The insured purchased a homeowner’s policy from American Family Insurance. The insured made a claim under the policy for damage by rain and moisture due to faulty construction. American Family denied the claim, and the insured filed suit. At the same time, the insured filed suit against Northern Heritage Builders for damages from the construction. The suit between the insured and American Family was decided in favor of the insured and American Family paid for the damage. In the settlement agreement, there is no assignment to American Family of the rights of the insured’s recovery against any party by reason of damage to his residence.

Later, American Family filed suit as the subrogee of the insured. American Family argued that once it paid the insured under the policy, it was equitably subrogated to his rights of action against the wrongdoers responsible for the loss to the extent of its payment to the insured. The court concluded that whatever the right of subrogation American Family acquired from paying the insured for the damage, it acquired pursuant to the subrogation provision of the policy, not by equitable principle. Therefore, because the insured did not assign his rights, American Family could not continue with a subrogation claim.

American Family Mut. Ins. Co. v. Northern Heritage Builders, L.L.C. 239 Ill.2d 549, 943 N.E.2d 1099 (Table) Ill. 2011. January 26, 2011

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