With tens, or even hundreds of thousands of dollars on the line, subrogation actions are bitterly fought and hard won. Whether you are the plaintiff or the defendant, subrogation claims are not to be taken lightly. The more you know and the more experience you have on your legal team, the better off you’ll be in the courtroom.
What is Subrogation?
Subrogation is the assumption by a third party (as a second creditor or an insurance company) of another’s legal right to collect a debt or damages. A Subrogation Lawyer can explain things in your specific situation, but here, we’ll explain it generically.
Subrogation typically applies to cases involving insurance carriers or business contracts with indemnification provisions. For example, when there is an automobile accident in which property is damaged and injuries are incurred, there is often a period of time where the insurance carrier runs an investigation to determine who was at fault. The injured party can’t wait for the investigation to be over to receive medical attention or to have their car repaired, so the insurance carrier will step in and pay the medical and auto repair/replacement bills. If another party is determined to be at fault in the accident, the insurance carrier can then attempt to recover from that situation. In other words, when the insurance company covered the damages for its insured, it assumed the right to collect damages from the at-fault party. That re-assignment of rights is subrogation.
Why Do I Need Legal Representation?
If you are an insurance carrier pursuing a subrogation claim, you need experienced counsel to make sure you have standing to pursue the claim and that your subrogation rights have not been compromised, such as through a settlement with a waiver of subrogation. If you are being sued by an insurance carrier who claims that you’re at-fault in an accident, you will need experienced counsel to determine whether the carrier has standing to pursue the claim. Whichever side you are on, you need a knowledgeable, experienced attorney to step in as soon as a loss is incurred. Laws vary from state to state, that’s why it’s important to hire a firm that’s familiar with Utah subrogation laws to help with your claim.
Tips for Borrowers Negotiating a Loan
The loan agreement isn’t the only document in a loan transaction. Other documents (sometimes dozens of them) can come into play. Here are a few to consider:
- Security Agreement. If the loan will be secured by personal property, such as accounts, inventory, equipment or IP (patents, trademarks, copyrights), there will be a security agreement. Many borrowers make the mistake of assuming security documents are simply standard agreements off the shelf and nothing to worry about. The truth is different: security agreements can be used by lenders to add additional terms into the deal. The most important consideration in a security agreement is to make sure it correctly describes the collateral. If the loan is to be secured by all the assets of the borrower, the collateral description is less of an issue, but if the loan is to be secured only by a certain type of collateral (e.g., inventory), an overly broad collateral description can get the borrower in trouble, especially if the borrower wants to reserve some of its assets to use as collateral on another loan. To avoid costly mistakes, have this document reviewed by an experienced finance lawyer.
- Pledge Agreement. Loans are often secured by stock or limited liability company membership units. A Lender may require a borrower to pledge the stock of its subsidiaries. A parent company or other affiliate may be required to pledge its stock as collateral. For all the stock pledges, the lender will insist on taking possession of the original stock certificates (if they exist) until the loan is paid back. In addition, the bank will ask for stock powers, a document that gives the bank the power to transfer the stock into its own name if an event of default occurs. During the loan period, the borrower will not be allowed to sell the pledged stock.
- Guaranty. The lender may require that a third party closely related to the borrower (such as a parent company, a subsidiary or a major stockholder) agree to provide a guaranty of the loan, which is essentially a promise to pay off the loan if the borrower fails to do so. Not all guaranties are the same. Some are limited in amount and revocable; others are unlimited and irrevocable. As with all the loan documents, you need a good finance lawyer to make sure you are getting the deal you agreed to.
- Promissory Note. A promissory note is a short document that represents the borrower’s obligation to pay back the loan and details the payments of principal and interest to be made. This document should be carefully reviewed by a professional to confirm that it correctly states the terms found in the term sheet and doesn’t introduce additional terms the borrower has not agreed to.
Free Initial Consultation with Subrogation Lawyer
When you need legal help, call the experienced lawyers at Ascent Law for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
Helpful Utah Law Articles