Opinion ID: 302
Heading Depth: 2
Heading Rank: 1

Heading: introduction

Text: This putative class action presents the Court with the question whether an insurer is permitted to recoup a payout from a third-party tortfeasor's insurance company before the insured has sued the third-party tortfeasor, and without first making the insured whole. Plaintiff Stuart Chandler purchased from defendant State Farm Mutual Auto Insurance Company an automobile insurance policy that reimburses policyholders for 80% of their out-of-pocket rental car costs while their automobiles are being repaired following covered accidents. Plaintiff suffered such an accident in March 2007 when his car was rear-ended by the driver of another card Plaintiff rented a card, which cost him approximately $300, and State Farm reimbursed him 80% of those costs. Then, State Farm, as a partial subrogee of Plaintiff, sought reimbursement from the third-party tortfeasor's insurer, which questioned the charge and paid State Farm only $70. State Farm apparently accepted the $70 payment. Plaintiff then likewise sought reimbursement of his out-of-pocket rental costs from the third-party tortfeasor's insurer, which refused to pay. Rather than institute a lawsuit against the driver who rear-ended him, Plaintiff demanded that State Farm pay him his out-of-pocket costs from the $70 it had received from the driver's insurance company because, according to Plaintiff, he is entitled to reimbursement from State Farm under the made whole rule, which purportedly bars State Farm from recovering any of its expenses until Plaintiffs rental car expenses are paid in full. Plaintiff candidly admits that his position could defeat a carrier's ability to recoup from tortfeasors and their insurers the full amount of its payments to its policyholder, and that it would, in effect and to that extent, require an insurer to pay more than its contractual obligation to the policyholder. Plaintiff claims to find support for his position in a variety of public policy arguments. But in the end, these arguments are not persuasive because Plaintiffs position undermines the most fundamental public policy at play in this and other casesthe principle that the person ultimately responsible for causing the damage should pay for it. In situations like the one presented here, the imposition of an obligation on an insurer to pay the insured out of proceeds obtained as reimbursement for its out-of-pocket costs in paying the policyholder's claim would confer greater rights on the policyholder than provided in the policy and eliminate any incentive on the part of the policyholder to seek reimbursement from the tortfeasor. The policyholder's carrier would end up short changed, and the tortfeasor would be off the hook even though the tortfeasor caused the damage in the first place. Although no California case addresses this question, a cause from New York provides that a carrier may pursue reimbursement and has no obligation to make the policyholder whole out of reimbursement proceeds unless and until the policyholder attempts and fails to recover from the tortfeasor. Winkelmann v. Excelsior Ins. Co., 85 N.Y.2d 577, 626 N.Y.S.2d 994, 650 N.E.2d 841, 843-45 (1995). The Court finds the reasoning in Winkelmann persuasive and consistent with the fundamental notion that, whenever possible, the tortfeasor should bear responsibility for losses resulting from her conduct. For these reasons, which are discussed in greater detail below, the Court concludes that Plaintiff lacks standing to proceed with his lawsuit, and that Plaintiffs claims are unripe. Defendant's motion to dismiss is therefore GRANTED, and Plaintiffs claims are DISMISSED WITHOUT PREJUDICE.