Previous columns appearing in this space by Kevin DeGarmo, director of subrogation for Allianz Global, and subrogation lawyer Susan Benson, of Benson Legal APC, have addressed, respectively, the role of the claims professional and of the insured in a subrogation investigation. Here, let’s focus on the advantages and desirability of assembling a fully staffed team both pre-loss and post-loss.
It is axiomatic that most insurers that experience success in subrogation stress early intervention by frontline claims professionals, independent claims professionals, forensic experts, and in-house or outside counsel. It is important that a team of experts and consultants are vetted and on call before a loss gets reported. We use the term “pounce position” to describe the optimal state of preparedness.
Likewise, budgets for outside consultants are essential. Hourly rates, travel protocols, and reimbursement of costs should be approved before a loss occurs. Certain types of high-volume losses (e.g., washing machines, toilets, hot water heaters, hoses, etc.) are recurring. Where possible, it is helpful to identify parties and documents prior to notice of claim so that the subrogation process can be streamlined. Recalls and serial numbers should be known and available in advance. Lining up experts, consultants, and technology providers before a loss occurs will improve subrogation recovery and help control subrogation costs.
After a loss occurs, the subrogation team needs to move expeditiously and make contact with some or all of the following:
- The insured.
- Employees of the insured.
- Witnesses.
- Public authorities.
- Potential tortfeasors.
- Other interested parties.
Ideally, these communications will begin to occur within hours or, at most, a day or two after the loss. Clarifying the roles and expectations of all involved can enable proper allocation of the team’s resources.
For example, in the instance of a commercial kitchen fire in a restaurant, successful subrogation likely will require communication with the owner of the building, the owner of the business, the employees of the business, and any company involved in the sale, service, cleaning, or inspection of the kitchen equipment and related fire suppression and detection equipment. It also is important to identify and speak to witnesses, local fire authorities, local building code authorities, and counsel for any employee or patron who may have been injured in the fire.
Identifying and securing pertinent documents and other potential evidence obviously is a key component of any effective subrogation investigation. This can include, but may not be limited to, contracts, invoices, purchase orders, tariffs, bills of lading, shipping receipts, warranties, guarantees, manuals, product literature, repair, service and maintenance records, blueprints, construction specifications and drawings including “as-builts,” alarm records, business and financial records, before-and-after photos, damage-proof records, surveillance video, news footage and reports, official reports (e.g., fire, police, Bureau of Alcohol, Tobacco, Firearms and Explosives, Occupational Safety and Health Administration, and Chemical Safety Board), and internal reports.
Depending on the type of loss, it may be advantageous to have an expert in the particular field at issue to help identify the various types of documents that are likely to exist. This is also helpful in determining whether the provided documents are complete and thorough.
The subrogation team should include an individual or individuals with expertise in social media and technology. Some of the techniques that can be used to gather evidence and help determine the cause of a loss and measure the resulting damages include: arc mapping, aerial images and drone photography, high-definition scanning and X-rays, 3D modeling and animation, CAD drawing and pictures of loss site scenes, and photogrammetry. Likewise, internet archival sites, EMS responder blogs, Google Maps, YouTube, Instagram, Twitter, and picture hosting services are all areas that may be rich in useful information. A subrogation team member should be capable of utilizing all of the above technology.
Knowledge of applicable state or federal law can be paramount. This is particularly true with respect to notice requirements in cargo matters or potential claims involving public entities or banks. Similarly, statutes of limitations and repose must be known to all involved. Local ordinances also can be very impactful.
It is fundamental that the likelihood of a favorable outcome in subrogation is optimized the sooner the loss scene is preserved and inspected and appropriate consultants become involved. In most instances, the team will start with an in-house or independent claims professional who must promptly identify losses that may provide potential for subrogation. Brokers should be encouraged to communicate by email and text immediately upon receipt of notice of such a loss from the insured. All involved must understand the importance of preserving the scene and preventing evidence access to potential tortfeasors—for example, when the sprinkler service inspection company is the first to respond to an unintended sprinkler discharge loss.
The importance of access to the internet and information resources from the start of the investigation and throughout to identify potentially adverse parties and notify them as soon as possible cannot be overstated. It is essential to move quickly to limit the sometimes interminable delays that can occur in connection with joint scene inspection and evidence removal.
Assembling an effective team and accentuating communication and cooperation have proven not only fundamental, but also indispensable for maximizing subrogation recovery. The team approach will increase the likelihood of success and minimize pitfalls.