Making the Most of Subrogation

To top it off, various lines of business have different procedures and guidelines for subrogation. Depending on the jurisdiction, subrogation procedures can differ for some lines of business but remain the same for others. In the state of Georgia, notification of the claimant is required when subrogation takes place for recovery of workers' compensation claims. On the other hand, notification is not required when subrogating a personal auto claim. However, right of recovery and limitations for both personal and commercial auto are the same. Needless to say, breaking down the subrogation requirements into groups based on lines of business can be a difficult task.

The Effects of Time

Another regulatory challenge is that as state requirements evolve over time, insurers must work even harder to stay abreast of current guidelines and take extra care so as not to confuse requirements, taking into account state-specific guidelines. Otherwise, they can miss opportunities. For example, those familiar with Texas' guidelines understand that, when it comes to handling an insurer's right to subrogate, a workers' compensation claimant does not need to be notified that subrogation will take place against a third party. The guidelines in New York, however, are somewhat more stringent. They require sending a claimant a specific notice at least 30 days prior to the expiration of the time allotted to file an action in order for the insurer to be in a position to file an action. Therefore, erroneously following the Texas guidelines for a New York case would mean that the opportunity to subrogate would be lost. Conversely, if you applied the New York guidelines in Texas, then you would have invested time working on an unnecessary notification.

Lost time is yet another problem insurers can face. Because subrogation policies are spread across each state's body of law, it usually takes a great deal of effort to gather the information needed to perform subrogation activities. Guidelines and procedures dictated by each state's legislature and department of insurance are communicated to insurance companies through statutes, regulations, bulletins, and other materials. This information is distributed throughout the year, through different mediums. Some states cover subrogation in one state statute. Other states may cover the topic across a number of regulations or statutes, each of which applies to one or more lines of business. This leads to the time-consuming process of uncovering content specific to subrogation activities. The last thing anyone wants to do is devote time to a subrogation case only to find out they have misinterpreted regulatory requirements or have followed the wrong guidelines.

Don't Miss Out

Missing updates to state regulations and statutes regarding subrogation can also have a negative impact on recovery opportunities. When the subrogation guidelines and procedures are not adhered to, recovery can be difficult and awards can be reduced or entirely withheld. Too often, opportunities to recover costs are missed entirely.

Costs also rise when parties enter subrogation activities where little or no recovery can be achieved. When subrogation guidelines are not properly maintained, cases can fall through the cracks and move forward even though the whole or the majority of the award directly benefits the claimant and expenses for the proceedings fall solely to the insurer. Knowing the guidelines for recovery can help your organization prioritize subrogation activities based on expected recovery, as well as assist in guiding subrogation activities to the best recovery outcomes.

Ultimately, time-consuming, costly mistakes related to subrogation occur when guidelines and procedures appropriate for the line of business and the jurisdiction have not been met or completed. Preventing these types of mistakes may seem overwhelming; however, establishing internal processes that meet the challenges of varying state guidelines and procedures is a vital safeguard.

Being informed about the latest changes to subrogation guidelines is the best place to start. Timely recognition of states' regulatory changes will help your organization stay abreast of the most recent guidelines and procedures that, if not followed, will have a negative impact on subrogation activities. Assign this responsibility to one or more people depending on how many states your company serves. These individuals will monitor and review regulatory activities related to subrogation. They will also assist in updating processes when changes are made to the guidelines. Timely and accurate sources for regulatory content can also help ensure success.

In addition, channels of communication among departments must remain open and conducive to the exchange of information in a timely fashion. The clock on subrogation begins ticking on the date of the loss or the accident. That clock just might be ticking faster than you think, depending on state-specific rules. A determination as to whether subrogation can be pursued should be made sooner rather than later. Provided that subrogation can proceed, the next step is to prioritize the activities based on a formula that includes the expected recovery period, expenses, and statutes of limitations.

Lastly, conduct regular audits of subrogation activities. This involves reflecting on the subrogation processes presently in place. Keep track of the subrogation guidelines for each state and each line of business, periodically checking that your procedures reflect these guidelines. When the guidelines and procedures don't align, correct the problem. While the solution will vary depending on the circumstances, most problems can be solved by adjusting the technology or the process being employed or simply by finding a new way to manage the information related to the case. Additionally, review any active subrogation opportunities to ensure that they also comply with the guidelines. By using the latest guidelines and procedures, you can be confident that the subrogation process your organization has instated will be compliant.

Dan Grey and Tim Kosinski are product managers for insurance compliance solutions at Wolters Kluwer Financial Services. They may be reached at dan.grey@wolterskluwer.com and tim.kosinski@wolterskluwer.com, respectively.