Erie Insurance recently lost a chance to recover $1.6 million after a court ruled against its claim related to a burned BMW. The Supreme Court of Pennsylvania decided on January 21, 2026, that Erie cannot use its subrogation rights to pursue a promissory estoppel claim against United Services Automobile Association (USAA).
The story goes back to January 22, 2017, when a fire broke out at Bates Collision, Inc., an auto shop in Erie County. The fire damaged the building and several vehicles, including a 2013 BMW 3 Series, 335i. Erie Insurance paid over $1.6 million to cover the losses of its policyholders. After the fire, investigators identified the BMW as a possible cause.
Erie Insurance followed the proper steps by notifying USAA, which insured the BMW, and BMW of North America. Together, they inspected the vehicle. USAA told Erie that the BMW had been sent to an auction house called Insurance Auto Auction and promised to have the car wrapped and saved for potential investigation.
However, the plan fell through. On March 28, 2017, the auction house sold the BMW as salvage. With the car gone, Erie lost the key evidence needed to pursue a products liability claim against the manufacturer.
Without the vehicle to examine, Erie shifted its strategy. On November 9, 2018, it sued USAA for promissory estoppel, asking for $1,624,217.15 plus interest. Erie claimed USAA broke its promise, making it impossible to identify the responsible party for the fire.
But the court was not convinced. Justice Donohue wrote that Erie’s own policy only allows it to recover from someone responsible for the covered loss—in this case, the fire. USAA did not cause the fire; it just made it harder for Erie to prove who did. This, the court said, is an important difference. Subrogation rights don’t cover parties who simply interfere with recovery efforts.
Two other justices also weighed in. Justice Brobson agreed with the decision for different reasons, while Justice Dougherty dissented. One positive note for insurers is that the court didn’t rule out Erie suing USAA in its own right, rather than as a subrogee standing in for its insureds.
The main lesson here for insurance companies is to think carefully about how they frame legal claims when someone obstructs their subrogation efforts. Being the insured’s substitute might not always be the best approach.