Recovering An Insured's Deductible - Texas

In a recent case out of the Seventh Court of Appeals of Texas, the court considered whether a waiver of subrogation provision waived an insurer's claim for its insured's uninsured losses or deductible. Am. Zurich Ins. Co. v. Barker Roofing, L.P., 387 S.W.3d 54, 66 (Tex. App.—Amarillo 2012, no pet.). In deciding this issue, the court focused on the specific language of the insurer's policy and relied on basic principles of subrogation law. The court's decision raises an important question as to whether an insurer has a right to include its insured's deductible in a subrogation claim.

A few states have statutes or regulations that control the right of an insurer to seek recovery of automobile or property deductibles. In Texas, Section 542.204 of the Texas Insurance Code provides that, unless an automobile insurer notifies its insured that subrogation will not be pursued in accordance with the provisions of the statute, the insurer must either take action to recover its insured's deductible against a responsible third party within one year after the insured's claim is paid or pay its insured the amount of the deductible. There is no Texas statute or regulation that applies to the recovery of property deductibles.

Generally, Texas law provides that payment of a loss creates a subrogation right, and no formal assignment is necessary. Campbell v. Jefferson, 453 S.W.2d 336, 338-39 (Tex. Civ. App.—Tyler 1970, writ dism'd) (citingWichita City Lines, Inc. v. Puckett, 156 Tex. 456, 295 S.W.2d 894, 899 (1956); Magnolia Pipe Line Co. v. Security Union Ins. Co., supra; International Insurance Company v. Medical-Professional Building...