Currently, under Virginia law the surviving spouse can collect both from the insurance company for the life insurance proceeds and from the tortfeasor. This can be remedied by allowing subrogation of life insurance claims where negligence occurred causing the death of the insured. Furthermore, insurers could begin placing a subrogation clause in the life insurance contracts of the insured to lay the foundation for future subrogation claims.
Life Insurance Subrogation: Benefits Too Remote? (Part 3)
The degree of attenuation between the amount paid out under a life insurance policy and the potentially limitless value of life presents another counter argument to allowing life insurance subrogation in Virginia. One of the conditions precedent in allowing a subrogation action is the recompense of the insured. However, how can an insurance company put a value on life? It can be credibly argued that the courts place a value on life all the time in the form of wrongful death settlements and verdicts. Furthermore, an insurance company’s payment of the pre-determined amount under the policy should be viewed as “making whole” the insured.
This may be one of the trickiest needles to thread in the argument for allowing life insurance subrogation in Virginia. Many people would be uncomfortable positing the payment of a term-life insurance policy as the value of the insured’s life.
Life Insurance Subrogation: Investment or Indemnity? (Part 2)
The bedrock of subrogation is the concept of indemnity, that is, the act of stepping in to collect a definite, cognizable amount of money, an insurer paid on behalf of another. One of the major arguments against allowing life insurance subrogation is that life insurance is, in essence, an investment vehicle rather than an indemnity payment.
For instance, in an automotive subrogation case the insurer pays out a certain amount of money based upon the repair bills, rental car expenses and medical bills. However, in life insurance there is a pre-determined amount of money paid out to the insured’s estate triggered by the policyholder’s death. This occurs no matter what the circumstances of the death were, barring suicide of course. There should be a distinction made between short term, or “term life” policies and long-term life insurance policies. the former are more of a hybrid between investment and indemnity, whereas long-term life insurance policies resemble investment vehicles.