Tuesday, October 18, 2016


What Is Subrogation?
Subrogation refers to the process an insurance company uses to seek reimbursement from the responsible party for a claim it has already paid.
Subrogation matters to you if:
  • You have a covered loss, and
  • You submit a claim to your insurance company, but
  • Another party is actually responsible for all or part of the damages (i.e. you have a car accident and the other driver caused the accident, or if damage to your home was caused by a faulty appliance)
In this case, your insurance company may pay your claim, and then seek reimbursement from the other party. This would depend on the circumstances surrounding the loss, the laws in your state, and your policy provisions.
If your company decides to pursue subrogation, the company will work to recover the damages from the responsible party.  Damages may involve costs paid by you and the insurance company. Costs paid by you usually means your deductible, but could include amounts over your policy limits not paid by your insurance company. This would depend on the laws in your state and the specific circumstances surrounding the loss.
The subrogation process may also be used if you are at fault for damages.  In this case, the other party and/or their insurance company would make a claim against you, usually directly to your insurance company.  Your company will review the facts of investigation to determine if you are liable for the damages.

 Your company may make payment to the other company if you have coverage and it is determined that you would be legally responsible for all or part of the damages. Keep in mind that often times liability is not clear cut. In some cases, both parties may be partially responsible. Dependent on the laws in your state, both parties may share responsibility for payment of damages. For example, one party may be 40% responsible, and the other party may be 60% responsible. This could mean that both companies make subrogation claims against each other, and each company pays their respective portion of the other party's claim.
In all cases, your participation and cooperation with us in the investigation phase of the claim process is important. Your assistance can help to establish important facts, and preserve evidence, and may help to accelerate the recovery process. 

Insurers do not ordinarily think of themselves as plaintiffs.  A carrier's subrogation rights can exist under common law, equity, contract, or statute.  No matter its origin, a carrier's right of subrogation and its ability to recover a loss, large or small, is a fundamental right of the insurance industry.  A successful subrogation program can often mean the difference between profit and loss. 
METROPOLITAN has represented more than 350 insurer, self-insured entities, third party adjusting companies, and government entities in connection with subrogation related litigation. This includes recovery efforts in the areas of personal lines insurance, worker's compensation, fire, group health, casualty, fidelity and surety bonds, uninsured motorist, inland and ocean marine, ERISA, long shore and harbor worker's compensation, aviation, hospital liens, group health and disability, conversion claims, med pay, mistaken payment of benefits, recovery of premiums, and other areas. 
METROPOLITAN aggressively pursues subrogation rights which have traditionally been neglected and underutilized.  Implementing an aggressive and successful subrogation program remains an insurance carrier's biggest challenge. Lacking the historical respect given to other areas of the insurance industry, aggressive subrogation has become an indispensable function of carriers interested in making every effort to maximize profit. Through aggressive subrogation training programs and the investment of subrogation resources, insurers are no longer backing down when it comes to recovering what is rightfully theirs.  

Hiring a full service firm like METROPOLITAN to implement an innovative recovery program and aggressively pursue and recover every possible subrogation dollar is a necessary step toward this end. In effect, failure to recognize third party liability and take advantage of all subrogation opportunities is tantamount to paying a claim twice. Subrogation must be recognized as a profit center worthy of the investment of time and resources. 

From automobile losses to fire and casualty to catastrophic inland marine transportation claims, METROPOLITAN takes the action necessary to preserve your subrogation interests and aggressively recover your claim dollars. 
When a work related injury results in a claim, every state has a different set of priorities and rules regarding your right to recover these dollars. Prompt action is necessary to guarantee maximum recovery. Our network of local counsel allows us to act as a clearinghouse for subrogation claims across the country. 
Transportation law and claim investigations can be complicated and confusing.  METROPOLITAN specialized in navigating the mine field of modern transportation and defeating limitations wherever possible. 
When an insurer makes a mistake of tact in paying a claim, it has valuable recovery rights which it should avail itself of. Prompt action is necessary in order to avoid bars and limitations to such recoveries. We aggressively pursue and recover overpayments, claims paid by mistake, as well as premiums due from insureds. 

In addition to counseling group health providers and plan administrators on plan and policy language, METROPOLITAN expertly puts to work favorable plan subrogation language and federal law under ERISA, where applicable, to maximize your recovery of medical and disability benefits at an absolute minimal cost. We represent several such group carriers and plan providers on a nation-wide basis. 

Most insurers don't realize when they have lost subrogation dollars.  When such recovery opportunities are lost, it is usually because third party liability is not timely recognized or is not recognized at all. These monies are lost forever and you may never even know it. 
METROPOLITAN believes that immediate investigation, especially in catastrophic losses, is essential to an effective subrogation program. METROPOLITAN will conduct an investigation of subrogation potential whenever there is a serious injury or catastrophic property loss, even in instances in which it appears that there is no visible source of recovery.  It is paramount that this investigation is initiated while memories are fresh, witnesses are available, and the evidence has not been destroyed or tampered with.  Our expansive collection of expert witnesses covers the nation and allows us to get the best quality professionals involved early, and at the right price. 
METROPOLITAN will also make investigators available to review your files to determine whether files have subrogation potential. Reviewing either electronic files or hard copies of files, METROPOLITAN will search for subrogation potential and make recommendations on files where further investigation or subrogation activity is needed. These services are offered free of charge to our clients.

The word subrogation comes from the Latin word subrogoree, meaning to substitute.  Subrogation is therefore a substitution of one creditor, the damaged Insured, for that of another, the insurer.  The concept of subrogation arises out of the property-casualty insurance policy as a contract of indemnity, with the purpose of returning the Insured to pre-loss condition.  No subrogation exists in life insurance because a life insurance policy is not a contract of indemnity.
As the right of subrogation arises out of the property-casualty policy as a contract of indemnity, this right exists without the subrogation clause contained in the policy, which would appear to make it redundant to write the subrogation clause into the policy.
The subrogation clause is written into the policy for two reasons: to prevent the insured from waiving subrogation rights after the loss; and to allow for recovery to the extent payment has been made, known as “pro-tanto” recovery.  The subrogation clause allows an Insurer to subrogate as soon as a loss has been partially paid and before there has been complete indemnity.
Most subrogation clauses allow the Insured to waive rights of recovery before a loss.  However, the ISO Builders Risk Form only allows a pre-loss waiver of subrogation with the written permission of the insurance carrier.
Nearly all insurers allow the Insured to engage in pre-loss waivers of subrogation in order to allow the insured to engage in some non-insurance transfer, such as hold harmless agreements, and are perceived as necessary to allow the Insured to conduct its business affairs.  On the other hand, most policies do not permit the Insured to waive rights of recovery after a loss, and the Insured who does risks voiding the policy.
The effect of subrogation is to create an equitable rate structure, reducing first-party losses and ultimately, fist party premiums (it has been estimated that auto collision premiums would increase by 31% without subrogation). 

Conversely, subrogation increases third-party losses and liability premiums.  Subrogation forces the party responsible for a loss to pay for it.
Recovery percentages can be increased through prompt recognition and investigation.  Most subrogation is missed through failure to recognize third-party liability.

1) Develop a theory of liability
Is this a products case, one of negligence, or possibly breach of warranty? The theory of liability indicates the various issues that must be proven and will become the blueprint for investigation.
2) Investigate
Preserve the evidence of how the loss occurred.  The closer to the time of loss you begin your investigation, the greater your chances of recovery. Remember that the burden of proof is yours.
If at all possible, retain an expert to pick up physical evidence to protect yourself from allegations that you altered the evidence.
An added benefit to the use of an expert is that it insures you will not have to testify at trial or be challenged as to your expertise. It also protects you from identifying the insurer.
Instruct your expert to document the evidence with a three-part receipt: one copy to be attached to the evidence, one copy for the claims file, and one for the owner of the evidence.
3) Secure the Evidence
The evidence should be kept in a place to which only the adjuster or his expert has access, such as a locked desk drawer or file cabinet. This helps to establish that control has been maintained and the evidence has not been altered.
4) Take statements
Statements help witnesses clarify what happened and can be used to refresh their memories later. Some people from whom statements are obtained may even be determined to be experts by the court. For example, the mechanic who worked on a particular automobile may not have a degree, but he may well have worked on that particular make and model car many times and be aware of technical problems associated with it.
Increased recoveries improve profit. Every dollar recovered decreases losses. Underwriting and loss adjustment expense is incurred whether or not there is a recovery. Subrogation recoveries are bottom-line profit, and can make the difference between profit and loss.

Metropolitan Engineering, Consulting & Forensics (MECF)
Providing Competent, Expert and Objective Investigative Engineering and Consulting Services
P.O. Box 520
Tenafly, NJ 07670-0520
Tel.: (973) 897-8162
Fax: (973) 810-0440
E-mail: metroforensics@gmail.com
Web pages: https://sites.google.com/site/metropolitanforensics/


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