Effective auto property subrogation may seem simple, but it often requires a thorough understanding of some of the more confusing legal concepts known to American civil jurisprudence. When your insured (owner of a vehicle) entrusts his or her vehicle to a permissive user who is then involved in an accident which results in damages to the owner’s vehicle, the question arises as to whether the fault of the permissive user should be “imputed” to the insured and, therefore, reduce the amount of which the insured’s carrier can recover in subrogation. After all, the owner didn’t cause the damage to his vehicle. For example, if the permissive user is 25 percent at fault and the tortfeasor is 75 percent at fault, and the damage to the owner’s vehicle is $10,000, can the owner or his/her subrogated carrier recover the full $10,000 from the tortfeasor, or only $7,500? The answer might surprise you, and certainly will confuse you. But, it absolutely can be put into practice to increase your auto property subrogation recoveries.
While common law once required that the negligence of the permissive owner be imputed to the owner when the owner sues the tortfeasor for the damage to his or her vehicle, this is no longer the case. Imputed contributory negligence is the old common law rule that recognized that if the owner cannot be held vicariously liable for the negligence of a permissive user of his vehicle, then the contributory negligence of that permissive user also could not be imputed to the owner when the owner sought to recover from a negligent third party. In the absence of some sort of vicarious liability or control relationship, state after state has abandoned the rule of imputed contributory negligence to the point where every state now rejects it. This can provide subrogation opportunities for maximum recovery of damages to the owner’s vehicle, even where the permissive user is partially at fault in causing the underlying accident. Contributory negligence can still be imputed in situations where there is vicarious liability, and subrogation and contribution laws can complicate the owner’s ability to use the inapplicability of imputed contributory negligence effectively. The following is an example:
HYPOTHETICAL AUTOMOBILE ACCIDENT
A (insured by American Insurance) is the owner and driver of a vehicle involved in an accident with B, a permissive user driving a vehicle owned by C (insured by Continental Insurance). Each vehicle has $10,000 in damage. Each driver is agreed to be 50 percent at fault, but C is in all respects free from fault. A’s carrier (American Insurance) presents a subrogation claim to C’s carrier (Continental Insurance) for $5,000 (50% of $10,000 damages), but C’s carrier says that B’s contributory negligence cannot be imputed to C, and that, because C is free from fault, American Insurance owes them the full $10,000 in damages to their vehicle.
In the above example, C’s carrier should be able to recover their full $10,000 subrogation claim, unless A’s carrier has a right of contribution against B for his fault in contributing to the $10,000 in damage. This hypothetical necessarily involves the precarious intersection of comparative fault, joint and several liability, guest statutes, contribution, vicarious liability, and imputed contributory negligence, all of which may be confusing for even the most seasoned of lawyers and claims handlers, and any one of which may be a roadblock to C’s recovery of its full $10,000 in damages. Understanding these concepts and effectively employing them in claims handling, subrogation claims, and litigation negotiations, however, are absolute necessities if you want to limit your claim payments and/or maximize your subrogation recoveries. Before applying the concept of Imputed Contributory Negligence, therefore, we need to be reasonably familiar with the other terms which shape its application and effectiveness.
In a comparative negligence jurisdiction, if a jury finds that Betty is 5 percent at fault and John is 95 percent at fault, Betty would still be able to recover, but her $10,000 in damages would be reduced by her 5 percent of fault, so Betty would recover only $9,500. Comparative negligence differs among states. For example, if Betty is found to be 50 percent at fault, and John 50 percent at fault, some comparative negligence states would still allow Betty to recover $5,000 (50 percent of her damages), while other states would prevent her from recovering because she is equally at fault with the other driver. In a pure contributory negligence jurisdiction, even 1 percent of fault on the part of the plaintiff can completely bar any recovery. A chart detailing the comparative fault systems of all 50 states can be found HERE.
“Contribution” is a claim brought by one joint and several tortfeasor against another joint and several tortfeasor to recover some or all of the money damages the first tortfeasor owes to an injured/damaged plaintiff, as a result of a settlement or a judgment in favor of the plaintiff. Jointly and severally liable defendants are generally (and theoretically) entitled to recover from one another the percentage of damages attributable to the other’s conduct. As an example:
Plaintiff is a passenger in a vehicle driven by a friend. The vehicle is involved in an accident with the defendant’s vehicle, and the plaintiff sues the defendant. In a state with joint and several liability, the defendant’s liability carrier could pay the damages to the plaintiff and then pursue a claim for contribution against the plaintiff’s friend as a joint and several tortfeasor. The liability carrier would seek reimbursement from the liability carrier of the friend based on the friend’s proportionate share of responsibility, liability, or fault assigned to the friend either in the original lawsuit or in a separate lawsuit seeking the contribution.
The law in each state varies as to whether, when, and how, contribution claims can be pursued. Understanding contribution law is important for subrogation practitioners because an insurer who settles on behalf of its insured must know whether the settlement will extinguish its subrogated right of contribution against the other tortfeasors in order to determine what should be paid in settlement. The concept and availability of contribution becomes a key piece of the puzzle when determining whether imputed contributory negligence will affect the damages an owner can recover from a tortfeasor involved in an accident with the owner’s vehicle, driven by a permissive user.
In some cases, contribution claims are brought within the original lawsuit itself, when one defendant files a cross-claim against a co-defendant. In other cases, a defendant brings (impleads) a completely new party into the lawsuit claiming that it is also responsible for causing the injury or damages. In a large number of cases, depending on state law, a liability insurance carrier might settle with the plaintiff before or during a pending lawsuit or as a result of a judgment, and then seek to make an independent claim for contribution against the third-party defendant, seeking to recover some or all of the damages it paid to the plaintiff, based on allegations that the third-party defendant bears a proportionate share of responsibility, based on its actions. A chart detailing the laws of joint and several liability and contribution in all 50 states can be found HERE.
A few other concepts come into play in determining whether the owner of a vehicle. They are as follows:
Family Purpose Doctrine. At common law, the Family Purpose Doctrine (also known as the “Family Car Doctrine”) imposes vicarious liability on the head of a family whose vehicle is used by a family member for family purposes. Country Mutual Ins. Co. v. Hartley, 65 P.3d 977 (Ariz. App. 2003). It is premised on the notion that the family car exists for the purpose of family use. In this sense, an owner understands that, with a family, vehicles are shared properties, but the ultimate responsibility comes to the assumed head of the household to exercise discipline and restraint over his or her family in the operation of the family vehicle. However, this is not universal among all states. Some regard drivers as their own agents of liability, putting them in the position of owning their own responsibilities.
The Family Purpose Doctrine is an exception to the general principle that one who permits another to use his vehicle does not thereby become liable for that person’s negligence in the absence of an agency or employment relationship. Under the Family Purpose Doctrine, if a member of the family is driving the family vehicle and causes an accident, the head of the household − defined differently in different states − can be held liable for the resulting damages. This doctrine interacts with state driver’s license rules and regulations regarding young drivers who are probationary and whose “sponsor” (usually a parent or guardian) is by law vicariously liable for any damages caused by the driver’s negligent operation of a motor vehicle. See, e.g., A.R.S. § 28-3160.
Vicarious Liability Statutes. Some states have statutes that make the owner of a vehicle automatically and vicariously liable for the negligent acts of a permissive user to whom the owner grants permission to operate his or her vehicle. Generally at common law, the owner of a motor vehicle is not liable for injuries caused by the negligence of another person driving the vehicle (i.e., vicariously liable) unless the driver was acting as an employee or agent of the owner. However, some states feel that if the owner is vicariously liable, he or she will be much more careful when making decisions about allowing others to driver the owner’s vehicle. The legislatures of Connecticut, New York, Rhode Island and many other states have rejected this common law principle with statutes that create owner liability so that innocent victims of negligence could receive compensation for their injuries from a financially responsible insured person. C.G.S.A. § 14-154a; N.Y. Veh. & Traffic Law § 388; R.I.G.L. § 31-33-6. In other words, the statutes were developed to take advantage of the “deep pockets” of the insured car owner. California, Connecticut, Florida, Idaho, Iowa, Maine, Michigan, Minnesota, Nevada, New York, Rhode Island, and the District of Columbia all have forms of vicarious liability statutes. Under these statutes, an owner who gives authority to another to operate the owner’s vehicle, by either express or implied consent, has a non-delegable obligation to ensure that the vehicle is operated safely. Aurbach v. Gallina, 753 So.2d 60 (Fla. 2000). This type of “strict liability” usually applies only in strict product liability law, but Florida is the only state to have adopted this rule by judicial decree. Strict liability statutes often play into whether or not the negligence of a permissive driver of the owner’s vehicle will be imputed to the owner in the owner’s action for property damage against the negligent third party.
While some states may have statutes making the owner vicariously liable for the negligence of their permissive users/bailees, it should be remembered that in 2005, Congress passed the Graves Amendment, which prohibits any state from holding those in the business of renting or leasing cars liable for injuries caused by those cars, absent any negligence on their part.
Liability for Minor’s Driving Statutes. Some states have statutes which make a parent or guardian automatically and vicariously liable for any damage done by a minor while driving with a temporary drivers’ license for which they are the sponsor. In Arkansas, for example, statute provides that a parent or guardian who signs an application for the minor’s drivers’ license will be liable with the minor for any damages caused by the negligence or willful misconduct operation of motor vehicle. A.C.A. § 27-16-702.
The vicarious liability statutes above play a significant role in how and when you are able to minimize the liability of another party or increase your subrogation recovery due to a non-negligent owner. All of the above lead into to the concept of Imputed Contributory Negligence.
Joint Enterprise. A joint enterprise exists when two or more people join together in pursuit of a common purpose, having an equal right to direct each other’s actions. Persons engaged in a joint enterprise are jointly and severally liable for the negligent actions of each other. A passenger in a vehicle may be responsible for the negligence of the driver if the two are engaged in a joint enterprise.
Agency and/or Partnership. When the owner of vehicle has not himself been negligent in causing an injury from driving his vehicle, the owner can be held vicariously liable when the negligence has been that of the owner’s servant or agent engaged in affairs of the owner. However, at the time of the negligence, the agent must have been conducting affairs or furthering the business of his principal. Many states have a presumption that the driver is the agent of the owner for purposes of determining whether the owner is vicariously liable for the driver’s negligence. There is a distinction between the liability of an employer for the negligence of an employee and the liability of a principal for the negligence of a non-servant agent. In addition, one partner may be liable for the acts of another partner.
IMPUTED CONTRIBUTORY NEGLIGENCE
We finally get to the mysterious legal concept which may allow us to maximize or limit damage claims and subrogation actions. It arises in two contexts:
(1) The owner sues the tortfeasor for damage to his or her vehicle which was driven by the permissive user and both the permissive user and tortfeasor were jointly and severally at fault, and
(2) The owner/passenger sues the driver for accident involving another vehicle and both vehicles were at fault. The issue in both contexts is whether the driver’s comparative fault is imputed to the owner.
Example. Suppose that A (our client’s insured) is in an accident with B, who is a permissive user and driving a vehicle owned by C. Each vehicle has damage and it is agreed that each driver is 50 percent at fault, but C is in all respects free from fault.
Question. The Imputed Contributory Negligence question is whether B’s negligence in the above example will be imputed to C so as to reduce (in 51 percent bar states) or eliminate entirely (in 50 percent bar states) C’s claim for damages.
In the mid-1880s, the concept of respondeat superior (imputed negligence) gave birth to the related concept of imputed contributory negligence. As modern legal thought evolved, however, and with the advent of the modern automobile, it was thought that there was no longer any basis for assuming that the passenger, no matter what his relationship to the other driver, had the capacity to assert control over or direct the operation of a moving automobile. Imputed contributory negligence began to crumble, and over time, disappeared altogether.
Today’s Restatement (Second) of Torts provides that, “Except as stated in §§ 486, 491, and 494, a plaintiff is not barred from recovery by the negligent act or omission of a third person.” Master/Servant – Restatement (Second) of Torts § 486 (1965); Joint Enterprise – Restatement (Second) of Torts § 491 (1965); Negligence of a Decedent – Restatement (Second) of Torts § 494 (1965) (outdated); Restatement (Second) of Torts § 485 (1965). Therefore, unless there is some independent negligence on the part of a vehicle owner, or the owner is vicariously liable through a statute or common law, there is no imputed contributory negligence applicable any more. Whether such an independent source of vicarious liability prohibits the imputation of contributory negligence depends on the state, facts, and statutory language involved. The issue now has become whether any vicarious liability law allows the imputation of contributory negligence.
California. In California, for example, where § 17150 makes the owner vicariously liable for the actions of the permissive user and § 17154 makes the bailee who, in turn, entrusts the vehicle to a third driver, vicariously liable for the actions of the vehicle operator as if he were the operator, the contributory negligence of the operator is not imputed to the owner because the statutes concern themselves only with owner liability to third persons. Hooper v. Romero, 68 Cal. Rptr. 7492 (Cal. App. 1968).
Connecticut. Contributory negligence is imputed under the Family Car Doctrine on the basis of agency. Vicarious responsibility under the doctrine is applicable equally to all parties, whether they are plaintiffs or defendants. The contributory negligence of an operator of a family car is imputable to the owner thereof for the same reasons that negligence may be imputed to impose liability. Ustjanauskas v. Guiliano, 225 A.2d 202 (Conn. Super. 1966). Otherwise, the contributory negligence of the permissive user is not imputed to the owner. Levy v. Senofonte, 204 A.2d 420 (Conn. Cir. Ct. 1964).
Iowa. Iowa once recognized what is commonly referred to as the both-ways test, imputing contributory negligence of the driver to the owner of a consent-driven vehicle. But, in 1956 this concept was abandoned. Today, when the owner of a vehicle sues to recover injuries to the owner or for damages to the owner’s car, in a collision resulting from the negligence of a third party, the contributory negligence of the owner’s consent driver cannot be imputed to the owner, unless there is a showing of some special relationship between the permissive user and the owner. This special relationship includes principal and agent, master and servant, partnership, or joint venture. Perry v. Tendal, 538 N.W.2d 296 (Iowa 1995); Duffy v. Harden, 179 N.W.2d 496 (Iowa 1970). Section 321.493 is Iowa’s Owner Liability Statute which makes the owner of a vehicle (i.e., either the titled owner or a lessee) vicariously liable for the negligent acts of its driver. I.C.A. § 321.493. However, the Iowa Supreme Court has held that this statute, which makes the owner liable for damage caused by the negligent driver of his car, does not bind the owner by the contributory negligence of the permissive user if the owner attempts to recover for injuries to his car or to his person through the negligence of a third party. Houlahan v. Brockmeier, 141 N.W.2d 545, supplemented, 141 N.W.2d 924 (Iowa 1966).
Minnesota. The Supreme Court of Minnesota overruled long-established precedent by rejecting the universal rule of imputed contributory negligence in automobile negligence cases. After tracing the history of the doctrine of imputed contributory negligence and the “both-ways” test, the Court concluded that “there is just no way to rationalize the rule.” Weber v. Stokely-Van Camp, Inc., 144 N.W.2d 540 (Minn. 1966).
Pennsylvania. Today, in Pennsylvania, the Suggested Standard Civil Jury Instructions in these situations provides as follows:
§ 6.190 (Civ) Imputation of Driver’s Negligence to Owner/Passenger.
(1) Master/Servant; (2) Principal/Agent; (3) Joint Venture (Nature of Relationship in Dispute and Evidence Conflicting)
In this case it is claimed that the [plaintiff] [defendant] as the owner of the vehicle should be held responsible for the alleged [contributory] negligence of the driver.
The [plaintiff] [defendant], as the owner of the vehicle in which [he] [she] is a passenger, is responsible for the negligence (if any) of the driver [or is chargeable with the driver’s contributory negligence (if any)] only if you find that [either]:
[1. the driver was a [servant] [employee] of the owner [plaintiff] [defendant] and was acting as such in operating the vehicle; [and] [or]
2. the driver’s physical conduct in operating the vehicle was actually controlled by the [plaintiff] [defendant]; [and] [or]
3. the driver and the [plaintiff] [defendant] had agreed upon, were engaged in, and actively participating in carrying out a joint enterprise of a business or other nonsocial nature entered into for mutual gain or profit, over which each of the parties had a right of equal control, and that the driving was directly related to that purpose.] (1) Master/Servant; (2) Principal/Agent; (3) Joint Venture (Nature of Relationship in Dispute and Evidence Conflicting) § 6.190 [FNa1] (Civ) Imputation of Driver’s Negligence to Owner/Passenger, Pa. SSJI (Civ), § 6.190 (2015).
In practice, what should happen in the hypothetical automobile accident fact pattern above, assuming we are not in a pure contributory negligence or a 50% bar modified comparative state, and assuming that the state allows contribution, is as follows:
A (or American Insurance) will owe C’s carrier (Continental Insurance) its full $10,000 subrogation claim, because B’s contributory negligence cannot be imputed to its insured, C. However, American Insurance will be able to recover 50 percent of its $10,000 subrogation claim ($5,000) from B, because B was 50 percent responsible, and A should be able to seek contribution against B for 50 percent of the $10,000 it paid to C’s carrier. Therefore:
• Continental Insurance recovers $10,000, but pays $5,000 (contribution) and $5,000 (B’s 50% fault).
• American Insurance pays $10,000, but recovers $5,000 (contribution) and $5,000 (B’s 50% fault).
• Both pay $10,000 to the other, net, and it’s a wash.
If A had only $5,000 in damage and C had $10,000 in damage, the result would be:
American Insurance will owe Continental Insurance the full $10,000, but will be only able to recover from Continental 50 percent of its $5,000 in damage ($2,500), and should be able to seek contribution against B for 50 percent of the $10,000 it paid to Continental ($5,000 to be paid by Continental as B’s insurer). Therefore:
• Continental Insurance recovers $10,000, but pays $5,000 (contribution) and $2,500 (B’s 50% fault). It nets a $2,500 recovery.
• American Insurance pays $10,000, but recovers $5,000 and $2,500. It nets a $2,500 loss.
• American should pay Continental $2,500 and walk away.
The above assumes that contribution is allowed in the state involved. If contribution isn’t allowed, it is likely the result of a state following the Pure Several Liability model or having legislation which prohibits a defendant from seeking contribution unless the defendant is wholly without fault, but held liable due to a non-delegable duty (e.g., Alabama). Such as where execution of work tends to create nuisance, is dangerous within itself or requires creation of dangerous conditions or when generally maintenance of safe conditions in connection with the work is essential to protection of public, chief contractor cannot transfer his public duty to subcontractor and, to extent that he attempts to do so, latter is in law his mere agent and contractor is liable for subcontractor’s negligence. Walter L. Couse & Co. v. Hardy Corp., 274 So.2d 316 (Ala. App. 1972). Of course, the above also assumes 50/50 liability, which will be a point of contention in any claim. Any small change in the percentages and the comparative fault scheme of the state you are dealing with becomes vitally important.
If either or both of the parties to the accident are uninsured, the dynamic changes considerably because C no longer becomes responsible for the actions of B, unless C is independently negligent or vicariously liable. However, because we are mainly dealing with insured claims, we will not dissect those examples. A chart discussing the Imputed Contributory Negligence rule in all 50 states and the accompanying legal theories of vicarious liability which affect its application, can be found HERE.
Whether you are a claims professional looking to limit claim exposure of an insured being sued by the owner of a vehicle driven by a permissive user or a subrogation professional looking to recover against a tortfeasor for injuries to an owner passenger or damage to a vehicle owned by a bailor, it is imperative that you become intimately familiar with the precarious intersection of comparative fault, joint and several liability, guest statutes, contribution, vicarious liability, and imputed contributory negligence. Ignorance of the law can be very costly for insurance companies looking to limit liability or increase its recoveries.
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