party: There appear to be no case decisions allowing for recovery of the residual diminution in value of a repaired vehicle in a third-party claim.
First Come, First Served: Subrogating Multiple Claims in Excess of Policy Limits
Insurance carriers often face the difficult situation of resolving claims among several claimants despite minimum or limited liability policy limits. Alabama courts have held that when multiple insurance claims exceed the maximum coverage provided by the policy, each claimant’s right to his pro-rata share of the proceeds is limited by the maximum “per person” coverage provided by the policy. Sheehan v. Liberty Mut. Fire Ins. Co., 258 So.2d 719 (Ala. 1972). In Sheehan, the court held that the chancellor erred in equally dividing interpleaded funds among claimants of uninsured motorist proceeds who sustained unequal losses. It said that the equal division was improper because of the differences in actual damages suffered by the claimants. Id. Where the claimants’ claims are equal, but the net amounts to be recovered by the respective parties are different because of offsets – such as under the UM provisions of their own policies – certain parties are not legally or equitably entitled to recover from the proceeds of the policies under and the holding in Sheehan would not be appropriate. Putman v. Womack, 607 So.2d 166 (Ala. 1992).
In such multiple claimant situations, Alabama recognizes that interpleader is the safest procedure. Monumental Life Ins. Co. v. Lyons-Neder, 140 F. Supp.2d 1265 (N.D. Ala. 2001). It prevents claimants from arguing that the insurer was unwilling to pay the full amount of its coverage. Because filing an interpleader action is equivalent to the plaintiff’s admitting that it is willing to pay the legitimate claimant, an interpleading stakeholder cannot logically be subjected to a claim alleging bad faith refusal to pay. Id.
Under the Alabama Rules of Civil Procedure, any party seeking interpleader may deposit with the court the claimed amount and the court then decides who gets what. Ala. R. Civ. P. 22(b). Furthermore, the insurer can be released upon payment of the limits into the court. Ex Parte Lewis, 571 So.2d 1069 (Ala. 1990). However, payment of liability insurance limits might not release the separate duty to defend the insured. The duty to defend extends beyond the exhaustion of the policy limit. Lambert v. State Farm Mut. Auto. Ins. Co., 576 So.2d 160 (Ala. 1991). If the carrier pays its limits to one claimant, knowing that there are several claimants with legitimate claims, it risks bad faith and/or could be required to pay out claims in excess of its stated policy limits. National Mutual Ins. Co. v. Hall, 643 So.2d 551 (Ala. 1994).
Funeral Procession Traffic Laws
There are no state laws governing funeral processions. However, the city of Birmingham has an ordinance that prohibits motorists from driving through a funeral procession if it is reasonably apparent to the public that an automobile is in a funeral procession. Therefore, the procession has the right-of-way to proceed as a single unit through intersections and traffic signals. Sloss-Sheffield Steel & Iron Co. v. Allred, 247 Ala. 499, 500, 25 So.2d 179, 180 (1945).
Imputing Contributory Negligence of Driver to Vehicle Owner
Imputed Contributory Negligence Law: Driver’s negligence is not imputed to owner of the vehicle unless agency or other relationship existed. Teague v. Motes, 330 So.2d 434 (Ala. App. 1976).
Negligence of the driver will not bar recovery of a plaintiff passenger unless the passenger assumed control of the vehicle. Johnson v. Battles, 52 So.2d 702 (Ala. 1951).
Vicarious Liability/Family Purpose Doctrine: No vicarious liability statute. Owner not responsible for actions of permissive user. Vehicles are not dangerous instrumentalities. Ala. Stat. § 6-5-71.
No Family Purpose Doctrine.
Alabama is one of three states with a Guest Statute which states no driver is liable for the injury of a passenger unless willful or wanton. Ala. Stat. § 32-1-2. (See Ill. & Ind.)
Sponsor Liability for Minor’s Driving: No Sponsorship Liability Statute.
Laws Regarding Using Cell Phones/Headphones/Texting While Driving
Cell Phone/Texting: No person may operate a motor vehicle while using a wireless telecommunication device to write, send, or read a text-based communication, except when obtaining emergency services, using device while parked, or using as a GPS. Ala. Stat. § 32-5A-350.
No driver under the age of 18 may operate a vehicle while using a cell phone, unless it is essential to operation of the vehicle. Ala. Stat. § 32-6-7.2.
Other Prohibitions: No Applicable Laws
Loss Of Use
Loss of Use: Yes. Loss of use (reasonable value of use or rental car) is recoverable while owner is deprived of the vehicle’s use. Hunt v. Ward, 262 Ala. 379, 79 So.2d 20 (1955). Loss of use recoverable regardless of whether the vehicle is repairable or not. Ex parte S & M, LLC, 120 So.3d 509 (Ala. 2012). Owner of vehicle that has been totally destroyed may recover loss of use damages in addition to the fair market value of the vehicle prior to accident. Id. No case law information regarding whether rental vehicle must actually be rented in order to use a rental vehicle as a loss of use calculation.
Lost Profits: No. Lost profits damages not recoverable for a period of time a commercial vehicle is out of commission for repairs. Wilson and Co. v. Sims, 34 So.2d 689 (Ala. 1948); L & N R.R. v. Bond Transfer & Storage Co., Inc., 190 So.2d 696 (Ala. 1966); Merrill v. Badgett, 385 So.2d 1316 (Ala. App. 1980). An award for lost profits is allowed in certain circumstances such as when no substitute commercial vehicle can be reasonably obtained while plaintiff’s vehicle is being repaired. S & M, LLC v. Burchel, 120 So.3d 505 (Ala. Civ. App. 2012). However, upon Supreme Court of Alabama’s review, the recoverability of lost profits wasn’t discussed. Ex parte S & M, LLC, supra. Purpose of compensatory damages is “to make the plaintiff whole by reimbursing him or her for the loss or harm suffered.” Ex parte Goldsen, 783 So.2d 53 (Ala. 2000).
Med Pay/PIP Subrogation
Med Pay: Contractual right of subrogation is enforceable. Wolfe v. Alfa Mut. Ins. Co., 880 So.2d 1163 (Ala. App. 2003).
PIP: Coverage not applicable.
Made Whole: Can be overridden with Plan language. Ex parte State Farm Fire & Cas. Co. v. Hannig, 764 So.2d 543 (Ala. 2000).
Statute of Limitations: The statute of limitations is two (2) years from the insured’s accident. Ala. Stat. § 6-2-38 (1975). Home Ins. Co. v. Stuart-McCorkle, 285 So.2d 468 (Ala. 1973).
Owner Liability For Stolen Vehicles
Key In The Ignition Statutes: Ala. Stat. § 32-5A-50 (1975).
Common Law Rule: A vehicle owner will not be liable for damages resulting from a stolen vehicle if the negligent act of the thief resulting in the injury could not be reasonably foreseen and is sufficient to break the chain of causation. Vines v. Plantation Motor Lodge, 336 So.2d 1338, 1340 (Ala. 1976).
Payment of Sales Tax After Vehicle Total Loss
First-Party Claims: When the insurance policy provides for the adjustment and settlement of first-party auto total losses on the basis of ACV or replacement with another of like kind and quality, the insurer must pay all applicable taxes, license fees, and other fees. Ala. Admin. Code § 482-1-125-.08. Where policy provides that “If we pay for loss in money, our payment will include the applicable sales tax”, sales tax is owed. Lary v. Valiant Ins. Co., 864 So.2d 1105 (Ala. Civ. App. 2002), overruled by Ex parte S & M, LLC, 120 So.3d 509 (Ala. 2012).
Third-Party Claims: No applicable statute, case law, or regulation governing recovery of sales tax.
Pedestrian and Crosswalk Laws
Ala. Stat. § 32-5A-211: If traffic signals are not present or not working, vehicles shall yield to pedestrian when pedestrian is on vehicle’s half of road or so close as to make it dangerous for vehicle to proceed. Pedestrians shall not leave curb or other place of safety and into path of oncoming vehicle which is so close as to constitute an immediate hazard.
Ala. Stat. § 32-5A-212: Pedestrian crossing other than within a marked crosswalk or within an unmarked crosswalk shall yield the right-of-way to all vehicles. No pedestrian shall cross a roadway intersection diagonally unless authorized by official traffic-control devices. If traffic control signals are in operation, pedestrians must cross at crosswalk.
Summary: Where pedestrian crossed diagonally and was struck in ‘parking lane’ by mail truck before exiting street to curb, crossing street diagonally outside crosswalk was contributory negligence. Anderson v. U.S., 2016 WL 270965 (N.D. Ala. 2016). Court telling jurors that pedestrian should not step off the curb until it was safe was prejudicial error where the plaintiff had been standing on the shoulder of the road, outside the normal way of traffic, when they were hit. Okafor v. Sanford, 544 So.2d 869 (Ala. 1989).
Rental Car Company Physical Damage and Loss of Use Claims
Recovery From Renter: Recovery of physical damage and loss of use are not prohibited or otherwise regulated. Terms of rental agreement control. Collision Damage Waivers not regulated. CDW which states that renter is responsible for part of the damage is enforceable.
Recovery From Third-Party: Case law allows for commercial vehicles (taxi and truck-tractor). Nothing specifically for rental cars. In general, a vehicle owner can recover for loss of use to vehicle while being repaired. Few cases specifically speak to recovery for loss of use by a commercial company or rental car company. Hannah v. Brown, 400 So.2d 410 (Ala. App. 1981); Alford v. Jones, 531 So.2d 659 (Ala. 1988). With regard to a damaged commercial vehicle (taxicab) that is not repairable, the recovery of reasonable loss of use damages is allowed during the time reasonably required to procure a suitable replacement vehicle. Ex parte S & M, LLC, 120 So.3d 509 (Ala. 2012) (overruling Hunt v. Ward, 79 So.2d 20 (Ala. 1955) and Fuller v. Martin, 125 So.2d 4 (Ala. App. 1960): Lary v. Valiant Insurance Co., 864 So.2d 1105 (Ala. App. 2003). Lost profits damages are generally not recoverable for a period of time a commercial vehicle is out of commission for repairs. Wilson and Co. v. Sims, 34 So.2d 689 (Ala. 1948); L & N R.R. v. Bond Transfer & Storage Co., Inc., 190 So.2d 696 (Ala. 1966); Merrill v. Badgett, 385 So.2d 1316 (Ala. App. 1980). However, an award for lost profits is allowed in certain circumstances such as when no substitute commercial vehicle can be reasonably obtained while plaintiff’s vehicle is being repaired. Etno, Inc. v. Rivers, 644 So.2d 3 (Ala. App. 1994); S & M, LLC v. Burchel, 120 So.3d 505 (Ala. Civ. App. 2012). In Dean v. Johnston, 281 Ala. 602 (Ala. 1968), the court held that the measure of damages for an injury to a commercial vehicle is the amount of money which would remunerate the plaintiff for necessary repairs in substantially restoring the vehicle to its former condition and the reasonable value of its use or hire during the time required to make such repairs and fit it for business.
Rental Car Company’s Liability Insurance Primary or Excess
Summary: No case or statutory law. Terms of rental agreement and renter’s liability policy should be compared to determine which is primary.
Slower Traffic Keep Right
Statute: Ala. Stat. § 32-5A-80 and Ala. Stat. § 32-5A-82
Alabama requires motorists to drive in the right lane, except when overtaking and passing another vehicle proceeding in the same direction; when avoiding an obstruction in the right half of the roadway; when the roadway is divided into three marked lanes for traffic; or when the roadway is restricted to one-way traffic; or when an obstruction exists in the right half of the roadway. Slower traffic must keep right.
Vehicles proceeding at less than the normal speed of traffic shall be driven in the right lane. Except when overtaking and passing on the right is permitted, the driver of an overtaken vehicle shall give way to the right in favor of the overtaking vehicle on audible signal.
Sudden Medical Emergencies While Driving
Sudden Emergency Doctrine. Motorist faced with emergency situation by no fault of his own, is held to standard of care of a reasonably prudent person under same or similar circumstances. Tillis Trucking Co. v. Moses, 748 So.2d 874 (Ala. 1999).
Jury charged that a loss of consciousness prior to accident without any warning symptoms or knowledge that such a condition could occur will relieve the driver of liability for negligence. Walker v. Cardwell, 348 So.2d 1049 (Ala. 1977).
Suspension of Drivers’ Licenses
Administrative Suspension: A person involved in an accident where a person is injured, killed or there is more than $250 worth of property damage must fill out a SR-13, and file it within thirty (30) days with the Director of Public Safety. Ala. Stat. § 32-7-5. The suspension will last two (2) years or until the at-fault party deposits the security required. Ala. Stat. § 32-7-8.
Judgment: A form called a PFR-1 requires a clerk or judge to certify sixty (60) days after a judgment is final and no appeal is filed, and must be mailed together with a certified copy of the judgment. Ala. Stat. § 32-7-14. The judgment suspension will continue for ten (10) years from the judgment date, or until the judgment is satisfied and the person gives proof of financial responsibility. Ala. Stat. § 32-7-15.
Contact Information: Alabama Law Enforcement Agency, Driver License Division, P.O. Box 1471, Montgomery, AL 36102-1471, (334) 242-4222, http://www.dps.alabama.gov/Home/
Use of Non-Original Equipment Manufacturer (OEM) Aftermarket Crash Parts in Repair of Damaged Vehicles
Authority: Ala. Stat. § 32-17A-1 to § 32-17a-3 (1975).
Summary: Alabama requires the insurer and repair shop to disclose the use of non-OEM parts. The written estimate must clearly identify each such part used in the repair. All non-OEM parts must have a logo or the name of the manufacturer on the part. The part’s manufacturers, rather than the auto manufacturer, are responsible for part warranties.
Federal , State, and Local Governmental Entities
Municipal/County/Local Government Immunity and Tort Liability
Legal Authority: For years, municipalities and counties were immune to tort liability in the exercise of governmental (immune), as opposed to proprietary (not immune) functions. Hilliard v. City of Huntsville, 585 So.2d 889 (Ala. 1991). That all changed in 1975. Local governmental entities can now be sued without regard to former governmental-proprietary distinctions. Jackson v. City of Florence, 320 So.2d 68 (Ala. 1975).
Municipality: Sworn statement/claim must be filed with clerk within six (6) months, detailing manner of injury, damages, etc. Ala. Code § 11-47-23.
County: Itemized, verified claim must be filed with County Commission within twelve (12) months and must be acted on within 90 days prior to suit or is considered disallowed. Ala. Code § 11-12-8.
Municipality: City and town liability limited to neglect of employees. Only employee liable for intentional act. Ala. Code § 11-47-190. A municipality has duty to maintain sidewalks in safe condition and is liable for negligent failure to do so, Johnson v. City of Opelika, 71 So.2d 793 (Ala. 1954).
County: County can be sued in any court. Ala. Code §§ 6-5-20, 11-2-1.
Comments/Exceptions: In 1984, Congress enacted the Local Government Antitrust Act (15 U.S.C. §§ 34-36 (1984)), which eliminates certain damage suits under the Clayton Act: treble damage claims by “persons,” single damage claims by the U.S., and treble damage claims by States. Protection against such damage suits extends to local governments. Undecided whether a governmental employee can be sued in his individual capacity for actions done on behalf of his employer. Suttles v. Roy, 75 So.3d 90 (Ala. 2010).
$100,000 Per Person/$300,000 Per Occurrence/$100,000 Property Damage. Ala. Code §§ 11-93-1 through 11-93-3.
Association of County Commissions of Alabama established a self-insurance fund for local government liability insurance. Ala. Code §§ 11-30-1, et seq.
Limits apply to municipal or county employees sued in their individual capacities. Suttles v. Roy, 75 So.3d 90 (Ala. 2010).
State Sovereign Immunity And Tort Liability
Tort Claims Act: No Tort Claims Act.
Alabama distinguishes between liability of the State and liability of State employees in their individual capacity (State-agent liability). Alabama enjoys strong sovereign immunity (known as “State-agent immunity”). It is almost invincible. Hutchinson v. Bd. of Trs. of Univ. of Ala., 256 So.2d 281 (Ala. App. 1971). It can never be made a defendant in any court. Ala. Const. Art. I, § 14. (“§ 14”). Alabama immunity is called “State immunity”. Individual State employee immunity is called “State-agent immunity.”
Notice Deadlines: None.
Claims/Actions Allowed: Individual State employees have qualified immunity (State-agent immunity) and can be sued for conduct “contrary to clearly established law” if not acting in good faith. Issue is whether a reasonable official could have believed his or her actions were lawful in light of clearly established law. Ex parte Sawyer, 876 So.2d 433 (Ala. 2003). State employees whose positions exist by virtue of legislative pronouncement get “State-agent immunity.” Claims against State employees who serve as constitutional officers barred by full State immunity. Burden-shifting process. State employee must show that action was subject to immunity. Then burden shifts to plaintiff to show exception. Ex parte Estate of Reynolds, 946 So.2d (Ala. 2006) (e.g., employee on personal errand at time of accident).
Comments/Exceptions: Operating a vehicle in scope of employment is protected. State-agent immunity protects State employees when formulating plans, exercising judgment, or discharging duties (including driving a vehicle), unless:
(1) When the U.S. or Alabama Constitutions or state law require otherwise; or
(2) Where State agent acts “willfully, maliciously, fraudulently, in bad faith, beyond his or her authority, or under a mistaken interpretation of the law.”*
Ex parte Cranman, 792 So.2d 392 (Ala.2000); Parker v. Amerson, 519 So.2d 442 (Ala. 1987).
*Police given Peace Officer Immunity under § 6-5-338(a) for “discretionary acts.” Two-prong test:
(1) defendant must prove discretionary function; and
(2) burden then shifts to plaintiff to show bad faith/malice/willfulness.
Hollis v. City of Brighton, 950 So.2d 300 (Ala. 2006).
Liability insurance covering State employees for wrongful acts is required. Ala. Code § 36-1.6.1.
Damage Caps: None.
The damage caps found in Ala. Stat. §§ 11-93-1 to 11-95-3 do not apply to actions against State. No punitive damages against the State. Ala. Stat. § 6-11-26.
General Tort Laws/Statutes
Pure Joint and Several Liability. Each defendant may be held liable for the entire loss. Tatum v. Schering Corp., 523 So.2d 1048 (Ala. 1988).The right of action against joint tortfeasors is one and indivisible and fault-based apportionment between tortfeasors is not allowed. Ex parte Goldsen, 783 So.2d 53 (Ala. 2000); Matkin v. Smith, 643 So.2d 949 (Ala. 1994); Crigler v. Salac, 438 So.2d 1375 (Ala. 1983); Mikkelsen v. Salama, 619 So.2d 1382 (Ala. 1993); General Motors Corp. v. Edwards, 482 So.2d 1176 (Ala. 1985).
No contribution or indemnity between joint tortfeasors allowed unless valid indemnification agreement exists or contribution plaintiff is totally without fault but held liable due to non-delegable duty. An important exception exists in medical malpractice cases where one tortfeasor can seek indemnity against another if the other’s negligence was the primary or proximate cause of the injury. Matkin v. Smith, 643 So.2d 949 (Ala. 1994).
In actions seeking indemnification, suit must be filed two (2) years after liability has become fixed. Ex parte Stonebrook Development, L.L.C., 854 So.2d 584, 591 (Ala. 2003).
Contributory Negligence/Comparative Fault
Pure Contributory Negligence. Damaged parties cannot recover any damages if even 1% at fault. If plaintiff is making claim based in negligence, entitlement to receive damages will be defeated by plaintiff’s negligence. John Cowley & Bros., Inc. v. Brown, 569 So.2d 375 (Ala. 1990); Ala. Power Co. v. Schotz, 215 So.2d 447 (Ala. 1968).
Dog Bite Laws
Dog owner is liable for damage caused by dog if, without provocation, the dog bites or injures any person who is at a place where he or she has a legal right to be, but only when the plaintiff is on property owned or controlled by the owner of such dog at the time such bite or injury occurs or when the plaintiff was chased off the property and was pursued by the dog. Ala. Code § 3-6-1.
Plaintiff is lawfully on the property awfully upon the private property when he is delivering mail, reading meters, delivering milk, or when making repairs to any public utility or service on the property, or when he is on such property upon the invitation, either expressed or implied, of the owner or lessee of such property. Ala. Code § 3-6-2.
Dog owner can prove he had no knowledge of any circumstances indicating the dog was vicious, and if not, then the plaintiff can only recover “actual expenses” incurred. Ala. Code § 3-6-3.
Plaintiff can still pursue common law negligence claim against dog owner. Ala. Code § 3-6-4.
In 1992, the Alabama Supreme Court radically expanded the means of proving scienter (knowledge of dangerous propensity of the dog) by allowing for a jury finding based on actual or constructive knowledge of the “breed propensity” of the dog in question. The supreme court’s innovation was ostensibly a social policy measure fueled by well-publicized attacks by certain “dangerous breeds,” i.e., Rottweilers, Doberman Pinschers, and Pit Bull Terriers. Unfortunately for the attorney involved in a dog-bite case, the question of how one goes about proving (or disproving) the breed propensity under the Humphries standard is not quite clear. Humphries v. Rice, 600 So. 2d 975 (Ala. 1992). The traditional common law rules for proving scienter would seem to apply but, even if they do, contending with the Humphries standard still presents various practical issues for the litigator.
Economic Loss Doctrine
Majority Rule. A cause of action does not arise in tort under theories of negligence, wantonness, strict liability, or Extended Manufacturer’s Liability Doctrine when a commercial product malfunctions or is defective and the malfunction or defect results in damage only to the product itself, and not personal injury or damage to “other property”. Ford Motor Co. v. Rice, 726 So. 2d 626 (Ala. 1998); Lloyd Word Coal Co. v. Clark Equip. Co., 543 So.2d 671 However, the ELD does not bar recovery for damages caused by a defective product to “other property.” Vesta Fire Ins. Corp. v. Milam & Co. Constr., 901 So.2d 84 (Ala. 2004); Tuscumbia City Sch. Sys. v. Pharmacia Corp., 871 F. Supp. 2d 1241 (N.D. Ala. 2012); Hanover Ins. Co. v. BASF Corp., 2019 WL 220240 (N.D. Ala. Jan. 16, 2019). A product is considered “other property” when a replacement part on that product fails and causes damage to the product. Everett v. Brad Ragan, Inc., 2000 WL 360240 (S.D. Ala. 2000) (defective fuel filter replacement on truck). There is also no cause of action under the Alabama Extended Manufacturer’s Liability Doctrine (AEMLD) for damage suffered to the product only. Wellcraft Marine v. Zarzour, 577 So.2d 414 (Ala. 1990). An exception to the ELD is fraudulent inducement resulting in “purely economic loss to a product itself based upon value that is indicated by a seller’s representations but not actually received, even when the product was in fact working properly.” Ford Motor Co. v. Rice, 726 So.2d 626 (Ala. 1998). The ELD only applies in product liability claims as to manufacturers. Lloyd Wood Coal Co., supra. There is no tort action allowed against a product manufacturer where the product malfunctions and causes damages only to itself. Harris Moran Seed Co. v. Phillips, 949 So.2d 916 (Ala. App. 2006). When a product defect results in damage only to the product itself, there is no cause of action in tort under theories of negligence, wantonness, strict liability, or EMLD.
In a recent decision involving damage to a home as a result of water leaks from PEX piping, the plaintiffs alleged damages to “other property” (e.g., floors, walls, ceilings, cabinets, etc.) which they claim are not barred by the ELD. Freeman v. NIBCO, Inc., 2020 WL 9814119 (N.D. Ala. 2020). The PEX manufacturer disagreed. Relying on Hanover and cases outside of Alabama, the manufacturer asserted that its plumbing products were so integrated into the plaintiffs’ houses that damage to the houses’ ceiling, walls, and floors is effectively the same as damage to the plumbing products themselves, such that the ELD bars those damages. They cited Premix-Marbletite Mfg. Corp. v. SKW Chems., Inc., 145 F. Supp. 2d 1348 (S.D. Fla. 2001); Wash. Apts., L.P. v. Oetiker, Inc., 43 Misc. 3d 265, 978 N.Y.S.2d 731 (N.Y. Sup. Ct. 2013); and Wausau Tile, Inc. v. Cnty. Concrete Corp., 593 N.W.2d 445, 452 (Wis. 1999). The court ruled that Alabama law did not prevent the plaintiffs from recovering all of their asserted damages.
No case applying Alabama law has analyzed specifically whether the ceiling, walls, or floors of a house damaged by defective plumbing is “other property” that escapes the ELD, but Hanover comes close.
Real or Personal Property. Parents or guardians liable when child causes intentional, willful, or malicious destruction to real or personal property. Child must be under 18-years-old. Parent’s liability is limited to $1,000. Ala. Code § 6-5-380 (1975).
Definition: Alabama defines spoliation as: “an attempt by a party to suppress or destroy material evidence favorable to the party’s adversary.” Vesta Fire Ins. Co. v. Milam & Co. Constr., Inc., 901 So.2d 84, 93 (Ala. 2004) (quoting May v. Moore, 424 So.2d 596, 603 (Ala. 1982)); Wal-Mart Stores, Inc. v. Goodman, 789 So.2d 166, 176 (Ala. 2000).
Third-Party Tort: Smith v. Atkinson, 771 So.2d 429, 438 (Ala. 2000), holds that spoliation may be a basis for a cause of action where a third-party has negligently destroyed material evidence, but states that adverse inference instruction and discovery sanctions are the remedy when spoliation is charged against an opposing party. Smith established a test to determine when a party could be liable for negligent spoliation of evidence. Smith, at 771 So.2d at 432, analyzes the concepts of duty, breach, and proximate cause. With respect to proximate cause, it held: “in order for a plaintiff to show proximate cause, the trier of fact must determine that the lost or destroyed evidence was so important to the plaintiff’s claim in the underlying action that without that evidence the claim did not survive or would not have survived a motion for summary judgment under Rule 56, Ala. R. Civ. P.” Smith, at 771 So.2d at 434.
In order for a defendant to show proximate cause, the trier of fact must determine that the lost or destroyed evidence was so important to the defense in the underlying action that without that evidence the defendant had no defense to liability. Id.
Adverse Inference: If the trier of fact finds a party guilty of spoliation, it is authorized to presume or infer that the missing evidence reflected unfavorably on the spoliator’s interest. McCleery v. McCleery, 200 Ala. 4, 75 So. 316 (Ala. 1917). Spoliation “is sufficient foundation for an inference of [the spoliator’s] guilt or negligence.” May v. Moore, 424 So.2d 596, 603 (Ala. 1982); Goodman, supra; Christian v. Kenneth Chandler Constr. Co., 658 So.2d 408, 412 (Ala. 1995).
Sanctions: Spoliation can have special consequences, i.e., sanction under Rule 37, Ala. R. Civ. P., when a party frustrates a discovery request by willfully discarding critical evidence subject to a production request. Iverson v. Xpert Tune, Inc., 553 So.2d 82 (Ala. 1989). In such a situation, where the plaintiff is guilty of spoliation, the sanction of dismissal of the claim may be warranted. Iverson, supra. Dismissal for failure to comply with a request for production may be warranted even when there was no discovery pending or even litigation underway at the time the evidence in question was discarded or destroyed. Vesta Fire Ins. Corp. v. Milam & Co. Constr., Inc., 901 So.2d 84 (Ala. 2004). Alabama courts have consistently employed a five-factor analysis in considering the appropriate sanction for spoliation of evidence: (1) the importance of the evidence destroyed; (2) the culpability of the offending party; (3) fundamental fairness; (4) alternative sources of information obtainable from the evidence destroyed; and (5) the possible effectiveness of other sanctions less severe than dismissal. Story v. RAJ Properties, Inc., 909 So.2d 797 (Ala. 2005) (citing Vesta Fire, 901 So.2d at 94-95). “In a case of classic spoliation, the offending party purposefully and wrongfully destroyed evidence he knew was supportive of the interest of his opponent.” Story, 909 So.2d at 804 (internal quotations omitted).
Statute of Limitations
- Personal Property2 YearsAla. Stat. § 6-2-38*
- Personal Property/Conversion6 YearsAla. Stat. § 6-2-34(3)
- Personal Injury/Death2 YearsAla. Stat. § 6-2-38
- Breach of Contract/Written6 YearsAla. Stat. § 6-2-34(9)
- Breach of Contract/Oral6 YearsAla. Stat. § 6-2-34(9)
- Breach of Contract/U.C.C./Goods4 YearsAla. Stat. § 7-2-725
- Statute of Repose/ProductsN/AN/A
- Statute of Repose/Real Property7 YearsAla. Stat. § 6-5-221**
- Breach of Warranty4 YearsAla. Stat. § 7-2-725(1)
- Workers’ Comp Third Party Case2 YearsAla. Stat. §25-5-11
- Strict Product Liability2 YearsAla. Stat. § 6-2-38
Statute of Limitations Exceptions
*Except actions based on conversion, and actions involving wanton conduct or an intentional tort to real or personal property, which is 6 years. Ala. Stat. § 6-2-34 (3); Ex parte Capstone Bldg. Corp., 96 So.3d 77 (Ala. 2012).
**7 Years from substantial completion to improvement to real property against any person performing or furnishing the design, planning, supervision or observation of the construction. Ala. Stat. § 6-5-221(2011). On May 26, 2011, the Alabama Legislature decreased the Statute of Repose for commencing litigation against an architect, engineer or builder from thirteen (13) years to seven (7) years.
Health Insurance Subrogation
Health and Disability Insurance
Statute of Limitations: 2 Years. Ala. Stat. § 6-2-38.
Subrogation of Medical and Disability Benefits are allowed. Int’l Underwriters/Brokers, Inc. v. Liao, 548 So.2d 163 (Ala. 1989). Made-Whole and Common Fund apply. Wolfe v. Alfa Mut. Ins. Co., 880 So.2d 1163 (Ala. Civ. App. 2003); Whigham v. Estate of Whigham, 781 So.2d 969 (Ala. Civ. App. 2000).
Admissibility of Expert Testimony
Admissibility Standards: Daubert
Case/Statutory Law: Ala. Code § 12-21-160 (1975)
Comments: The Alabama Legislature amended § 12-21-160, Ala. Code 1975, effective January 1, 2012, to adopt, with some exceptions, the standard for scientific expert testimony established in Daubert.
Pre-Suit Disclosure of Liability Policy Limits in Third-Party Claims
Duty To Disclose: No.
Failure To Disclose A Basis For Bad Faith: Alabama law recognizes bad faith actions and actions based on negligence when the insurer wrongfully fails to settle a claim against its insured. Waters v. Am. Cas. Co. of Reading, Pa., 73 So. 2d 524, 529-30 (Ala. 1954). Thus, if an insurance carrier is given the opportunity to settle within policy limits, Alabama law imposes a duty of ordinary care on the insurer to investigate the matter and see if the settlement is feasible. Id. Alabama courts have held that the decision not to settle must be honest, intelligent, and objective. State Farm Mut. Auto. Ins. Co. v. Hollis, 554 So.2d 387, 390 (Ala. 1989).
Alabama law does not require disclosure of limits of coverage prior to the filing of a civil action. Ala. R. Civ. P. 26(b)(3). However, Alabama law does allow discovery of the contents of any insurance agreement by which an insurer “may be liable to satisfy part or all of a judgment that may be entered in the action or to indemnify or reimburse for payments made to satisfy the judgment.” Limits of liability insurance policies are discoverable in personal injury actions under rule permitting discovery of the existence and contents of liability policy limits. Ex parte Badham, 730 So.2d 135 (Ala.1999).
One-Party Consent: Alabama statute defines eavesdropping as to “overhear, record, amplify or transmit any part of the private communication of others without the consent of at least one of the persons engaged in the communication.” Ala. Code § 13A-11-30(1) and § 13A-11-31.
Product Liability Subrogation
Product Liability Law
Statute of Limitations/Repose: 2 years for personal injury and wrongful death. Ala. Code § 6-2-38(1).
Liability Standards: Negligence, warranty, and other (Alabama Extended Manufacturer’s Liability Doctrine).
Fault Allocations: Pure Contributory
Non-Economic Caps/Limits On Actual Damages: Wrongful Death, Purely Punitive
Punitive Y/N and Limits: Yes, personal injury limit.
Heeding Presumption?: No. Deere & Co. v. Grose, 586 So.2d 196, 198 (Ala. 1991).
Innocent Seller Statute: Yes.
Joint and Several Liability: Yes.
Available Defenses: Assumption of Risk; Preemption; Learned Intermediary; Alteration; Sophisticated User; Misuse; Compliance with Government Standards; Seatbelts
Restatement 2nd or 3rd?: Both.
“Matching Regulations” And Laws Affecting Homeowners Property Claims
Caselaw: A replacement cost policy only requires the insurer to pay for the pieces of property that were actually damaged. Graffeo v. State Farm Fire & Cas., Inc., 628 So.2d 790 (Ala. Civ. App. 1993); see also Padgett v. State Farm Fire & Cas. Co., 714 So.2d 302 (Ala. Civ. App. 1997).
Condominium/Co-Op Waiver of Subrogation Laws
Association’s insurance policy must contain waiver of subrogation against any unit owner or member of household. Alabama’s Uniform Condominium Act § 35-8A-313(d).
Damage to Property Without Market Value
Service Value: “Where the article lost has no market value, the rule of damages seems then to be its value to the plaintiff; and … inquiry… into the constituent elements of the cost to the plaintiff in producing it.” Southern Express Co. v. Owens, 41 So. 752 (Ala. 1943).
Intrinsic Value: “The action of the court in allowing the witness to state the cost of the articles that are not shown to have had a market value was proper.” Kates Transfer & Warehouse Co. v. Klassen, 59 So. 355 (Ala. App. 1912).
Sentimental Value: “The plaintiff, in the absence of evidence showing market value, may prove other factors of value such as the value of the property to him.” Lary v. Gardener, 908 So.2d 955 (Ala. App. 2005).
General Contractor Overhead And Profit Payments In First-Party ACV Property Damage Claims
Payment and Depreciation of GCOP/Sales Tax: No available state case law authority or opinion issued by the Commissioner/ Department with regard to payment of GCOP. ACV includes GCOP when it is reasonably likely that the services of a general contractor will be necessary in repairing or replacing the property at issue. This is true regardless of whether the insured actually repairs or replaces the property. Mills v. Foremost Ins. Co., 511 F.3d 1300 (11th Cir. 2008). In 2017, Alabama Senate Bill No. 268 proposed changes to statute to include a “cost of undertaking” definition as “the total cost of the materials, labor, supervision, overhead, and profit.” Such language being enacted would be persuasive toward GCOP being paid for by property insurers. However, it died in chamber. In an amicus curiae brief, the Property Casualty Insurer’s Association of America argued that recent certification of a class based on an obligation to pay GCOP when there are three (3) trades or more is contrary to interests of both policyholders and insurers. National Sec. Fire & Cas. Co. v Dewitt, 85 So.3d 355 (Ala. 2011).
If a lease clearly and unambiguously states that each party agrees to cause any fire insurance policy on the property to contain a waiver of subrogation or endorsement under which the insurance company waives its right of subrogation against any party to the lease agreement in the case of destruction or damage by fire, each party waives any cause of action against the other in case their property is damaged by fire as the result of other’s negligence. McCay v. Big Town, Inc., 293 Ala. 582, 307 So.2d 695 (Ala. 1975).
An insurer has no right of subrogation against its own insured. Moring v. State Farm Mut. Auto. Ins. Co., 426 So.2d 810 (Ala. 1982). There is no right of subrogation against a tortfeasor when the tortfeasor and victim are insured by the same insurer. Id. In that case, plaintiff Karen S. Moring was injured in a single vehicle accident in Mobile County. The vehicle in which she was a passenger was being driven by Lawrence D. Phillips. Moring incurred in excess of $13,000 in medical expenses as a result of the injuries she suffered. At the time she was injured, Moring’s father, Herbert Moring, had in full force and effect four policies of insurance issued by defendant State Farm Mutual Automobile Insurance Company. The four policies carried medical payment benefits in the aggregate amount of $8,000. State Farm also provided liability and medical payments coverage to Lawrence Phillips, under a policy insuring his father Anthony Phillips and his family. The liability limits were $25,000 per person while medical benefits limits were in the amount of $5,000 per person. The court held that under the facts of this case, State Farm had no right of subrogation against the tortfeasor Phillips. It appears that, Alabama, unlike some other states, applies the ASR to cases which involve separate insureds under two separate policies.
The purchaser of a home has an insurable interest in the property but does not inherently become an “additional insured” on the contractor’s builder’s risk policy by purchasing the home. McGuire v. Wilson, 372 So.2d 1297 (Ala. 1979). In McGuire, McGuire, the homebuilder, got a builder’s risk policy from American Liberty, which insured McGuire from loss during construction of a home. McGuire contracted to sell the home to Wilson, contingent on Wilson getting an FHA loan. Wilson moved into the home prior to getting the FHA loan and negligently started a fire that damaged the home. American Liberty paid McGuire $22,000 for the damage assuming the damage was covered under the builder’s risk policy and the home subsequently was officially sold to Wilson. American Liberty filed a subrogation action against Wilson. The court held that a purchaser with a beneficial interest does not become an additional insured under the builders’ risk policy so as to trigger the ASR and, therefore, subrogation was permissible.
Alabama’s Restitution to Victims of Crimes Act provides for the recovery of restitution by a victim from a criminal defendant. Ala. Stat. § 15-18-65, et seq. It states that it is essential “that all perpetrators of criminal activity or conduct be required to fully compensate all victims of such conduct or activity for any pecuniary loss, damage or injury as a direct or indirect result thereof.” Ala. Stat. § 15-18-65. Perpetrators of criminal activity or conduct are required to fully compensate all victims for any pecuniary loss, damage, or injury as a direct or indirect result thereof when the “defendant’s criminal act was the proximate cause of the victim’s injury and a reasonable person could have foreseen or anticipated that the injury might occur as a natural consequence of the action.” Richardson v. State, 603 So.2d 1050 (Ala. Crim. App. 2004) Therefore, before a criminal defendant can be held responsible for making restitution to a victim, it must be shown that the criminal defendant’s conduct was the proximate cause of the injury or damage for which restitution is being ordered. Strough v. State, 501 So.2d 488 (Ala. Crim. App. 1986). The court has broad discretion with regard to the payment and amount of restitution. Ex Parte Stutts, 897 So.2d 431 (Ala. Crim. App. 2004). Absent a clear abuse of discretion, a trial court’s restitution award will not be overturned. Id.
Alabama considers a subrogated insurance company to be a “victim” for purposes of recovering restitution from a criminal defendant. Hagler v. State, 625 So.2d 1190 (Ala. Crim. App. 1993). This is because the term “victim” is meant to encompass persons who were not necessarily the primary object of the defendant’s criminal conduct. Butler v. State, 608 So.2d 773 (Ala. Crim. App. 1992). In Hagler v. State, a criminal defendant was ordered to pay restitution to the victim’s mother in the amount of $1,280 and to the Wal-Mart Group Health Plan. The court concluded that Wal-Mart Group Health Plan was a “victim” of the criminal’s wrongful conduct.
Exculpatory Agreements And Liability Waivers
Exculpatory Agreements: Valid, unless it releases a party for wanton or willful conduct. Barnes v. Birmingham Intern. Raceway, Inc., 551 So.2d 929 (Ala. 1989); Young v. City of Gadsden, 482 So.2d 1158 (Ala. 1985) (overruled by Barnes).
Drafting Guidelines: Contract of adhesion are unenforceable in Alabama. These are contracts in which the principal obligation of the adhering party is the payment of money. Ensure that the major obligation of the contract is to participate in an activity or obey certain rules – not to secure the payment of money. Dudley v. Bass Anglers Sportsman Soc., 777 So.2d 135 (Ala. Civ. App. 2000).
Comments: An exculpatory agreement between parties with unbalanced bargaining powers (e.g., landlord/tenants) are scrutinized more thoroughly. Morgan v. South Cent. Bell Tel. Co., 466 So.2d 107 (Ala. 1985). The mere fact that a party did not understand the release is an insufficient defense for voluntary hazardous activities. Rommell v. Automobile Racing Club, Inc., 964 F.2d 1090 (11th Cir. 1992).
Made Whole Doctrine
The Alabama Supreme Court first adopted the Made Whole Doctrine in 1989 in the case of Liao. International Underwriters/Brokers, Inc. v. Liao, 548 So.2d 163 (Ala. 1989). Where contractual subrogation rights existed, the Court said that parties are free to contract around the Made Whole Doctrine, as long as the contract “expressly provides” that the Made Whole Doctrine will not apply. One year later, this decision was overturned when Alabama became home to one of the classic made whole decisions in all of American jurisprudence. In Powell v. Blue Cross & Blue Shield of Ala., 581 So.2d 772 (Ala. 1990), overruled on other grounds, Ex parte State Farm & Cas. Co. v. Hannig, 764 So.2d 543 (Ala. 2000), the Alabama Supreme Court held that a health Plan was not entitled to subrogation rights until the insured had been “made whole” for all elements of damages. The Made Whole Doctrine was applied to both rights of reimbursement and subrogation, and the Court looked at whether or not the Plan beneficiary had been completely compensated for all of his damages.
In 1999, this line of decisions was again affirmed by the Alabama Supreme Court in Ex parte Black, 734 So.2d 998 (Ala. 1999). However, in 2000, the Alabama Supreme Court flip-flopped once more, overruling this line of decisions as being unjust. Ex parte State Farm Fire & Cas. Co. v. Hannig, 764 So.2d 543 (Ala. 2000). In a well-reasoned decision, the Alabama Supreme Court did what a number of states in this country are failing to do – it recognized the difference between legal/equitable subrogation and conventional/ contractual subrogation. The Court was motivated by its perception of the “inequitable consequences that can result from a strict application of the ‘Made-Whole’ Doctrine without regard to the express desires of the insured or the type of insurance involved.” Id. The decision overturned Powell and reinstated Liao as the rule in Alabama. In order to prevent the tortfeasor from escaping a wrongdoing, the Court held that the normal equitable rules of subrogation could be modified by contract. Id.; Wolfe v. Alfa Mut. Ins. Co., 880 So.2d 1163 (Ala. Civ. App. 2003). In Wolfe, the Court discussed precisely what sort of language was sufficient to override the Made Whole Doctrine. The Court in Wolfe totally rejected the idea that in order to override the Made Whole Doctrine, the insurance contract must specifically mention “made whole” and negate it. Instead, they indicated that the policy must only provide a statutory scheme “contrary to established equitable principles.” Id. at 1167. In Wolfe, the policy at issue contained the following language: “…if [insurer] makes a payment to its insured, and if that insured has a right to recover damages from another, [insured] shall be subrogated to that right.”
The Court held that this language alone merely gave Alfa a subrogation right but did not rise to the level of “expressly providing” that made whole was overruled. However, the policy in Wolfe also contained the following language: “[I]f [insurer] makes a payment under this policy and [insured] recovers damages from another, [insured] shall hold in trust for [insurer] the proceeds of the recovery and shall reimburse [insurer] to the extent of [insurer’s] payment, costs and fees.” This language was deemed sufficient to “expressly provide” for the abrogation of the Made Whole Doctrine. Id. at 1167-68. Therefore, in Alabama, equitable principles denying subrogation until the insured has been made whole apply to all instances of subrogation except those where a contract expressly provides otherwise. Allstate Ins. Co. v. Fugh Cole Builder, Inc., 772 So.2d 1145 (Ala. 2000); Liao, supra; Ex parte Cassidy, 772 So.2d 334 (Ala. 2000). Undoubtedly, the future of Alabama litigation will be fought over whether and to what extent the language “expressly provides” that the equitable Made Whole Doctrine does not apply. It should be noted that only the insured has standing to assert the Made Whole Doctrine. National Prop. & Cas. Ins. Co. v. DPF Architects, P.C., 792 So.2d 369 (Ala. 2000). In determining whether the insured has been made whole, the court must consider every payment made to, or on behalf of, the insured which arises out of the loss sustained, but should not consider attorney’s fees. Powell, supra.
For purposes of subrogation, the test for determining when the insured has been made whole is whether the injured plaintiff has been completely compensated for all of his losses. Alfa Mut. Ins. Co. v. Head, 655 So.2d 975 (Ala. 1995). Likewise, all sources of reimbursement must be considered in determining the extent to which the plaintiff has been compensated. It is only when the plaintiff’s recovery exceeds the sum total of the plaintiff’s damages that the right of subrogation arises. This test also applies to reimbursement of property damage claims. The determination of whether the insured has been made whole may be determined before the trial court in what is known as a Powell hearing.
If the total damages collected from the responsible tortfeasor, either through settlement or judgment, when added to the amount paid to the plaintiff by the subrogated carrier (such as reimbursement of medical expenses, lost wages, and disability), equals the amount of the plaintiff’s loss, then the plaintiff is made whole. Powell, supra. Calculation of the plaintiff’s loss must include such damages as property damage, medical expenses, pain and suffering, lost wages, and disability. Punitive damages are not included in the calculation because such damages are not an element of compensation. Attorney’s fees and costs are not included as part of the insured’s loss. Id.
To calculate the plaintiff’s recovery for purposes of the Made Whole Doctrine, every payment made to or on the plaintiff’s behalf that arises out of the damages in the plaintiff’s claim must be considered. Id. The Supreme Court of Alabama has rejected the argument that just because an insured settles a third-party claim it has been made whole. Complete Health, Inc. v. White, 638 So.2d 784 (Ala. 1994). The burden is on the insurer to prove that the insured has been fully compensated before asserting its subrogation rights against the insured. Id. If plaintiff’s counsel takes the position that the insurer is not entitled to any reimbursement of its subrogation claim, then he may not be entitled to reduce the amount of reimbursement by attorney fees if the insurer proves that your client is fully compensated. CNA. Ins. Co. v. Johnson Galleries of Opelika, 639 So.2d 1355 (Ala. 1994).
Medical Expenses, Insurance Write-Offs, and The Collateral Source Rule
Collateral Source Rule: Alabama recognizes the CSR but modified it by statute as a rule of evidence. Evidence of plaintiff’s receipt of collateral sources, such as insurance, admissible. Ensor v. Wilson, 519 So.2d 1244 (Ala. 1987); Jones v. Crawford, 361 So.2d 518 (Ala. 1978); Gribble v. Cox, 349 So.2d 1141 (Ala. 1977). CSR modified by statute (see right) in 1979 for product liability cases, and in 1987 for medical malpractice and civil actions generally (see right). Alabama law regarding the CSR and its exceptions remains murky.
Recovery Of Medical Expenses Rule: CSR modified by statute as a rule of evidence, eliminating the write-off issue for all practical purposes. In all civil actions, defendant can introduce evidence of collateral source payments of medical expenses. If defendant does, plaintiff can introduce evidence of the costs of obtaining those collateral source payments, as well as evidence of subrogation obligations. Addresses evidence only. Damage recovery determined by common law. Ala. Stat. § 12-21-45. Defendant may argue that reimbursing plaintiff for medical expenses already paid by an insurer is a double recovery. Plaintiff may argue that the defendant reaps a windfall unless additional damages are awarded, to compensate the plaintiff for having the discipline and foresight to purchase insurance. Plaintiff is free to introduce gross amount of medical expenses billed. Hull v. Jackson, 794 So.2d 349 (Ala. 2001). Section 12-21-45 held unconstitutional in 1996. American Legion Post No. 57 v. Leahey, 681 So.2d 1337 (Ala. 1996). Then held constitutional in 2000. Marsh v. Green, 782 So.2d 223 (Ala. 2000).
Related Law/Comments: No law governing specifically with Medicare /Medicaid write-downs. In product liability suits, proof that plaintiff’s medical expenses paid by medical, hospital, or workers’ compensation insurance is admissible. Plaintiff’s cost of obtaining them is admissible. Ala. Code. § 6-5-522. However, collateral sources inadmissible if they must be repaid due to subrogation. Ala. Stat. § 6-5-524. In medical malpractice suit, collateral sources and plaintiff’s cost of obtaining them are admissible. Plaintiff can show obligation to repay subrogation, but doesn’t affect admissibility of collateral sources by defendant. Ala. Stat. § 6-5-545. Litigants usually stipulate to (1) gross amount of medical bills; (2) amount of bills paid by insurance or other collateral sources; (3) the amount of any write-down or write-off; and (4) the plaintiff’s out-of-pocket payments or subrogation obligations.
Employee Leasing Laws
An employee of a temporary services agency was also held to be an employee of the client company to which she was assigned to work for purposes of workers’ compensation, where the client company supervised her work and paid a fee to the temporary services agency which included an amount to obtain workers’ compensation insurance for the worker. Marlow v. Mid South Tool Co., Inc., 535 So.2d 120 (Ala. 1988).
Hospital Lien Laws
Statute: Alabama Property Code §§ 35-11-370 – 375. Lien Declared.
Perfecting Lien: To perfect a lien in Alabama, the hospital must:
(1) Before or within 10 days of discharge of patient, file in the office of the judge of probate in the county where the cause of action accrued, a verified statement setting forth the name, address, dates of admission and discharge, amount claimed to be owed, and to the best of the hospital’s knowledge, name and address of all persons, firms, or corporations who may be liable for the damages from the treated injuries. § 35-11-371.
(2) Within one day of filing the lien, the hospital must send by certified mail, a copy of the lien filing to each person, firm, or corporation so claimed to be liable for the damages. The notice must also be sent to the patient, guardian or personal representative to the address given at admission. The filing of the notice acts as a notice to all parties, known or unknown, at the time of the filing of the lien. § 35-11-371.
Comments: The hospital’s lien attaches to all reasonable charges for hospital care, treatment, and maintenance of an injured person who entered such hospital within one week of sustaining injuries. § 35-11-370. The lien attaches to all judgments, settlements, and settlement agreements entered into by the injured party for the actions related to the injuries for which treatment was sought. § 35-11-372. The lien does not attach to any real or personal property of the injured party. The lien does not attach to any workers’ compensation benefits. The hospital has no independent right to assert a cause of action against any potential responsible party. If injured party settles their claim within the 10-day period the hospital has to perfect the lien, the lien is not waived unless the hospital signs a release of their lien. If the hospital does not sign off on the lien during the 10-day period, the hospital is entitled to bring a civil action for damages and is entitled to seek recovery of court costs and attorneys’ fees. § 35-11-372.
OCIP/CCIP Subrogation In Workers’ Compensation Construction Cases
OCIP Law: No statute or case law specifically dealing with effect of OCIP/CCIP.
Statutory Employer Law: Alabama remains one of the minority states who have maintained a sensible approach to the Exclusivity Rule in construction settings. In order for contractor or subcontractor to have their liability limits limited to benefits paid under workers’ compensation, it is essential that the person seeking to limit the remedy of the injured party be in an actual employer/ employee relationship with that party. The Exclusive Remedy Rule does not preclude a suit against an owner or general contractor, even though the compensation benefits were paid by the insurer for the owner or general contractor. Kilgore v. C.G. Canter, 396 So.2d 60 (Ala. 1981)
Comments: Must generally look to terms of the wrap-up program documents. The Exclusive Remedy Rule does not preclude a suit against an owner or general contractor, even though the compensation benefits were paid by the insurer for the owner or general contractor. Kilgore v. C.G. Canter, 396 So.2d 60 (Ala. 1981); Ala. Stats. § 25-5-51, 25-5-53.
Recovery Of Increased Workers’ Compensation Premiums By Employer
Recovery For Increased Premiums? Undecided.
Statute/Case Law: None.
Rule Summary: There is no authority or precedent allowing or prohibiting the attempted recovery of damages for increased workers’ compensation insurance premiums by an employer from a third-party tortfeasor.
Which Workers’ Compensation “Benefits” Can Be Subrogated?
No precedent or discussion in case law. Section 25-5-11 provides as follows:
To the extent of the recovery of damages against the other party, the employer shall be entitled to reimbursement for the amount of compensation theretofore paid on account of injury or death.
For purposes of this amendatory act, the employer shall be entitled to subrogation for medical and vocational benefits expended by the employer on behalf of the employee:
Attorney’s Fees: The Alabama Workers’ Compensation Act sets the amount of fees that attorneys can charge in workers’ compensation cases. Section 25-5-90 provides that a 15% attorneys’ fee can be paid out of the compensation awarded or paid to the employee, upon application of the employee. The judge fixes the fee amount.
Statute of Limitations: 2 years. Ala. Stat. §25-5-11.
Can Carrier Sue Third Party Directly: Yes, 6 months after statute of limitations.
Right to Intervene: Yes, if shown it could make substantial contribution.
Recovery from UM/UIM Benefits: No.
Subrogation Against Medical Malpractice: Yes.
Subrogation Against Legal Malpractice: No.
Recovery Allocation/Equitable Limitations: (1) Carrier Reimbursement, Less Attorney’s Fees; (2) Balance to Plaintiff.
There is confusion over whether there are reimbursement rights for both medical benefits and indemnity benefits.
Employer Contribution/Negligence: No, the employer is immune even if intentional.
Attorney’s Fees/Costs: Pro-Rata. Fitch Formula. The carrier can recover fees if it files suit.
Future Credit: Yes, the carrier owes fees on value of future benefits. Use Miller Formula.
Auto No-Fault: No.
Workers’ Compensation Subrogation Waiver Endorsements
Subrogation Statute: Ala. Stat. § 25-5-11
Waiver Allowed? Nothing in the Alabama Workers’ Compensation Act or applicable case law prohibits the use or efficacy of a waiver of subrogation.
Effect Of Waiver Endorsement On Carrier’s Right To Assert A Lien On Claimant’s Recovery: The effect of a waiver of subrogation on the carrier’s rights, including its right to enforce its statutory lien, has not yet been decided.
Other Applicable Law: None.
Workers’ Compensation Claims by Undocumented Employees
Statute: The statutory term “employee” includes “aliens,” but is otherwise silent as to their status or rights. Ala. Code § 25-5-1.
Case Law: Yes. On October 18, 2005, Jefferson County Circuit Judge G. William Noble signed an order ruling that illegal immigrant, Omar Santos-Cruz, is entitled to workers’ compensation benefits and medical care for life. The case is of questionable legal precedent as it was not appealed.
Comments/Explanation/Other: Rights of deceased worker’s non-resident dependents to death benefits under the Workers’ Compensation Act were separate and distinct from the rights of the deceased worker under the Act and were not derivative of the worker’s rights. Dependents were barred from challenging the constitutionality of the provision of the Act that excluded non-resident alien dependents from recovering death benefits. Duran v. Goff Grp., 23 So.3d 45 (Ala. App. 2009).