In an increasingly mobile world, more subrogation claims than ever involve multiple jurisdictions, and neither carriers nor subrogation lawyers can count on states sharing similar statutes. In this episode of On Subrogation: Conflict of Law – Statute of Limitations, Rathbone Group partner Jason Sullivan discusses what to do when a subrogation case involves states with conflicting statutes of limitations on subrogation claims and procedures. Which state’s statutes win out? It’s not always straightforward.
A conflict of law arises where two states may have interest in their law being applied to a subrogation claim. For instance, if an Ohio motorist gets into a car accident in Florida, both states may have an interest in their subrogation procedures being adhered to instead of the other’s. Properly maneuvering through these interstate cases requires a knowledge of each state’s statutes of limitations and which one applies to your claim. This is especially important when considering statute of limitations, as a misstep in meeting the “correct” deadline can essentially eliminate the right to subrogate the claim even if liability is clear.
Conflict of law is complicated and nuanced, which makes managing a subrogation claim especially difficult if an attorney does not have state-specific knowledge of their insurance laws.
In general, though, there are two types of laws: substantive and procedural:
- Substantive law governs parties and their duties in regular conduct. It defines how individuals are expected to behave and what constitutes liability. In the context of auto insurance subrogation, substantive law includes rules such as right-of-way, traffic control obligations, and speed limits.
- Procedural law is used to enforce substantive law for the proper administration of justice. This includes rules related to filing deadlines, court procedures, evidentiary rules, and litigation processes.
In most states, statutes of limitations fall under procedural law. As a rule of thumb, courts often follow the substantive laws of the location of the loss incident and the procedural laws of where the subrogation lawsuit is filed. If we call back to our Ohio motorist getting into a car accident in Florida and apply it, let’s consider that Ohio has a 2-year statute of limitations for property damage, but Florida’s is 4. If the recovery claim is filed in Ohio, the courts will adhere to the 2-year statute. If it is filed in Florida, the 4-year statute of limitations applies. If you are not sure which state’s statutes of limitations apply, you could miss your subrogation deadline by years!
Complications & Conflicts: Ensuring You’re in the Right Jurisdiction
Hence, the importance of knowing which state’s statute of limitations applies cannot be understated. Failure to follow the correct deadlines can render an otherwise viable subrogation action null. Not to mention the importance of thorough pre-suit investigations, the time it takes to gather expert analysis on the subrogated matter, and coordination among multiple parties that may not be cooperative.
In every case involving multiple states, the subrogating carrier’s legal team must quickly determine:
- Where did the loss occur?
- This typically determines the substantive law governing liability.
- Where does the defendant(s) live?
- This may affect where the subrogation lawsuit can be filed.
- What state does the policy cover?
- In some cases, this can introduce a third jurisdiction with potential interest in the claim, making the claim even more complex.
- Which state has the shortest statute of limitations?
- Identifying the shortest applicable deadline is critical to maximizing the potential for claims recovery.
However, one thing every subrogation lawyer can count on is that state laws vary, and claims resolution is almost never simple. In subrogation claims involving multiple states, every encounter with a conflict of law is not as straightforward as the Ohio driver in the Florida accident. In the episode, Jason offers an example involving Ohio and New York’s conflicting subrogation statutes:
A New York driver on a cross-country trip gets into an accident in Ohio. Ohio has its 2-year statute of limitations, and New York has a 3-year statute. If the suit is filed in Ohio, they will follow Ohio’s substantive and procedural laws. So, if the lawsuit is filed in New York, the substantive rules of Ohio and procedural rules of New York apply, right?
Not this time. New York has a borrowing statute that considers where the incident of loss occurred, compares both states’ statutes of limitations, and adheres to the shortest one. Borrowing statutes are designed to prevent “forum shopping”, which is the process of filing a lawsuit in a jurisdiction with more favorable laws, such as a longer statute of limitations. Therefore, in a subrogation case like this, regardless of where the claim is filed, Ohio’s statute of limitations applies.
Protect Your Carrier’s Claims with Specialized Knowledge of the Subrogation Process
Conflict of law issues are an unavoidable part of motor vehicle subrogation, particularly in incidents involving interstate activity. Needless to say, with any of 50 states involved, this is a complex area of insurance law. While the distinction between substantive and procedural law provides a helpful starting point, real-world applications are rarely that cut and dry. A subrogation team handling a regional or national automotive insurer’s recovery claims must include attorneys with state-specific knowledge. Know each state involved in the loss and which statute of limitations applies so you can do what you need to protect your claim and maximize your potential recovery.
Curious to learn more about how to optimize your clients’ subrogation claims? Find more educational material on subrogation topics that matter to you on Rathbone Group’s blog, video series, and podcasts. Have a question or topic we haven’t yet covered? Reach out at video@rathbonegroup.com or podcast@rathbonegroup.com to suggest new topics for our subrogation attorneys to cover.