Flooding, tornados, severe storms, and other catastrophiclosses present unique complications when evaluating potential forsubrogation recovery. In 2011, there have been many catastrophiclosses: flooding in Australia with 35 fatalities and overall lossesat $7.3 billion; severe storms and tornados affecting Missouri,Oklahoma, Arkansas, Minnesota, and Kansas, including a devastatingtwister that leveled the town of Joplin, Mo. on May 22. There were170 fatalities related to U.S. severe storms, with overall lossesat $7 billion.

Separately, 330 tornados hit five southern states between April22 and 28, 2011, impacting towns in Mississippi, Oklahoma, Georgia,and Tennessee, resulting in 350 fatalities, with overall losses at$7.5 billion. New England also sustained a 6.3 magnitudeearthquake, resulting in 181 fatalities and overall lossesestimated at $20 billion. The enormity, scale and shortage ofavailable resources in the loss areas further complicate recoveryefforts.

CAT Subrogation Training
Most property insurers have CAT team members pre-designated torespond to catastrophic losses. Those CAT teams should receivepre-deployment subrogation issue-spotting training, which shouldoccur prior to responding to the loss site to ensure potentialsubrogation opportunities are evaluated by the on-scene CAT teammember.

It is important to keep in mind the basis for subrogation, which was developed to ensure a partywho causes a loss is held responsible. It is not a rigid concept;it changes as justice dictates. As one court noted, “Subrogationadvances an important policy rationale underlying the tort systemby forcing a wrongdoer who helped to cause a loss to bear theburden of reimbursing the insurer for payments made to its insuredas a result of the wrongdoer's acts and omissions.” State FarmGen. Ins. Co. v. Wells Fargo Bank, N.A. (2006) 143 Cal.App.4th1098, 1119.

Training should cover how to properly secure a loss site; whento bring in security; how to identify potential parties and placethem on notice; when to bring in building consultants and counsel;how scene inspections are conducted; maintenance and protection ofthe loss site while the investigation is ongoing; use ofstandardized procedures for inspections; handling of evidence; andpreservation of evidence, and so on. Trainingshould also cover the need to obtain contracts or involved leasesand their provisions' potential impact on subrogation. Rapidlyobtaining these documents is critical because it shapes who may bea viable, responsible party to pursue. Further, how best topreserve key critical witness statements about the loss needs to becovered.

Spotting product failures poses additional trainingrequirements. The key is to accurately identify the product (type,brand, model/serial number, manufacturer, seller, and so on). Thesubrogation investigation training must also stress the need forprior repairs, maintenance, and recovering exemplars from the losssite.

Structural failures often require obtaining data on the weatherto include wind speeds in the area, building specifications forwind and building code requirements. Evaluation of brackets,trusses, and membranes all need to be checked. The CAT teammember's checklist should cover those areas and others as part ofhis or her initial size-up of the loss.

A common sense review is best. CAT members will be stressed by the enormity of the losses,personal tragedies and extreme lack of resources in the affectedareas. Nonetheless, when unusual damage is noted in areas not seenin comparable areas, further subrogation inquiry needs to be made.Why did that damage happen only there? Should a qualified buildingconstruction consultant be hired? Should counsel be retained?Having standardized evidence inspection, handling, cost sharing(maintenance, security, and so on), and testing agreementspre-drafted, with fill-in blanks ready to go, are stronglyencouraged.

Get Ready, Be Safe, Go!
CAT team members need prepared kits to ensure their safety, as wellas basic tools to evaluate subrogation issues. Emergency kits musthave basic supplies often not available in a catastrophe zone.Water, non-perishable food, hand-crank radios with cell phonechargers and flashlights all need to be part of the emergency kitfor work in the disaster area. The American Red Cross offers adetailed checklist online called “Be Red Cross Ready,” which coverswhat safety issues should be considered and specific catastrophes,such as earthquake, wildfire, flood, landslide, hurricane, tornado,and tsunami. As mentioned, blank prepared evidence inspection,handling, cost sharing (maintenance, security, and so on) andtesting agreements need to be part of the CAT kit. Blank preparedstandardized notice of loss letters should also be available. Themost important rule is safety of all team members—to returnunharmed.

In addition, an on-call list of consultants must be part of theCAT kit. That list should include mobile vendors that can respondto the loss site. Categories to consider are experts (building,general contractor, subcontractor specialties, and so on), securitycompanies, remediation companies and counsel, amongst others. Thoseconsultants who can independently deploy to the loss area aregenerally favored over those who cannot.

Getting to the Scene
Reaching the loss site can be challenging forprofessionals because of the devastation to roads, airports, andwaterways. It is not uncommon for private helicopters to becontracted to get CAT members to severely impacted areas. It may becritical to photograph the loss areas from the air. A pattern ofdestruction versus no destruction may be apparent from above.Building construction issues implicating potential subrogation mayexist because of differing materials and construction techniquesused within those substantially similar buildings to explain damageversus no damage, and you may not be able to recognize thoseconditions from a street-level view. Video of the loss areas isalso highly recommended.

“You must run at least twice as fast as that!” said theQueen
Management of a CAT loss requires “running twice as fast,” becauseof the lack of resources in the affected areas. Steps to followinclude determining:

• Potential parties
• Area of origin of the loss
• Security issues
• Evidence preservation
• Controls of site access
• Protocols for investigation
• Evidence removal procedures
• Complete documentation for the area of origin
• Communication systems are operable
• Agreed-upon destructive testing protocols

Cost-sharing agreements for maintenance, security, cost ofequipment rental and needed demolition.

Out of the Rabbit Hole
Preplanning, pre-staging, and training assists CAT members inevaluating subrogation issues as part of their claims handlingduties. That preparation minimizes delays inherent in adjustingcatastrophic losses. These suggestions provide claims professionalswith a concise outline to manage a loss site while preservingsubrogation opportunities and avoiding creating a “looking-glassbook” while in the catastrophe zone.