Insurance Law

15 Minutes (Fifteen Seconds, Really) Could Have Saved The Gecko More Than 15% On Car Insurance

Coverage Opinions hardly ever addresses automobile or subrogation cases. Here I address both. But wait, stay with me. This is an interesting one. It also speaks to an overarching issue concerning how insurers treat policyholders in a certain claim setting.

The issue before the Indiana Court of Appeals in Geico Insurance Co. v. Graham, No. 49A02-1310 (Ind. Ct. App. August 8, 2014), [enhanced version available to subscribers], is a simple one. The court described the background very succinctly right at the outset:

“Insured motorists are called upon every day to pay their deductibles in order for their carriers to cover the necessary repairs to their motor vehicles after accidents. Many carriers refuse to include those deductibles in the subrogated claims they make against the other motorists involved in accidents with their insureds. Because they are left on their own, insured motorists often later sue the other motorist(s) involved in those accidents in a small claims court to recover the deductible amounts they paid. And, almost as often, these insured motorists are successful in the small claims action for their deductibles. But here, Geico Insurance Company's insured, Ralph Heitkamp, lost his claim for his deductible in the Small Claims Division of the St. Joseph Superior Court.”

As a result of Geico’s insured losing his small claims court action, to recover his deductible from Graham, the other driver, a trial court held that Geico was now precluded, in its own action, from pursuing a subrogation claim against Graham. The trial court held that the prior small claims judgment in favor of Graham acted as res judicata to bar Geico’s subrogation claim against Graham. Geico appealed.

The Indiana Court of Appeals affirmed. I’ll put aside all of the reasoning and just state the court’s conclusion: “Under the facts and circumstances before us in this case, we conclude that Geico was in privity with Heitkamp for purposes of the res judicata effects of the St. Joseph County small claim action. Geico’s Marion Superior Court claim against Graham was derivative of Heitkamp’s St. Joseph County small claim against Graham. Heitkamp lost in the small claims action against Graham, and neither he, nor Geico as his subrogee, could relitigate the same claim in Marion County. Accordingly, the trial court did not err in granting Graham’s motion to set aside the judgment on the grounds that Geico’s current claim against her is barred by the claim preclusion branch of the doctrine of res judicata.”

The most interesting part of the court’s decision is its commentary on what caused Geico to lose its right of subrogation and how that could have been prevented: “The concerns of insureds to recover their auto policy deductibles are a matter of everyday business for insurance companies like Geico. The better practice would be for carriers like Geico to expressly include their insured’s claims for deductibles in subrogation and share any recovery obtained pro rata. In the alternative, carriers should clearly inform their insureds of the insureds’ responsibilities not to proceed in a legal forum to recover their deductibles incurred in covered claims without the clear permission of the carrier, permission that would include the opportunity for joinder of the carrier for its subrogated interests. After such clear notice, insureds like Heitkamp would sue separately for their deductible at the peril of being held responsible for any damages incurred by their carriers flowing from breach of the underlying contract of insurance.”

For Geico to not include an insured’s claim, for recovery of its deductible, within its own subrogation claim for recovery of damages paid, seems very un-Gecko like. I would have expected the Gecko to take a more collegial approach: “Sure, mate. We’d be happy to include your claim for your deductible within our subrogation claim.” Presumably it would have taken fifteen seconds to add the insured’s name to the caption on the subrogation complaint. And making the effort to recover the deductible would generate goodwill with the customer. But, for whatever reason, and there may have been valid ones, Geico did not do so here. And the court noted that this practice is prevalent among many insurers. I do not know why this is the case. I just don’t handle these types of claims. [Admittedly, Geico may have lost its subrogation case for the same reason why its insured lost its small claims court case seeking recovery of the deductible.]

Query whether this decision will cause any insurers to revisit a practice of not including their insured’s deductible claims within their own subrogation claims made against allegedly at-fault drivers.

Coverage Opinions is a bi-weekly (or more frequently) electronic newsletter reporting or providing commentary on just-issued decisions from courts nationally addressing insurance coverage disputes. Coverage Opinions focuses on decisions that concern numerous issues under commercial general liability and professional liability insurance policies. For more information visit

The views expressed herein are solely those of the author and not necessarily those of his firm or its clients. The information contained herein shall not be considered legal advice. You are advised to consult with an attorney concerning how any of the issues addressed herein may apply to your own situation. Coverage Opinions is gluten free but may contain peanut products.

    Randy Maniloff is Counsel at White and Williams, LLP in Philadelphia. He previously served as a firm Partner for seven years and transitioned to a Counsel position to pursue certain writing projects including Coverage Opinions . Nonetheless he still maintains a full-time practice at the firm. Randy concentrates his practice in the representation of insurers in coverage disputes over primary and excess obligations under a host of policies, including commercial general liability and various professional liability policies, such as public official’s, law enforcement, educator’s, media, computer technology, architects and engineers, lawyers, real estate agents, community associations, environmental contractors, Indian tribes and several others. Randy has significant experience in coverage for environmental damage and toxic torts, liquor liability and construction defect, including additional insured and contractual indemnity issues. Randy is co-author of “General Liability Insurance Coverage - Key Issues In Every State” (Oxford University Press, 2nd Edition, 2012). For the past twelve years Randy has published a year-end article that addresses the ten most significant insurance coverage decisions of the year completed.

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