Obviously, the most important settlement consideration to the plaintiff in a personal injury case is his/her net recovery. Therefore, the plaintiff’s attorney must understand the role of the various parties who make a claim against the settlement proceeds. The plaintiff’s net recovery is enhanced by proper handling of these claims. In addition, the plaintiff must be aware of the potential consequences of not handling these claims correctly.
Subrogation arises between an insurer and its insured, allowing the insurer to recover payments against the person who caused the loss. Subrogation “allows an insurer who has fully compensated the insured to step into the shoes of the insured and collect what it has paid from the wrongdoer.” Amica Mut. Ins. Co. of Ariz. v. Maloney, 120 N.M. 523, 527, 903 P.2d 834, 838 (1995). Subrogation arises “by operation of law.” Safeco Ins. Co. of America v. U.S. Fid. & Guar. Co., 101 N.M. 148, 149, 679 P.2d 816, 817 (1995). Subrogation also arises in the suretyship context. See NM State Highway & Transp. Dep’t v. Gulf Ins. Co., 2000-NMCA-007, ¶11, 128 N.M. 634, 996 P.2d 424.
New Mexico has applied subrogation principles only in disputes involving insurers. Gulf Insurance Co. v. Cottone, 2006-NMCA-150, ¶11, 140 N.M. 728, 148 P.3d 814. Cottone arose from a chain reaction auto accident. A person injured in the accident sued (only) a driver, insured by Gulf Insurance Co. Gulf then sought reimbursement from others allegedly at fault for the accident. Gulf argued it became subrogated to the claims of the injured party when it settled with her. The court rejected this attempt to expand the concept of subrogation, which traditionally has been limited to insurance companies that had paid their own insureds. The reasons for this rejection were (1) the doctrine of comparative fault meant that Gulf had only paid damages by which its insured was responsible and, therefore, had no claim against the other parties, (2) New Mexico does not allow an assignment of personal injury claims, and (3) the release signed by the injured party did not release anyone other than Gulf’s insured.
An insurance company providing uninsured or underinsured motorist coverage is entitled to reimbursement out of the proceeds of any recovery which might be obtained from the person(s) responsible for the accident (the “tortfeasors”). See NMAC, Dept. of Insurance Regulations, §126.96.36.199.2. The company also has a subrogation right, and may sue the uninsured tortfeasor to recover any amounts it may have paid. Id, §188.8.131.52.4. The insured must cooperate in any subrogation suit brought by the carrier, and the carrier could compel joinder of an uncooperative insured to serve as an “involuntary plaintiff.” §184.108.40.206.11.
Special considerations apply in workers compensation cases. If the employer paid the premiums for the uninsured motorist coverage, reimbursement is handled normally. See Section 52-5-17C. (As a practical matter, most employers have figured out that they can opt not to have uninsured motorist coverage to cover their employees.) On the other hand, if the worker pays the premiums of the uninsured motorist coverage, the employee is not required to reimburse the workers’ compensation carrier. Id. Moreover, this subsection does not entitle the UM carrier to a credit or offset for the amount of workers’ compensation benefit paid to the worker. Mountain States Mut. Cas. Co. v. Vigil, 1996-NMCA-062, 121 N.M. 812, 918 P.2d 728.