A carrier pursuing a subrogation claim has no better rights than its insured. This may seem elementary and logical, but a New York court has had to remind one carrier of this standard.

The abutter to a construction project made an insurance claim for property damage arising from construction, and also sued the developer of the project under a “Zoning Lot Development Agreement.” The abutter was awarded $1.192 million in its lawsuit against the developer, and also recovered $952,424 from Seneca, its insurance carrier. The payment from Seneca included $131,523 for lost rent.

The abutter’s claim against the developer for lost rent was denied. When Seneca sued the developer, the developer moved to dismiss that lawsuit on the grounds that (a) the insured abutter had already recovered damages, and (b) the abutter’s claim for lost rent had been denied in the first lawsuit.

Seneca argued that its subrogation rights against the developer differed from and were not solely derivative of the abutter’s rights. It also argued that it was entitled to recover the amount of benefits it had paid, even if those amounts were not recoverable in the abutter’s action against the developer.

The court did not agree. Citing longstanding law, it noted that “the insurer can only recover if the insured could have recovered.” Also, the doctrine of collateral estoppel barred the claim for lost rent.

In the original lawsuit, the developer was barred from entering into evidence, as a defense to the abutter’s claim, proceeds the abutter had received from Seneca. (This ruling was based on the collateral source rule.) Quoting from another NY case, the court noted: “Equitable subrogation is premised on two related concepts. First, that the party who causes injury or damage should be required to bear the loss by reimbursing the insurer for payments made on behalf of the injured party. Second, that the injured party should not recover twice for the same harm—once from its insurer and again from the wrongdoer. Therefore, if an injured party receives monies from the tortfeasor attributable to expenses that were paid by its insurer, the insurer may recoup its disbursements from its insured.”

The court dismissed Seneca’s lawsuit against the developer, and also denied recovery of any attorneys’ fees.

Thus, Seneca should look back to its own insured abutter to recoup what the abutter had received from the developer, up to the amount paid by Seneca. The case is Seneca Ins. Co. v Related Cos., L.P., 2017 N.Y. Misc. LEXIS 554 (Feb. 15, 2017).