Loren Smith & Melissa Murrah Kelly, Smith & Murrah, P.C Yoakum Blvd Houston, Texas The Subro Grapevine

I. Subrogating The Insured’s Contractual Claims Against A Third-Party. II. Waivers Of Subrogation. III. Releases. IV. Indemnification Provided By Employer. V. Contracting Around The Made Whole Rule And The Common Fund Doctrine.

1. The right of subrogation extends to the insured’s claims against a third-party in both tort and contract. 2. The third-party agreed to indemnify and hold harmless your insured. a. Examples:

Plaintiff (Employee of Contractor) Defendant (Chemical Company) Third Party Plaintiff Third-Party Defendant (Contractor’s Insurance Carrier) (Chemical Company’s Ins. Carrier) Third-Party Defendant (Contractor- Plaintiff’s Employer)

1. The right of subrogation extends to the insured’s claims against a third party in both tort and contract. 2. The third party agreed to indemnify and hold harmless your insured. Examples: a. The indemnity clause normally must comply with the Fair Notice Doctrine.

1. The right of subrogation extends to the insured’s claims against a third party in both tort and contract. 2. The third party agreed to indemnify and hold harmless your insured. Examples: a. The indemnity clause normally must comply with the Fair Notice Doctrine. b. The Fair Notice Doctrine would not apply if you are subrogating for your insured’s contractual liability to the claimant.

3.Your insured is an additional insured on the third-party policy of insurance with another carrier.

Plaintiff (Employee of Contractor) Defendant (Chemical Company) Third Party Plaintiff Third-Party Defendant (Contractor’s Insurance Carrier) (Chemical Company’s Ins. Carrier) Third-Party Defendant (Contractor- Plaintiff’s Employer)

3. Your insured is an additional insured on the third- party policy of insurance with another carrier. a.There may not be a right of subrogation against a co- insurer, if your carrier is primary or co-primary. b.However, if your coverage is normally primary, it still may be deemed excess in many circumstances, which would allow subrogation against the true primary carrier. c.A carrier which refuses to provide a defense cannot challenge reasonableness of the settlement.

1. Generally, carriers are allowed to waive subrogation by contract; 2. Elements: a. Waiver Provision in Policy/Consent by Carrier i. Consent Required ii. Make sure you view your policy Waivers Of Subrogation

1. Generally, carriers are allowed to waive subrogation by contract. 2. Elements: a. Waiver Provision in Policy/Consent by Carrier. i. Consent Required. ii. Make sure you view your policy. b. Written contract between Employer and Third Party. i. Should predate accident. ii. Look at scope of waiver. iii. Don’t be fooled by property damage-only waivers. Waivers Of Subrogation

“Waiver of Subrogation. Each of Landlord and Tenant hereby releases the other from any and all liability or responsibility to the other or any claiming through or under them by way of subrogation or otherwise for any loss or damage to property caused by fire or any other perils insured in the policies of insurance covering such property, even if such loss or damage shall have been caused by the fault or negligence of the other party, or anyone for whom such party may be responsible, provided, however, that this release shall be applicable and in force and effect only with respect to loss or damage occurring during such times as the releasor’s policies shall contain a clause or endorsement to the effect that any such release shall not adversely affect or impair said policies or prejudice the right of the releasor to recover thereunder and then only to the extent of the insurance proceeds payable under such policies.”

1. Generally, carriers are allowed to waive subrogation by contract; 2. Elements: a. Waiver Provision in Policy/Consent by Carrier i. Consent Required. ii. Make sure you view your policy. b. Written contract between Employer and Third Party i. Should predate accident. ii. Look at scope of waiver. iii. Don’t be fooled by property damage-only waivers. iv. Look for self-insured retention issues. Waivers Of Subrogation

1. Generally, carriers are allowed to waive subrogation by contract. 2. Elements: a. Waiver Provision in Policy/Consent by Carrier i. Consent Required. ii. Make sure you view your policy. b. Written contract between Employer and Third Party i. Should predate accident. ii. Look at scope of waiver. iii. Don’t be fooled by property damage-only waivers. iv. Look for self-insured retention issues. v. Look to see if clause is unambiguous. Waivers Of Subrogation

3. Look for other third parties to which the waiver does not apply. 4. Is there a lien remaining against the employee’s recovery? 5. Does the waiver bar the carrier’s credit against future benefits ?

1. Post-accident. a. Post payment release does not destroy carrier’s rights; b. Post payment release does destroy carrier’s rights; c. In states where the statutory right of subrogation is provided directly to the employer, instead of the carrier, a release by the employer may bar the claim. d. The carrier becomes the “pro tanto” owner of the claim to the extent of its subrogation interest. e. Attack consideration for release as insignificant. f. If employee’s release destroys subrogation rights, you might be able petition workers’ compensation commission to suspend benefits. Releases

2. Duty of employee to give notice to carrier of lawsuit or release. a. Statutory duty to notify carrier prior to settlement. Releases

2. Duty of employee to give notice to carrier of lawsuit or release: a. Statutory duty to notify carrier prior to settlement. b. No duty by employee’s attorney to notify carrier of settlement. Releases

3. Bring reimbursement/conversion claim against employee and third party for amount of settlement. a. When a third person pays a settlement or judgment to an employee, and the employee fails to reimburse the carrier, the third person and the employee “are jointly and severally liable to the compensation carrier for its entire subrogation claim”. b. Can recover amount of subrogation interest directly from employee. c. In Texas, the courts have even held the employee’s attorney to be personally liable for conversion.

4. Pursuing both underlying negligence claim and reimbursement/conversion claim. 5. Pre-accident - “Exculpatory clause”.

1. An Indemnity Clause is Not a Release of Waiver. 2. Anti-subrogation Rule. 3. Workers’ Compensation Subrogation is Strictly Statutory. a. Statute is Strictly Construed. Indemnification Provided By Employer

V. CONTRACTING AROUND THE MADE WHOLE RULE AND THE COMMON FUND DOCTRINE