The importance of subrogation to the insurance industry has increased by leaps and bounds over the last two decades. Carriers now recognize the enormous benefit that subrogation can bring to their bottom lines. Dedicated subrogation units and technological advancements have elevated the level of attention placed on recovery dollars.
Regardless of the technological and philosophical changes in subrogation over the last decade, the most important person in the subrogation process remains the claims professional. With just a few simple steps, the claims professional can ensure that everyone reaps the benefit of a successful recovery, including the insured, the agent/broker, and the insurance carrier.
The most critical step in the entire subrogation process, especially in property and marine subrogation, is early recognition by the claims professional. During that first phone call with the insured, the claims professional should be thinking about the possibility of recovering money paid on a loss from a responsible party or parties.
Clear communication with the insured is of utmost importance, combined with a predisposition by the claims professional toward the possibility of subrogation. When speaking with the insured, it is absolutely critical for claims professionals to ask clear, open-ended questions. Too often, we see subrogation potential mistakenly ruled out because an insured states that there hasn’t been any “recent” work completed at his home or business. Rather than asking the insured about recent work, ask when work was last completed, what work was done, and why the work was done. Every state has unique statutes of limitations and repose, and while an insured may not consider activity that occurred several years ago to be recent, it still can fall within the jurisdiction’s applicable statute, making it very relevant to the claim at hand.
Immediately after it is determined that there has been some type of activity that may have impacted the cause of loss, regardless of the time frame, refer the claim to a subrogation professional and let them do the heavy lifting of determining whether that activity and the timeline impacts subrogation potential.
After the possibility of subrogation has been identified, the next step is to secure the evidence and the artifacts. This also needs to be addressed by the claims professional during that first phone call. By the time the loss is inspected, the evidence often is no longer available. Insureds are understandably anxious to recover from their losses and get their lives or businesses back in order. Even the simple act of remediation can alter or destroy a scene, leading to claims of spoliation by responsible parties. Spoliation of evidence is one of the biggest obstacles that subrogation professionals face in proving their cases.
In addition, while the insured may believe that a particular piece of evidence is relevant to the subrogation claim, the professionals and the experts retained by the carrier may have other artifacts in mind that they want to preserve. For example, the experts may need to examine electrical components or retain products/artifacts that were in the area of origin simply to rule them out as a cause of the loss. These artifacts can disappear quickly, so it is imperative that the claim be referred to subrogation as soon as possible. It is better to give subrogation professionals the opportunity to rule out subrogation potential than to give them no opportunity at all.
All of this further emphasizes the need for expedient referral to a subrogation professional—whether that means internal staff, outside counsel, or a contracted vendor—so that the appropriate experts can be engaged to protect the scene and potentially responsible parties can be placed on notice and invited to examine the loss site. While this at times may cause delays in the claims resolution process, it is extremely important to protect and preserve the loss site. Not following this necessary step impacts the overall success of the claim. The quicker the referral to the subrogation professional is made, the sooner the insured can move forward with repairs and the better the chances for a successful recovery.
Clearly explaining the reason for the delay and the impact to the financial outcome of the claim usually will ensure the insured’s understanding and cooperation. Keep in mind that subrogation professionals often are measured on cycle time and typically have financial targets to meet. That means they have no interest in needlessly delaying the claims resolution process.
The final piece of the puzzle is the partnership between the claims professional and the subrogation professional, whether that department is internal to the carrier or outsourced to a recovery firm or attorney. Claims professionals typically have cycle time and customer service goals, too, which may make subrogation seem secondary to their primary tasks of evaluating coverage, assessing damages, and resolving claims.
Involving a subrogation professional early in the claim transfers ownership of the subrogation process to the appropriate party and allows the claims professional to focus on the resolution of the claim. In most companies, the subrogation professional manages the preservation of evidence, places responsible parties on notice, coordinates inspections, and handles the myriad of other tasks related to recovery. This takes those tasks off the desk of the claims professional, allowing them to focus on resolving the claim. Rest assured that referring a claim to subrogation will not negatively impact the resolution of the claim, and minor delays are well worth the potential financial benefit to everyone involved.