Promissory note and subrogation
A promissory note is a negotiable instrument defined as an unconditional promise or order to pay a fixed amount of money (with or without interest) or other charges described in the promise or order.
In the course of trying to collect from uninsured motorists, some insurers and their vendors may use promissory notes. It is important to remember that for these notes to be valid and collectible there are rules the insurer should follow. A promissory note is a negotiable instrument, which is defined as an unconditional promise or order to pay a fixed amount of money (with or without interest) or other charges described in the promise or order.
Keep in mind, in order for the note to be valid it should be written for a fixed amount of money or a sum certain. That means, if the balance is still pending, the insurer may want to hold off on getting the uninsured motorist to sign a promissory note.
It is important to remember even if the note indicates the balance is pending on the subrogation claim, putting the words “claims pending” into the note does not allow you to unilaterally add that balance onto the promissory note amount at a later date. Examples include an outstanding balance on medical payments or a bodily injury settlement. Also, indicating that the amount of the note is fluid could also invalidate the note on its face.
If the balance on the subrogation claim goes up after the promissory note is signed, the insurer would have to get the uninsured motorist to agree to sign another promissory note for the new amount or waive the pending claims. If you would like to learn more about promissory notes or discuss a file, don’t hesitate to contact one of our subrogation lawyers.