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Claim splitting debated

Claim splitting debated

Claim splitting debated
June 30
10:54 2022


Digested from case reports published online


Claim splitting debated

On or about May 21, 2020, Julie Blazer was operating her vehicle in Hastings, Nebraska, when she was struck by a pickup truck being operated by Travis Stewart. At the time of the accident, Blazer was insured with North Star. It appeared that North Star paid Blazer insurance benefits as a result of the accident, but the amount of any such benefits and the coverage(s) under which the benefits may have been paid were not clear on this record.

On August 25, 2020, North Star filed suit against Stewart in the county court for Adams County. North Star brought the action in its own name “as subrogee of Julie Blazer,” but did not join Blazer as a party. The complaint alleged that Blazer and Stewart were involved in a motor vehicle accident that was solely and proximately caused by Stewart’s negligence. The complaint further alleged that North Star “issued a policy of insurance covering” Blazer and that “as a direct and proximate result of [Stewart’s] negligence, [North Star] and its Insured incurred damages in the amount of $6,710.00.”

The complaint contained no allegations that described the nature of Blazer’s damages or the nature or amount of insurance benefits, if any, paid to Blazer by North Star. Nor was it clear from the complaint whether North Star was claiming a right of subrogation under the terms of the policy, under a Nebraska statute, or under some other legal theory.

Stewart moved to dismiss the complaint, alleging that it failed to state a claim on which relief could be granted and failed to join Blazer as a necessary party plaintiff. The motion asserted that Blazer, not North Star, was the real party in interest in any negligence action against Stewart that arose from the accident and that North Star was improperly splitting Blazer’s claim by suing separately to recover its subrogation interest.

At the hearing on the motion to dismiss, neither party adduced evidence. North Star generally took the position that it was allowed to file the action in its own name because “this is just a subrogation of a property damage claim for North Star” and the subrogation claim was “separate and distinct from any claim that … Blazer could have.” The court questioned North Star’s counsel about the rule against claim splitting, and specifically it asked whether Blazer intended to “forego[sic]” any claim against Stewart for damages related to the accident.

The court advised the parties that if documentation was provided showing that Blazer had either signed a release in favor of Stewart or was forgoing any additional claim for damages against him, “then I maybe … would entertain a withdrawal of the motion to dismiss.”

Several days later, North Star filed an affidavit from Blazer with the clerk of the county court. The affidavit was file stamped by the clerk, but nothing in the record indicated that it was offered or received into evidence. According to the affidavit, North Star issued Blazer a check for property damage to her vehicle, but the affidavit did not identify the amount of the check, the amount of the property damage sustained, or the amount of any deductible. The affidavit also stated that Blazer did not intend to file a lawsuit against Stewart for “physical injury.”

In its order granting Stewart’s motion to dismiss, the county court stated that Blazer’s affidavit was “not dispositive” of the claim-splitting issue. The court concluded that Blazer remained the real party in interest for the entire action against Stewart, and it dismissed North Star’s complaint without prejudice for lack of standing. North Star appealed to the district court.

In connection with its appeal to the district court, North Star requested preparation of a transcript and bill of exceptions but did not file a statement of errors. Consequently the district court limited its appellate review to plain error. It ultimately reversed, finding that it was plain error for the county court to apply the rule against claim splitting and that doing so deprived North Star of its right to pursue its subrogation claim. The district court generally relied on Blazer’s affidavit to conclude that North Star had compensated Blazer for property damage to her vehicle and that Blazer was asserting no personal injury claims related to the accident. Based on these conclusions, it determined there was no concern that North Star was improperly splitting its insured’s claim against Stewart. Stewart appealed.

On appeal, Stewart contended that the district court erred in (1) reviewing the county court’s order finding plain error, (2) considering Blazer’s affidavit as evidence, and (3) determining that North Star’s action was not barred bythe Nebraska rule against claim splitting.

North Star filed a negligence action against Stewart in its own name, without joining its insured, seeking to recover damages in the sum of $6,710 as a result of the collision between Stewart and Blazer. The parties des-cribed this as a subrogation action, and they framed the primary question on appeal as whether North Star had standing to bring a subrogation action in its own name. The court said it needed to determine whether this case was properly characterized as one to enforce subrogation.

In the complaint, North Star described itself “as subrogee of” Blazer but did not otherwise allege any facts that would support a right of subrogation under any recognized legal theory. The complaint did not allege that North Star paid insurance proceeds in any amount to Blazer under the policy as a result of damages sustained in the accident. The complaint’s only reference to damages stated simply that “[North Star] and its Insured incurred damages in the amount of $6,710.00” as a result of the collision. Whether North Star was claiming to be subrogated to some or all of this alleged damage amount was unclear.

Because North Star described itself as Blazer’s subrogee in the complaint, however, the court decided to accept the parties’ characterization of this action as one that sought to recover a subrogation interest.

The jurisdictional question was whether North Star was the real party in interest with standing to prosecute this subrogation action in its own name, without joining its insured.

Because Blazer’s affidavit was not received as evidence by the county court and did not appear in the bill of exceptions, it could not be considered as evidence by an appellate court. The district court, sitting as an appellate court, should not have relied on the affidavit, and the supreme court said it would not rely on it.

In the complaint, North Star purported to bring the negligence action against Stewart as Blazer’s “subrogee” to recover damages caused by the accident. Under the rule against claim splitting, and even assuming North Star had a valid subrogation interest under some theory, Blazer was the real party in interest for the entire action against Stewart, not North Star.

Moreover, the complaint contained no facts suggesting that any exception to the rule against claim splitting applied here. North Star’s complaint did not allege that it had compensated Blazer for any of the damage or loss she sustained in the accident, let alone fully compensated her for all sustained damage or loss. Nor was there an allegation that Blazer settled with Stewart without protecting North Star’s subrogation interest.

As to damages, the only allegation in the complaint was that “as a direct and proximate result of [Stewart’s] negligence, [North Star] and its Insured incurred damages in the amount of $6,710.00.” At best, this suggested that both the insured and the subrogated insurer were entitled to recovery against Stewart, and under that circumstance, the rule against claim splitting applied.

The supreme court reversed the judgment of the district court and remanded the matter with directions to affirm the judgment of the county court.

North Star Mutual Insurance Company v. Stewart—Nebraska Supreme Court—February 25, 2022—No. S-21-485.


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Jim Brooks

Jim Brooks

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