Subrogation Limited to What Was Paid by Insurer to Insured
Post number 5270
Posted on January 23, 2026 by Barry Zalma
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In Erie Insurance Exchange A/S/O Bates Collision, Inc. James Myers, Anita Morgan, Lossie Auto Service, And Benedictine Sisters Of Erie, Inc. v. United Services Automobile Association v. Bates Collision, Inc., No. 19 WAP 2024, No. J-23-2025, Supreme Court of Pennsylvania (January 21, 2026) Erie attempted to obtain coverage for spoiliation of evidence against the property insurer.
FACTUAL BACKGROUND
On January 22, 2017, a fire broke out at Bates Collision, Inc., resulting in substantial damage to both the facility and several vehicles stored inside. Erie Insurance Exchange, as insurer for Bates and the affected vehicles, paid more than $1.6 million to its insureds under its insurance policy, which allowed Erie to pursue reimbursement for its payments.
Erie, acting as subrogee for Bates and the other insured parties, filed suit against United Services Automobile Association (USAA), asserting that USAA failed to preserve a vehicle Erie believed was crucial evidence and possibly the cause of the fire. According to the Complaint, Erie’s investigators determined that the fire originated from and was caused by a BMW.
The Complaint alleged that USAA failed to preserve the vehicle, a BMW, responsible for the fire, and as a result, Plaintiff cannot pursue its claim against the manufacturer or the owner of the vehicle or anyone involved in maintaining the vehicle as it was unable to perform an invasive laboratory examination, testing and/or other investigation necessary to precisely identify the components inside the BMW which caused the fire.
LEGAL ANALYSIS
Erie’s claim was framed as one for “promissory estoppel,” but the Supreme Court questioned whether this was, in essence, a claim for spoliation of evidence — a cause of action not recognized under Pennsylvania law.
The central legal issue was whether, as subrogee of its insureds, Erie had any right of recovery against USAA for its alleged failure to preserve evidence. The Court examined the insurance policy’s subrogation clause and Pennsylvania law regarding both subrogation and spoliation of evidence.
Erie pled that it insured Bates and several cars in the shop, and that it paid out approximately 1.6 million dollars in claims. Based on payments made to insureds under the relevant insurance policy provisions and Pennsylvania law.
The Supreme Court determined that Erie, in its capacity as subrogee, did not possess a right of recovery against USAA for the alleged failure to preserve the vehicle. The Court noted that the underlying claim for promissory estoppel was tantamount to a spoliation claim, which Pennsylvania courts do not recognize as an independent cause of action.
As a result the trial court’s decision in favor of USAA was reinstated holding that Erie could not recover under the circumstances presented since USAA was not responsible for the fire. Since Erie’s suit is brought solely as the subrogee of its insureds and an insurance company’s rights as subrogee do not rise above those of its insureds.
Pursuant to the basic premise a subrogee may only recover for the loss it paid and against the party liable for the loss. Here, the loss that Erie paid out was for the fire loss damage sustained by its insureds. Thus, under subrogation principles, Erie could seek to recoup that payout from the party responsible for the fire loss. USAA did not cause the property damage for which Erie paid its insureds nor could its insured seek damages against its insurer.
ZALMA OPINION
Spoiliation of Evidence, as a tort is available in many courts across the USA but not in the state of Pennsylvania. Although Erie believed the BMW caused the fire, it could not prove the fact because USAA, insuring the auto’s in its insured’s care, allowed it to be disposed of without analysis, deprived itself and USAA of the ability to subrogate against BMW. Both insurers failed to protect the evidence and neither had a suit against BMW nor could Erie succeed against USAA for spoiliation.
(c) 2026 Barry Zalma & ClaimSchool, Inc.
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PIP Fraud Disputes Should Never be Limited to Arbitration
Post number 5269
Read the full article at https://lnkd.in/gn7YmPny, see the video at https://lnkd.in/g4HzAf2r and at https://lnkd.in/gTFNBc_Z, and at https://zalma.com/blog plus more than 5250 posts.
In Government Employees Insurance Co. et al v. Active Medical Care, P.C. et al, No. 2:24-cv-10909 (BRM) (JRA), United States District Court, D. New Jersey (January 9, 2026) Defendants moved to Compel Arbitration and Stay the Proceedings (“Motion”). Plaintiffs Government Employees Insurance entities opposed.
Defendants’ Motion to Compel Arbitration and Stay the Proceedings was administratively terminated, and it was further ordered that the parties shall jointly notify the Court as soon as a decision is issued by the New Jersey Supreme Court in the appeal of Allstate New Jersey Insurance Company, et al. v. Carteret Comprehensive Medical Care, P.C., et al. Supreme Court Docket No.: 090337.
ANALYSIS
The central dispute was whether GEICO’s IFPA claims ...
Insurer’s RICO Claim Against Fraudulent Health Insurance Claims Proper
Post number 5268
Read the full article at https://www.linkedin.com/pulse/allstate-works-take-profit-out-crime-fraud-barry-zalma-esq-cfe-xu89c, See the video at and at and at https://zalma.com/blog plus more than 5250 posts.
Allstate Properly Asserted Fraud Claims Against Hospital and Doctors
In Allstate Indemnity Company et al. v. Memorial Heights Emergency Center et al., No. 25-20020 (5th Cir. Jan. 14, 2026) the Plaintiffs, a group of Allstate insurance entities, brought suit against several Defendants who own, manage, and operate Memorial Heights Emergency Center in Houston, Texas to recover monies paid to the listed fraud perpetrators only to have its case dismissed by the trial court and seek reversal at the Fifth Circuit.
FACTUAL BACKGROUND
In 2018, the Defendants entered into agreements with personal injury attorneys to refer ...
Insurer’s RICO Claim Against Fraudulent Health Insurance Claims Proper
Post number 5268
Read the full article at https://www.linkedin.com/pulse/allstate-works-take-profit-out-crime-fraud-barry-zalma-esq-cfe-xu89c, See the video at and at and at https://zalma.com/blog plus more than 5250 posts.
Allstate Properly Asserted Fraud Claims Against Hospital and Doctors
In Allstate Indemnity Company et al. v. Memorial Heights Emergency Center et al., No. 25-20020 (5th Cir. Jan. 14, 2026) the Plaintiffs, a group of Allstate insurance entities, brought suit against several Defendants who own, manage, and operate Memorial Heights Emergency Center in Houston, Texas to recover monies paid to the listed fraud perpetrators only to have its case dismissed by the trial court and seek reversal at the Fifth Circuit.
FACTUAL BACKGROUND
In 2018, the Defendants entered into agreements with personal injury attorneys to refer ...
Court Must Follow Judicial Precedent
Post 5252
Read the full article at https://www.linkedin.com/pulse/sudden-opposite-gradual-barry-zalma-esq-cfe-h7qmc, see the video at and at and at https://zalma.com/blog plus more than 5250 posts.
Insurance Policy Interpretation Requires Application of the Judicial Construction Doctrine
In Montrose Chemical Corporation Of California v. The Superior Court Of Los Angeles County, Canadian Universal Insurance Company, Inc., et al., B335073, Court of Appeal, 337 Cal.Rptr.3d 222 (9/30/2025) the Court of Appeal refused to allow extrinsic evidence to interpret the word “sudden” in qualified pollution exclusions (QPEs) as including gradual but unexpected pollution. The court held that, under controlling California appellate precedent, the term “sudden” in these standard-form exclusions unambiguously includes a temporal element (abruptness) and cannot reasonably be construed to mean ...
Lack of Jurisdiction Defeats Suit for Defamation
Post 5250
Posted on December 29, 2025 by Barry Zalma
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He Who Represents Himself in a Lawsuit has a Fool for a Client
In Pankaj Merchia v. United Healthcare Services, Inc., Civil Action No. 24-2700 (RC), United States District Court, District of Columbia (December 22, 2025)
FACTUAL BACKGROUND
Parties & Claims:
The plaintiff, Pankaj Merchia, is a physician, scientist, engineer, and entrepreneur, proceeding pro se. Merchia sued United Healthcare Services, Inc., a Minnesota-based medical insurance company, for defamation and related claims. The core allegation is that United Healthcare falsely accused Merchia of healthcare fraud, which led to his indictment and arrest in Massachusetts, causing reputational and business harm in the District of Columbia and nationwide.
Underlying Events:
The alleged defamation occurred when United ...
Zalma’s Insurance Fraud Letter
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ZIFL Volume 29, Issue 24
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Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/
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