Experienced subrogation professionals are usually quite adept atpursuing subrogation opportunities. Most property and casualtyclaims with recovery potential involve mundane automobile accidentswith vehicle damage or more challenging homeowner losses involvinga faulty product, improper installations or vehicle damage to astructure.

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These scenarios are familiar to the seasoned recoveryprofessional; and for cases involving more complicatedcircumstances, an abundance of reliable information and resourcesare widely available from peer groups, experts and other sources onthe Internet. However, before a subrogation recovery can besuccessfully pursued, success depends on the last person looking atthe claim file before closure. That person must be adept atidentifying recovery potential or there is automatic failure.

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Failure to Identify + Failure to Pursue = NoRecovery.

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Just as the loss facts and state negligence rules in everyautomobile loss vary; there are certainly numerous loss scenariosin property and workers' compensation claims with countlessrecovery opportunities that are often overlooked to the untrainedeye. Here are five loss scenarios frequently missed as a result ofa failure to identify a recovery opportunity.

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Acts of God and weather-related claims.

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Everyone is familiar with runaway shopping carts on windy daysor leaky roofs during heavy down pours. To rule out recoverypotential it is critical to delve deeper into the facts surroundinga claim when conducting an investigation. A properly constructedchimney should not topple over nor have bricks come loose during anormal wind storm unless there is an underlying cause such as poorconstruction which created the dangerous condition. Insight can begained by inspecting the weather report to determine if the windalone was strong enough to cause the damage while simultaneouslyinvestigating the age of the failed structure.

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

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Burglaries

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In many jurisdictions, crime victims have been defined toinclude indirect victims such as insurance carriers. If the culpritis apprehended and the courts include court-ordered restitution aspart of the sentencing or plea, or in lieu of time served, theinsurance carrier may have a right of recovery. Pursuing asubrogation claim against a criminal tortfeasor may have challengesdue to the unlikelihood of the financial means to make restitution.However, if restitution is established by the court, it is morelikely the tortfeasor will make payments to avoid incarceration. Itis certainly wise to contact the local district attorney or lawenforcement agency to alert them of the loss paid by the insurancecarrier, thereby placing the judicial system on notice forpotential recovery.

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Statutes and regulations

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

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Another example is the right of recovery for no fault paymentsin Florida, where payments made by the injured party's personalautomobile carrier (whether the individual was the driver orpassenger of a commercial vehicle) are recoverable from the carrierfor that vehicle. The recovery is not based on liability sinceunder the Florida state statutory scheme personal injury protection(PIP) is mandatory for all noncommercial vehicles registered andlicensed in Florida. While owners of vehicles with PIP coverage areimmune from subrogation claims, uninsured owners of vehicleswithout PIP coverage do not enjoy that immunity. Knowing the statestatutes and regulations is crucial in reviewing PIP claims forpotential recovery.

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Parental lack of or negligent supervision

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

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

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Workers' compensation direct action claims

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

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But what about the claims where the non-litigious employee doesnot retain representative counsel? How often are these claimsclosed without pursuing the at-fault party directly? It is crucialfor a workers' compensation adjuster to be aware of the recoveryrights associated with a specific statute since they do varywidely. Some jurisdictions allow a carrier to pursue a recoveryclaim directly against a negligent party, while others give theinjured worker the first right to pursue a liability claim within aspecified timeframe, but afterwards either party can commence anaction. Workers' compensation claims managers must make a strongeffort to educate their claims teams on the laws governing thestates where their policyholders are conducting their business.

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Experienced subrogation adjusters and a high-performingsubrogation program can contribute significantly to a company'sfinancial health. Companies can facilitate the effectiveness oftheir program by routinely conducting subrogation awarenessdiscussions with their claims adjusters and subrogationspecialists. It's easy for recoveries to slip through the cracks ifthe potential is not properly identified.

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

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Kathleen Smith, CSRP, is the managing director for SpartanRecoveries LLC. Donna Geraghty is the business development manager.For more information visitspartanrecoveries.com.  

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