"Grossly Negligent Utilities," "Unimaginable Property Damage" and the Scope of Liability Insurers' Duty to Indemnify Subrogated Property Insurers - Probative and Empirical Inferences from Courts' Divided Subrogation and Indemnification Decision
Ohio State Business Law Journal
Each year, extreme weather, natural disasters and allegedly "grossly negligent" investor-owned utilities concurrently destroy property, persons and lives. In the wake, billions of dollars are lost. Given utilities' general immunity under the judicially created filed-rate or filed-tariff doctrine, residential and commercial owners are precluded from filing ordinary negligence actions against utilities. Thus, many injured consumers try to settle their property-loss claims with their insurers. Some property insurers satisfy the "make-whole" doctrine and cover all losses. Most insurers, however, refuse to settle any claim. Or, they partially compensate the insureds. Yet, an overwhelming majority of property insurers are increasingly filing subrogation actions against utilities and the latter's liability insurers---demanding to be totally reimbursed for the entire value of each property-loss or personal-injury claim. Should the "most profitable property insurers in the world" have standing to file duty-to-indemnity actions against utilities-if the insurers refuse to fully compensate injured property owners after natural disasters and energy interruptions? The question has produced conflicting judicial rulings-given that a few states' anti-subrogation statutes are ambiguous. Should unsophisticated utility customers have a right to file ordinary negligence actions against utilities? The answer might be easy given utilities' ever-rising rates as well as politically "conservative" and "liberal" state supreme courts' negligence based, utility-maintenance and pro-consumers decisions. The Article explains the origin and substance of utilities-caused, subrogation and indemnification disputes. It also presents the results of an empirical study to help explain the judicial conflicts-focusing on courts' differential application of settled rules and allowing extra-legal factors to influence the outcome of cases. Expectantly, the findings will provide some 'judicial guidance" for state legislatures who are contemplating 1) whether to adopt or revise anti-subrogation statutes-which block property insurers' direct actions against utilities' liability insurers, and 2) whether to enact legislation that would allow average ratepayers to commence ordinary- and gross negligence actions against highly profitable utility companies.
Willy E. Rice, "Grossly Negligent Utilities," "Unimaginable Property Damage" and the Scope of Liability Insurers' Duty to Indemnify Subrogated Property Insurers - Probative and Empirical Inferences from Courts' Divided Subrogation and Indemnification Decision, 17 Ohio St. Bus. L.J. 53 (2023).