CCP Subrogation Recovery Process 3 — Questions and Answers
Question 1: In a workers' compensation subrogation case, which party typically has the primary right to sue the third-party tortfeasor?
- The injured employee (Correct answer)
- The workers' compensation insurer
- The employer
- The state workers' compensation board
Correct answer: The injured employee
In most states, the injured employee retains the primary right to file a third-party tort action, with the insurer having a lien on any recovery.
Question 2: When a subrogating insurer and the insured jointly pursue a third party and the total recovery is insufficient, how are funds typically allocated under the Made Whole Doctrine?
- The insured is paid first until made whole, then the insurer receives the remainder (Correct answer)
- The insurer is paid first as the primary loss payer
- Funds are split 50/50 between insured and insurer
- The court determines allocation based solely on fault percentages
Correct answer: The insured is paid first until made whole, then the insurer receives the remainder
Under the Made Whole Doctrine, the insured's uncompensated losses must be satisfied before the insurer can recover any subrogation proceeds.
Question 3: Which lien type gives a workers' compensation insurer a legal claim against the proceeds of an employee's third-party settlement?
- Statutory Lien (Correct answer)
- Equitable Lien
- Mechanic's Lien
- Judgment Lien
Correct answer: Statutory Lien
Workers' compensation statutes in most states create a statutory lien giving the carrier rights to third-party settlement proceeds up to the amount of benefits paid.
Question 4: A subrogation demand letter is sent to a tortfeasor's insurer. The insurer fails to respond for 90 days. What is the subrogating insurer's best next step?
- File a lawsuit before the statute of limitations expires (Correct answer)
- Wait indefinitely since the demand letter tolls the statute
- Report the delay to the state insurance commissioner only
- Accept silence as a denial and close the file
Correct answer: File a lawsuit before the statute of limitations expires
The subrogating insurer should file suit to protect its rights because a demand letter does not typically toll the statute of limitations.
Question 5: What is 'voluntary payment defense' as used by tortfeasors in subrogation disputes?
- Argument that the insurer paid without legal obligation, defeating subrogation (Correct answer)
- The tortfeasor's offer to settle the subrogation claim voluntarily
- A doctrine requiring the insurer to pay the insured before suing
- The insured's right to refuse the insurer's settlement offer
Correct answer: Argument that the insurer paid without legal obligation, defeating subrogation
The voluntary payment defense argues the insurer paid the claim without being legally obligated to do so, which can defeat subrogation rights in some jurisdictions.
Question 6: In auto subrogation, which document most clearly establishes the tortfeasor's liability and is critical to a subrogation file?
- Police Accident Report (Correct answer)
- Vehicle Registration
- Insured's Recorded Statement
- Adjuster's Reserve Sheet
Correct answer: Police Accident Report
The police accident report provides an official third-party account of fault, witness information, and often citations, making it essential to establishing liability.
Question 7: An insurer pays a fire loss and later discovers the fire was caused by a neighbor's negligence. The insured, however, had already settled with the neighbor and signed a release. What is the insurer's likely recovery?
- Nothing, because the insured's release extinguished the insurer's rights (Correct answer)
- Full subrogation recovery because the neighbor's negligence was proven
- Partial recovery based on proportional fault allocation
- Recovery from the insured for impairing subrogation rights
Correct answer: Nothing, because the insured's release extinguished the insurer's rights
When an insured releases a tortfeasor without the insurer's consent after a loss, the insurer's subrogation rights against that party are typically extinguished.
CCP Subrogation Recovery Process 3
In a workers' compensation subrogation case, which party typically has the primary right to sue the third-party tortfeasor?