Filed Under:Markets, Commercial Lines

5 subrogation opportunities insurers shouldn't miss

Experienced subrogation professionals are usually quite adept at pursuing subrogation opportunities. Most property and casualty claims with recovery potential involve mundane automobile accidents with vehicle damage or more challenging homeowner losses involving a faulty product, improper installations or vehicle damage to a structure.

These scenarios are familiar to the seasoned recovery professional; and for cases involving more complicated circumstances, an abundance of reliable information and resources are widely available from peer groups, experts and other sources on the Internet. However, before a subrogation recovery can be successfully pursued, success depends on the last person looking at the claim file before closure. That person must be adept at identifying recovery potential or there is automatic failure.

Failure to Identify + Failure to Pursue = No Recovery.

Just as the loss facts and state negligence rules in every automobile loss vary; there are certainly numerous loss scenarios in property and workers’ compensation claims with countless recovery opportunities that are often overlooked to the untrained eye. Here are five loss scenarios frequently missed as a result of a failure to identify a recovery opportunity.

Acts of God and weather-related claims.

Everyone is familiar with runaway shopping carts on windy days or leaky roofs during heavy down pours. To rule out recovery potential it is critical to delve deeper into the facts surrounding a claim when conducting an investigation. A properly constructed chimney should not topple over nor have bricks come loose during a normal wind storm unless there is an underlying cause such as poor construction which created the dangerous condition. Insight can be gained by inspecting the weather report to determine if the wind alone was strong enough to cause the damage while simultaneously investigating the age of the failed structure.

This same premise applies to roofing claims where water has penetrated the roof tiles or areas which should have been sealed. Determining the age of the roof can often lead to a recovery for faulty workmanship or defective materials. Not every snowstorm causes structures to collapse, yet many do. The cause of the collapse should be investigated early on when the adjuster is on premises to establish age, wear and tear versus poor construction. Too often, claims like these are written off as weather-related claims with no subrogation when in fact there is recovery, even if it's negotiated and compromised.

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Burglaries

In many jurisdictions, crime victims have been defined to include indirect victims such as insurance carriers. If the culprit is apprehended and the courts include court-ordered restitution as part of the sentencing or plea, or in lieu of time served, the insurance carrier may have a right of recovery. Pursuing a subrogation claim against a criminal tortfeasor may have challenges due to the unlikelihood of the financial means to make restitution. However, if restitution is established by the court, it is more likely the tortfeasor will make payments to avoid incarceration. It is certainly wise to contact the local district attorney or law enforcement agency to alert them of the loss paid by the insurance carrier, thereby placing the judicial system on notice for potential recovery.

Statutes and regulations

In state specific statutes and regulations such as the New York Loss Transfer recovery, it is all too common for a claims handler to not realize the subrogation potential if any of the vehicles involved in the loss are over 6,500 pounds or are used for the livery of persons or property. Specifically, the at-fault vehicle need not meet the criteria since the vehicle need only be involved in the loss, even if parked.

Another example is the right of recovery for no fault payments in Florida, where payments made by the injured party's personal automobile carrier (whether the individual was the driver or passenger of a commercial vehicle) are recoverable from the carrier for that vehicle. The recovery is not based on liability since under the Florida state statutory scheme personal injury protection (PIP) is mandatory for all noncommercial vehicles registered and licensed in Florida. While owners of vehicles with PIP coverage are immune from subrogation claims, uninsured owners of vehicles without PIP coverage do not enjoy that immunity. Knowing the state statutes and regulations is crucial in reviewing PIP claims for potential recovery.

Parental lack of or negligent supervision

Depending on the policy language of a homeowners policy, neglectful parents may be responsible for claims arising out of the misdeeds of their children under the age of 21 and residing in their household. The age and intelligence of the child will play an important role in whether or not a child can be held liable for negligent acts. Parents can be held with negligent supervision if it can be shown the child had dangerous tendencies of which the parents were aware.

Parents have been held responsible for damage to personal property resulting from fires, explosions, water and other perils. A thorough investigation is required to determine the intent of the child at the time of the event and the availability of insurance coverage. Given the potential cost to repair damages resulting from a fire to a home or building, it is certainly worth the time and expense to determine if there is a responsible party to pursue.

Workers’ compensation direct action claims

This is definitely an area often missed by over-burdened reps working to make sure the medical bills and indemnity are paid in a timely manner. They get the injured worker back on the job as quickly as possible and close the file. How many times has a representative wondered if there was a “Mr. Somebody” who may have been responsible for those injuries? If the compensation carrier is placed on notice by a third-party attorney, the carrier will be aware that there may be money coming back on their lien.

But what about the claims where the non-litigious employee does not retain representative counsel? How often are these claims closed without pursuing the at-fault party directly? It is crucial for a workers’ compensation adjuster to be aware of the recovery rights associated with a specific statute since they do vary widely. Some jurisdictions allow a carrier to pursue a recovery claim directly against a negligent party, while others give the injured worker the first right to pursue a liability claim within a specified timeframe, but afterwards either party can commence an action. Workers’ compensation claims managers must make a strong effort to educate their claims teams on the laws governing the states where their policyholders are conducting their business.

Experienced subrogation adjusters and a high-performing subrogation program can contribute significantly to a company's financial health. Companies can facilitate the effectiveness of their program by routinely conducting subrogation awareness discussions with their claims adjusters and subrogation specialists. It's easy for recoveries to slip through the cracks if the potential is not properly identified.

External resources may be utilized to conduct closed file reviews to capture any claims that may not have made it to the subrogation team. It is wise to get the subrogation adjuster involved early in claims with high dollar potential to be certain the investigation is conducted with subrogation recovery in mind. While the recovery potential may be obvious, the paid loss amount may not seem worth the pursuit, but smaller recoveries can add up to a larger amount. And who doesn't want a lot of recoveries?

Kathleen Smith, CSRP, is the managing director for Spartan Recoveries LLC. Donna Geraghty is the business development manager. For more information visit spartanrecoveries.com.  

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