In the case of Allstate Ins. Co. v. Theodotou, 171 So. 3d 163 (Fla. 5th DCA 2015), a panel of Florida's Fifth District Court of Appeal dismantled equitable subrogation. Equitable subrogation was administered by Courts of Equity for centuries following settled principles, until this case was decided on July 24, 2015.
Equitable subrogation always required that the injured or damaged parties must be fully compensated for their injuries or damages as an element of another party seeking to stand in their shoes and sue somebody else for a part of the injuries or damages. Parenthetically, the victim has traditionally been identified as the "creditor" in equitable subrogation, whereas in recent cases, judges often refer to the injured or damaged party by the made-up word, "subrogor."
In the case of Allstate Insurance Co. v. Theodotou, the Fifth District panel expressed confusion over this requirement. The panel opinion even describes this requirement in terms that make it seem like something of a Florida Supreme Court innovation in 1999. Allstate Ins. Co. v. Theodotou, 171 So. 3d 163, 166-67 (Fla. 5th DCA 2015). Far from an innovation of the Florida Supreme Court in 1999, the requirement that the injured person must be fully compensated for the loss before anyone else can sue to recoup their payment to the injured party, this has been a requirement of equity at least until July 24, 2015.
The Florida appellate panel seemed to recognize the need for this requirement in equity when they wrote that "[s]urely, the injured victim deserves to be made whole." Allstate Ins. Co. v. Theodotou, 171 So. 3d 163, 168 (Fla. 5th DCA 2015). So much for that, however. Right after making that statement, the panel shifted its attention to the party which paid the money and no longer even expressed concern about the victim. In shifting its attention away from the victim which claimed compensation for injuries, the panel shifted its attention to the party which claimed the right to recover money it had paid under an obligation to the victim. In short, the panel shifted its attention from redressing injuries to recouping money. And then they called this "equity."
It must be recalled that the case presented a claim for equitable subrogation, meaning that the subrogation plaintiff claimed the rights of the victim against another party. It was not a case where the subrogation plaintiff claimed compensation for its own injuries; it was a case in which the subrogation plaintiff claimed the right to be compensated for the victim's injuries.
The panel's holding resulted from this skewed viewpoint. It permitted the insurance company to sue medical providers who allegedly caused a part of the victim's injuries compensated by the insurance company. The panel went further, however, and in Its opinion wrote that "equity" requires that the party which paid money to the injured victim -- here, an insurance company which paid its policy limits, which were not enough to fully compensate the victim -- should still be subrogated to the rights of the victim to sue "the Medical Providers" which allegedly increased the victim's injuries.
The panel did not explore an alternative, which would have included allowing the subrogation plaintiff to sue subsequent tortfeasors or joint tortfeasors subject to a requirement that the victim must be paid first out of any recovery.
Apparently in doubt of discarding the full compensation requirement of equity, the panel certified the following question to the Supreme Court of Florida to answer:
Is a party that has had judgment entered against it entitled to seek equitable subrogation from a subsequent tortfeasor when the judgment has not been fully satisfied?
Allstate Ins. Co. v. Theodotou, 171 So. 3d 163, 168 (Fla. 5th DCA 2015). One judge on the three-judge panel in this case joined in certifying the question, but dissented on eliminating the full compensation requirement for equitable subrogation.
Two judges, or more, can invent this rule of recoupment, if they want to. But they have no right to call their rule "equitable" subrogation.
Please Read The Disclaimer. ©2015 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with 2015 Supplements), including Section 7:9, Actions by Excess Carriers--Subrogation. All rights reserved.
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