Delaware Court Affirms Common Law Subrogation Rights for Out-of-State Insurers

In a significant ruling for insurance practitioners, the Court of Common Pleas for the State of Delaware recently clarified the boundaries of the state’s Personal Injury Protection (PIP) statute. On March 12, 2026, in USAA Casualty Insurance Company v. John Eric Ohnstad, the Court denied a motion to dismiss, confirming that out-of-state insurers are not barred by Delaware’s “no-fault” statutory restrictions when pursuing common law subrogation against individual tortfeasors.

The dispute arose from a 2023 motor vehicle accident in Newark, Delaware. The plaintiff’s insured, operating a vehicle registered and insured in New Jersey, was struck by the defendant, who drove through a flashing red light. USAA paid PIP benefits to its insured and subsequently filed a subrogation action against the defendant personally to recover those costs.

The defendant moved to dismiss, arguing that under Delaware’s PIP Statute (21 Del. C. § 2118), subrogation actions must be brought against the tortfeasor’s insurer rather than the individual, and that out-of-state insurers lack standing to recover under this statutory scheme.

Judge Mayer rejected the defendant’s arguments, identifying a critical distinction between statutory PIP claims and common law subrogation:

• Non-Applicability of § 2118: The Court noted that because the plaintiff’s insured was operating an out-of-state vehicle not registered in Delaware, they did not fall within the class of persons governed by Delaware’s PIP statute.
• Survival of Common Law Rights: The Court reaffirmed that 21 Del. C. § 2118 did not abrogate common law subrogation. Instead, the statute merely created a specific framework for Delaware-insured parties. For those outside that framework, the common law right to “stand in the shoes of the insured” remains a viable cause of action.
• Proper Parties: Addressing the defendant’s claim that he was the “wrong” party to be sued, the Court held that Delaware is not a “direct action” state. Outside the specific mandates of the PIP statute, an injured party (or their subrogated insurer) must sue the individual tortfeasor, not the liability carrier.

“The Delaware legislature… neither through its express language or in failing to provide a specific remedy… intended to divest a no-fault insurer of its common law right to subrogation against a tortfeasor under the facts presented in this case.”

This decision is a victory for insurers handling multi-jurisdictional claims in Delaware. It reinforces several essential principles:

1. Jurisdictional Nuance: Delaware’s restrictive subrogation rules (which often mandate intercompany arbitration) apply strictly to vehicles registered or insured in Delaware.
2. Litigation Strategy: For out-of-state clients, the proper defendant remains the individual tortfeasor. Attempts by defense counsel to force these claims into arbitration or against insurers directly under § 2118 should be resisted based on the Ohnstad precedent.
3. Contractual Rights Matter: The Court emphasized that if an insurance contract grants subrogation rights, the insurer possesses the same right to initiate an action that the insured would have had.

This ruling ensures that out-of-state carriers are not “boxed out” of recovery simply because they do not fit the specific definitions of the Delaware no-fault system.

Please reach out to Krista Shevlin or Travis McElhaney with questions. Weber Gallagher’s Subrogation Practice serves clients throughout Delaware, Pennsylvania, New Jersey, and West Virginia.