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.
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.
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.
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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.
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
OF 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/
https://sites.google.com/site/metropolitanenvironmental/
http://metroforensics.blogspot.com/
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