McCarter & English LLP on Fasso v. Doerr, Did The New York Court Of Appeals Clarify -- Or Confuse -- Equitable Subrogation Principles And Procedures?

 
Although the general concepts underlying equitable subrogation and its limitations are simple, New York courts often disagree in subrogation cases on how to reconcile the specific competing equitable rights and obligations. The 2009 decision of the New York Court of Appeals in Fasso v. Doerr shows how sharply judicial minds may differ on the equities. In Fasso, the Court of Appeals unanimously reversed a unanimous panel of the Appellate Division. The Court of Appeals in Fasso clarified aspects of equitable subrogation, such as the “made whole” doctrine, in favor of health insurers; but dicta in the decision has clouded health insurers’ rights to intervene in order to enforce their subrogation rights.
 
In its decision, the Court of Appeals agreed with the health insurer that, after a patient had settled with an alleged tortfeasor, the insurer’s subrogation claim was viable in that it could be satisfied from the physician’s remaining malpractice insurance limit and from the physician’s other assets. It also held that the settling parties had no right to limit the subrogation rights of the health insurer over its objection.
 
However, the Court of Appeals’ dicta then questioned whether an insurer may intervene in an injured party’s action against a tortfeasor to enforce subrogation rights. Health insurers may therefore find their future intervention motions denied by courts relying on Fasso. Consequently, they may find more of their potential subrogation claims barred by the running of statutes of limitations.
 
 
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