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Why Efficiency Isn’t Enough

Maximizing your effectiveness in subrogation.

July 25, 2017 Photo

In this age of task overload, efficiency is a matter of survival. But in the subrogation world, is efficiency enough?

The goal of subrogation is not to manage claims or cases, but to make money out of them. Your mindset has to go beyond just being highly efficient; you need to be effective, too. After all, we can be highly efficient, but also unprofitable. Efficiency is about speed and accuracy. Effectiveness is about winning strategies. You need both in order to be successful in subrogation. 

Effectiveness in the subrogation world involves strategic thinking in terms of mapping out the future of the case, evaluating it over the long term both quantitatively and qualitatively, and deftly shifting direction as the case develops. 

Maximizing Effective Thinking Time

Lack of thinking time is the enemy of effectiveness. One way to take control of our effective thinking time throughout the day is something called the Pomodoro Technique. This time management philosophy developed by Francesco Cirillo in the late 1980s seeks to maximize focus and creativity by working in bursts of energy and then breaking up your work. 

In short, you work fast and furious for a straight 25 minutes, then take a three-to-five minute break. After four cycles, you then take a 15-30 minute break. The breaks aid in information assimilation. If a distraction pops in your head, jot it down, but then get back on task. This simple process can increase your chances of mastering a longer-term mindset shift for effectively handling your case overload. 

Effective Communication and Assessment

There is a simple equation to being successful in subrogation: Convince the other side to pay you more than the costs and fees you have to incur. Achieving this starts with first understanding your own risks and costs. You need to not only quantify, but also qualify your own information on the liability, damages, and costs your case presents both to you and to the other side. The better you understand your own risks and costs relative to theirs, the more effectively you can credibly convey the overall picture to the other side. This starts with effective case assessment.

Getting quality information involves intense focus and detailed fact-gathering when the case is still fresh, if possible. In the world of task overload, facts come and go in and out of our heads. The best way to ensure that the information you gather is not only captured but also fully digested is to write it down. Writing down just the facts will get to a basic point of assessment. But truly effective assessment involves the added step of composing a critical analysis of those facts. 

For effective fact gathering and critical analysis tools, consider using “the Notebook method.” This involves a memorandum template setting forth key data points and issues for the case. The top has the key data points, such as insured, loss location, loss date, and claim number. The body of the notebook then has the issues that comprise the initial bones of the claim, to which we begin to add the meat:

  • Facts

  • Experts

  • Other Interested Persons

    • Insured contact

    • In-house claims professional contact

    • Independent claims professional contact

      • Broker/agent contact, witnesses, attorneys

  • Damage Analysis

  • Legal Issues

    • Statutes of repose, limitations

  • Chronology of Events

Another form of template is a “proof tree,” which sets out the elements that you need to prove your claim along with the witnesses, documents, and other evidence needed to do so. Ideally, your notebook or proof tree should be a working document, something that you can add to regularly. Repeatedly updating these documents not only captures new information but also adds new depth to your analysis and enhances your ability to strategize the case. Examples of more substantive, effective notebooks and proof trees, and the key entries for them, are available upon request.

Understanding the Measure of Damages

Our cases will have a set dollar amount paid by our insurance company. But effective assessment means understanding the true recovery figure. Defendants can be wrong in claiming the damages are capped at actual cash value (ACV). If you paid based on the estimated cost to repair (RCV), several jurisdictions will consider that sufficient. Depending on the facts and the venue, the true damages may be neither RCV nor ACV, but diminution in market value of the items. Thorough analysis of the actual, provable measure of damages in your venue will help you better measure a truly effective recovery.

Additionally, recognizing the projected costs for pursuit of your claim is critical to assuring profitability. Consider the “good” $40,000 case, where defendant’s negligence clearly caused the loss and the $40,000 figure is, indeed, the true measure of damages. Despite this, defendant only offers you $25,000 to settle it. Assume the defendant is not a member of intercompany arbitration. You are certain you can get more through litigation. If you are not carefully analyzing what it will cost you to get more than $25,000, then you could end up with a net recovery less than the amount offered even if defendant ultimately pays a $40,000 check.

But costs to the defendant can be an effective point of persuasion. Consider sending the defendant a projection of his or her own defense budget, itemizing the costs as follows:

                                             Defendant’s           Defendant’s
Activity                                  Cost                      Attorney hours     

Receipt and review              
Complaint                              ?                            1.5                     

Defense counsel’s
report analyzing case              ?                            4.0                     

File responsive
pleading or motion                  ?                            3.5                     

Receipt and response
to written discovery                ?                             8.5                     

Draft and propound
written discovery                    ?                            3.5                     

Retain and/or consult
with defense expert                $1,500                    3.0                     

*Be sure to itemize the depositions, mediation, motions, trial preparation, trial, post-trial costs, and time.

Effectively assessing and demonstrating to defendants the true cost of not settling by showing that they may face costs and fees far in excess of the underlying loss can be a powerful motivator for improving your numbers. More complete templates for demand letters, with such projections and other key points of persuasion, are available upon request. 

Making money is the ultimate reward in subrogation. If used regularly and rigorously, these techniques and tools should help you be more effective in doing so.

About The Authors
Multiple Contributors
John W. Reis

John W. Reis is an attorney with CLM Member Firm Smith Moore Leathewood LLP. He can be reached at (704) 384-2692, john.reis@smithmoorelaw.com

Timothy Dunn

Timothy Dunn is a subrogation team leader with ESIS, part of the Chubb Group, in Alpharetta, Ga. He can be reached at  timothy.dunn@esis.com

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