CONSTRUCTION
DEFECT SUBROGATION
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.
PROPERTY DAMAGE
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.
WORKER'S
COMPENSATION
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.
INLAND AND OCEAN
MARINE
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.
RECOVERY OF
MISTAKEN PAYMENTS AND OVERPAYMENTS
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.
GROUP HEALTH AND
DISABILITY
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.
BENEFITS OF A FULL SERVICE
SUBROGATION FIRM
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.
INVESTIGATING
SUBROGATION
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.
SUBROGATION
EVALUATION PROGRAM
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.
USE OF SUBROGATION
AT METROPOLITAN
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.
IMPLEMENTATION SUBROGATION TECHNIQUES AT METROPOLITAN:
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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http://metroforensics.blogspot.com/
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