No UM subrogation against excess carrier — Oklahoma

No UM subrogation against excess carrier — Oklahoma

In Raymond v. Taylor, 2017 OK 80, the Oklahoma Supreme Court said the UM carrier could not subrogate against the tortfeasor’s excess policy. Raymond was killed while a passenger in a truck driven by Taylor, which was in an accident with a truck driven by Bedell.  Both Raymond and Taylor were employees of Guy’s Seed. American Mercury Insurance Company (Mercury), issued a commercial automobile insurance policy to Guy’s Seed which provided uninsured/under-insured motorist (UM) coverage of $1,000,000 per accident.  Raymond and Taylor qualified as insureds under Mercury’s UM coverage.  Mercury paid its UM limits ($500,000 each to Taylor and Raymond), while Raymond’s suit against Bedell and his employer was pending. Raymond settled with Bedell for a confidential amount greater than the primary insurance liability limits but less than the excess policy; and paid Raymond the amount of the settlement minus the $500,000 claimed by Mercury, which was held until there was an agreement or order regarding entitlement to the money.

The trial court found Mercury was entitled to the money, the Oklahoma Supreme Court reversed, citing 36 Okla Stat. 3636(F):

In the event of payment to any person under the coverage required by this section and subject to the terms and conditions of such coverage, the insurer making such payment shall, to the extent thereof, be entitled to the proceeds of any settlement or judgment resulting from the exercise of any rights of recovery of such person against any person or organization legally responsible for the bodily injury for which such payment is made, including the proceeds recoverable from the assets of the insolvent insurer. Provided, however, with respect to payments made by reason of the coverage described in subsection C of this section, the insurer making such payment shall not be entitled to any right of recovery against such tort-feasor in excess of the proceeds recovered from the assets of the insolvent insurer of said tort-feasor. Provided further, that any payment made by the insured tort-feasor shall not reduce or be a credit against the total liability limits as provided in the insured’s own uninsured motorist coverage. Provided further, that if a tentative agreement to settle for liability limits has been reached with an insured tort-feasor, written notice shall be given by certified mail to the uninsured motorist coverage insurer by its insured.

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The Oklahoma Supreme Court found the second sentence limits the UM carrier’s right to subrogation to recovery from the tort-feasor’s primary automotive liability insurer only and prohibits recovery against the tort-feasor in excess of the proceeds recovered from primary insurer or their assets. This exception only applies to UM payments made because of under-insured vehicles and insolvent liability insurers.  “Section 3636(C) does not contemplate excess policies in determining liability limits for whether a vehicle is under-insured. GEICO, 2005 OK 40, ¶¶ 0, 13, 22, 115 P.3d at 857, 859, 860.”

The Supreme Court concluded:

[T]he tort-feasors carried $1,000,000 in primary automotive liability insurance. Because Raymond’s claim was clearly in excess of the liability limit, Mercury paid UM benefits under the definition of uninsured motor vehicle in Section 3636(C). We hold that under Section 3636(F), Mercury was limited to subrogation from the primary insurer and is not entitled to subrogation from any assets of the tort-feasor, including the excess liability policy.