On May 1, 6:42 am, s...@panix.com (Seth) wrote:
> In article <7fib33pjsqf2c0rekda98s0d8r9n5lo...@4ax.com>,
> Mike Jacobs <mjacobs...@gmail.com> wrote:
>
> >As an innocent indemnitor, the insurer thus has the primary right to
> >full reimbursement from any recovery they may get from that
> >responsible third party (the uninsured driver) before they owe a penny
> >of it back to their own insured driver.
Which, in context of the post this was excerpted from, applies in jurisdictions where the insurer is required to be "made whole" before the insured can recover his deductible. As noted in that original post, some other states require the claims to be split proportionately, in relation to their percentage of value. E.g if the insurer paid 70% of the claim and the deductible covered 30%, the insurer takes the first 70% of any recovery (after fees and costs) even if it is less than full, and the insured recovers the remaining 30% (after fees and costs).
> That would give the insurance company an incentive to settle for less
> than the full damages, since all the money it's giving up it would
> have to pay the policyholder anyway. That seems perverse.
Look at it the other way: what incentive would the insurer have to pursue the claim at all, if it had to pay back the deductible first, before the insurer received any reimbursement of the amount it already paid out? The insurer is doing all the work, and taking all the risk, and thus has the right to call the shots.
There's _always_ an incentive to settle for less than full value. Otherwise, why settle? Zero offers, and policy limits (or full dollar value) demands, make it very easy to decide to go to trial rather than settle, because then there is no room for compromise and someone else (a judge or jury) will have to make the decision because the involved parties will never see eye to eye. What gets people to the settlement table is, if they both are willing to give up a little of the best that could happen, and get a little more than the worst that could happen, so both sides go away partially satisfied. That is a win-win situation because, for both sides, "a bird in the hand is worth two in the bush".
There are some, but not many, circumstances where policy language and/or substantive law give the insured the right to approve or disapprove any third party settlement, and those usually arise in the context of third party liability insurance for commercial lines or professional liability such as medical malpractice, where policies often provide that the insurer cannot settle without the doctor's OK. But in most "personial lines" policies, such as ordinary auto and home coverage for average Joes, ol' Joe has no right at all to say yes or no to settlement of a subrogation claim, so long as the insurer has satisfied its obligation to him by paying the first party damages he claimed above his deductible. The only practical way for the insured to reduce the amount of his own deductible money he has at risk is to ask for a lower deductible, which of course carries a higher premium payment.
--
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Mike Jacobs
LAW OFFICE OF W. MICHAEL JACOBS
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