Allstate Insurance v. Mel Rapton, Inc.

This appeal involves a common situation. A person whose car is damaged by someone else’s negligence tenders a claim to her insurance company. The company pays off, but its policy does not cover all of the damages. Hence, the policyholder files a small claims action against the tortfeasor to recover uninsured losses.

After the policyholder in this case obtained a small claims judgment in her favor, her insurance company brought a subrogation action against the tortfeasor to recover what the insurance company had paid to the policyholder to cover losses she suffered as a result of the tortfeasor’s negligence.

The question tendered is whether the policyholder’s small claims judgment against the tortfeasor bars the insurance company from pursuing its subrogation action because the latter action is precluded by the res judicata effect of the rule against splitting a cause of action. As we shall explain, the trial court correctly determined that the insurance company’s action is barred.

Facts and Procedural Background

A fire that started in Katie Gallagher’s Honda Accord destroyed the interior of the car and its contents. Gallagher had purchased the car from defendant Mel…