Professional Flooring Co. v. Bushar Corp.
152 A.3d 292
| Pa. Super. Ct. | 2016Background
- A 2001 fire destroyed a commercial complex; Rose Line (Appellant) suffered losses and was insured by Brethren, which paid $32,502.67 and took subrogation receipts that expressly subordinated subrogation until the insured was made whole.
- Six businesses (including Rose Line) filed class litigation; the consolidated Bridgeport Fire class settled for $35,000,000 and the court-approved claims process required a Claims Administrator whose determinations were "final and non-appealable."
- The Claims Administrator reviewed Rose Line’s claim (which sought $378,416.98), awarded a gross loss of $135,205 and a gross distribution of $145,477.30 (including an allocation from remaining settlement funds), with $19,430.81 withheld pending resolution of Brethren’s asserted $32,503 subrogation lien.
- Rose Line signed a release accepting the Claims Administrator’s award as final, while the release and correspondence expressly described the subrogation amount as withheld pending independent resolution (not as a final award to Brethren).
- Brethren moved in 2015 to direct distribution of the $19,430.81 escrowed funds to it; the trial court granted the motion and ordered distribution to Brethren. Rose Line appealed.
Issues
| Issue | Plaintiff's Argument (Rose Line) | Defendant's Argument (Brethren) | Held |
|---|---|---|---|
| Whether Brethren was bound by the Claims Administrator’s "final" determination and thus precluded Rose Line from contesting subrogation | Release and claims-process bar Rose Line from challenging distribution; Rose Line waived challenge by not opting out and by signing release | Claims Administrator’s determinations were final; Rose Line accepted award and waived appeals including as to escrowed funds | Rejected Brethren’s waiver argument: the escrowed $19,430.81 was expressly "withheld pending resolution" of subrogation, not finally awarded by the Claims Administrator |
| Whether Brethren is entitled to subrogation before Rose Line is made whole (the "made whole" doctrine) | Rose Line: it was not made whole (claimed larger losses and asserted attorneys’ fees/costs exceed insurer payment), so Brethren cannot invoke subrogation | Brethren: its subrogation right is valid and should be enforced against escrowed funds; class distribution constitutes Rose Line’s recovery | Held for Brethren: the Claims Administrator’s factual determination of Rose Line’s total loss (and resulting gross award) is equivalent to a factfinder’s determination; Rose Line was made whole as to the awarded loss, so Brethren’s subrogation is enforceable |
| Whether attorneys’ fees and costs charged against Rose Line’s share defeat Brethren’s subrogation right | Rose Line: net recovery after pro rata fees/costs left it unpaid; therefore Brethren should not recover until insured truly made whole net of fees | Brethren: both insurer and insured were in the same class and should bear pro rata fees; allowing insured to avoid fees would permit double recovery | Held for Brethren: equitable principles and common-fund doctrine require pro rata allocation of fees/costs; permitting Rose Line to avoid its share would unjustly enrich it and allow double recovery |
Key Cases Cited
- Jones v. Nationwide Prop. & Cas. Ins. Co., 32 A.3d 1261 (Pa. 2011) (describing the made whole doctrine and equitable subrogation principles)
- Heller v. Pennsylvania League of Cities & Municipalities, 32 A.3d 1213 (Pa. 2011) (noting made whole requirement for subrogation)
- In re: Bridgeport Fire Litigation, 8 A.3d 1270 (Pa. Super. 2010) (background on the class settlement and claims procedure)
- AAA Mid-Atlantic Ins. Co. v. Ryan, 84 A.3d 626 (Pa. 2014) (subrogation rights arise by contract or law but remain subject to equity)
- Daley-Sand v. Western American Ins. Co., 564 A.2d 965 (Pa. Super. 1989) (subrogation is equitable and cannot be used to place subrogee ahead of subrogor)
- Allstate Ins. Co. v. Clarke, 527 A.2d 1021 (Pa. Super. 1987) (subrogation prevents insured from receiving double recovery)