I footnoted in last week’s post that this week’s post would address an insurer’s subrogation rights against an individual or entity listed as an additional insured in an insurance policy. An additional insured is a
person or organization not automatically included as an insured under an insurance policy of another but for whom the named insured desires or is required to provide a certain degree of protection under its insurance policy.1
Additional insureds often come about by
an endorsement added to the policy[,] which either identifies the additional party by name or by a general description contained in a ‘blanket additional insured endorsement.’2
Here is what the insurance treatise cited in last week’s post has to say, in part, about the nuances of subrogation against additional insureds:
[A limitation on an] insurer’s right to subrogation is that, as a general rule, no right of subrogation exists against a person who holds the status of an additional insured under the policy of insurance issued to the injured party. The courts have advanced two general reasons for the rule. First, to allow subrogation under those circumstances would permit an insurance company, in effect, to pass the loss, either partially or totally, from itself to the insured and thus avoid the coverage that was purchased by or on behalf of the insured. Second, to allow subrogation would result in a conflict of interest. The insured would be under a duty to cooperate with the company, and the company, if it were allowed subrogation, could then use the information so obtained to build a liability case against the insured.
A few courts, however, have recognized an exception to the rule prohibiting subrogation against additional insureds. Ignoring the conflict of interest problem, they have held (a) that subrogation will be allowed if it would not be inequitable for an insurance company to pass a loss on to an additional insured, and (b) that this prerequisite is met when the protection afforded the additional insured by the policy is limited and does not extend to the loss that was incurred.
For example, in McBroome-Bennett Plumbing, Inc v[.] Villa France, Inc[.], [515 S.W. 2d 32 (Tex. App. 1974),] the court held that the insurer was entitled to subrogation against a subcontractor whose negligence caused the fire loss paid by the insurer pursuant to a builder’s risk policy. The court held in the alternative that the subcontractor was an additional insured under the policy, but only as to its property, and not as to the damage it negligently caused to the property of others. The court, therefore, reasoned that it would be ‘irrational’ for the subcontractor ‘to claim the entire cloak of immunity from subrogation.’3
Of course, this treatise (as with most treatises) surveys case law on a national level and provides a general discussion of subrogation-related case law, but does not necessarily represent the law in your jurisdiction. Florida courts follow the general rule that an insurer cannot subrogate against an additional insured.4
1 Insurance Risk Management Institute (http://www.irmi.com/online/insurance-glossary/terms/a/additional-insured.aspx)
3 2 Insurance Claims and Disputes § 10:7 (6th ed.) (West, April 2013) (internal citations omitted).
4 See, e.g., Allstate Ins. Co. v. Fowler, 480 So. 2d 1287 (Fla. 1985); Lumbermans Mut. Cas. Co. v. Morgan, 513 So. 2d 1283 (Fla. 4th DCA 1987).