In an unpublished opinion, the Superior Court of New Jersey ruled that an insurer's contractual subrogation rights were not triggered in Liberty Mut. Ins. Co. v. Goodfellas, LLC, 2006 WL 290281 (N.J. Super. A. D. Feb. 8, 2006).
Juan Sanchez struck a vehicle driven by Rachael Bousquet in which Sam Gut was a passenger. Sanchez had been drinking at the Hi Point Pub, where he had been flagged. He also drank earlier in the evening at Goodfellas. His blood alcohol content was .108 at the time of the accident.
Insureds Bousquet and Gut had separate policies with Liberty Mutual., which included UIM coverage. Insureds did not file personal injury actions against Sanchez, the Hi Point Pub, or Goodfellas. They filed UIM claims with Liberty Mutual.
Liberty Mutual settled with the two insureds and obtained releases from both of them. The court said that the “releases do not contractually endow insurer with the rights insureds may have against defendant taverns for personal injury recoveries, from which insurer's UIM payment could be recouped.” Bousquet's release, the court said, provided only subrogation rights against Sanchez, while Gut's release was “limited to the insured's taking direct action against the tortfeasors.”
Liberty Mutual contended that its subrogation rights did not arise from the releases, but from its policy provisions. The court pointed out that the insureds did not file actions against the tortfeasors and did not recover damages from them, as the policy language required. Thus, Liberty Mutual's contractual subrogation rights were not triggered.
Quoting the New Jersey Supreme Court in Culver v. Ins. Co. of N. Am., 115 N.J. 451 (1989), the court reiterated the three ways subrogation rights are created: (1) in an agreement between an insured and an insurer; (2) statutorily, and (3) in a judicial “device of equity to compel the ultimate discharge of an obligation by the one who in good conscience ought to pay it.” The court said that the policies did not provide for the subrogation the insurer pursued.