When Cases Reach an Impasse

Despite how passionately a recovery professional feels about the liability existing against an adverse party, despite the plethora of support documentation, including expert reports and even obtaining the cooperation of the policyholder and the fact that you, as the subrogation representative, have attempted to utilize all of your very best negotiation skills and tactics, the adverse party refuses to settle, or even negotiate. It’s time to face facts: Your perfect case has now reached an impasse. Now what?

Appropriate goals for every recovery representative should involve obtaining the best recovery for the company, carrier, or client (as well as for the policyholder) in the shortest time possible. Generally, those goals are me—unless that perfect case hits a wall and the adverse carrier denies the claim with or without an explanation, leaving the question “Should this case be closed or referred to arbitration or subrogation counsel?”

Obviously, if arbitration is an option, both you and the adverse carrier or self-insured third party are members of Arbitration Forums and the amount paid is within the guidelines, then arbitration would be the next likely step. If arbitration is not an option, then recovery representatives must ask themselves if the case is worthy of litigation.

The first question to answer before sending a case to subrogation counsel should be “Does the amount of the claim paid support the cost of litigation?” The recovery representative must also determine whether the case will be referred on a contingency fee-basis or time and expense, and verify if counsel is willing to accept the referral if the loss dollar is relatively low.

Loss value should not be the only deciding factor when considering to refer cases to counsel. Not every case is a slam dunk, high-value loss case. Consideration must be given to the loss facts, whether or not there is comparative negligence involved, as well as understanding the loss state’s negligence rules. Do you have supporting documentation in support of the loss facts that you are presenting to the other side? All of these matters factor into the decision of whether or not a case should be sent to counsel for further pursuit through litigation.

Another key area for consideration concerns the expense factor. The actual projected cost of litigation must be considered because expenses incurred during the litigation process can add up quickly when litigation ensues. Additionally, summons must be filed with the courts and served. After the party is served, and if liability is still being disputed or denied, then depositions of the involved party as well as any experts that may be needed also will need to take place. Mediations will follow, and eventually trial, all of which have a price tag associated with each event. All of these necessary steps and procedures cost money and with each step of the litigated process, the net settlement can be diminished.

So if the sun, stars, and moon align and you refer your case to subrogation counsel, what’s next? Sitting back with a long diary waiting for a status call or a recovery check is probably not the best tactic. Every case that is assigned to a recovery specialist is important and deserves attention, which includes obtaining current status from counsel as well as determining if counsel requires any additional investigation. The bottom line is this: be involved and stay focused on the recovery. Do not abdicate to counsel, no matter how much you trust and respect them.

On the bright side, there is value in demonstrating to an adverse carrier that you mean business by filing suit against its insured because it now has to justify its expenses in defending the claim. This could work in your favor as it will have to decide whether or not it would be in its best interests to make an offer in order to not incur all of the expenses previously outlined. Just as these expenses add up quickly for the pursuit of the claim, they also add up just as quickly for the defense of the claim—possibly even faster since most carriers pay defense counsel on a time-and-expense basis.

Depending on the facts of the loss and the how clear liability is, the mere action of filing suit will cause the other carrier to make an offer in some circumstances. Sometimes it is a nuisance-value offer; sometimes it is a comparative offer. Sometimes. they even concede to pay the claim in full.

In instances where an adverse carrier has come around and made an offer (after causing unnecessary expenses to be incurred for legal counsel, subpoena, and filing fees) it’s still not the end of the case unless that offer was for 100 percent of the damages. An important question that must be considered is whether or not the offer made is reasonable based on the loss facts and supporting documents. Settlement offers should not be accepted just to discontinue litigation, especially since there is no economical reason to do so in the early stages of litigation, especially before depositions have been taken and additional costs are incurred. Something to consider is that while the adverse carrier will continue to incur the hourly costs of the defense counsel it retained, in most instances recovery counsel is working on a contingency fee and the initial costs to pursue the litigation already have been incurred.

So, what is the impetus to accept an offer? Is the adverse carrier or its defense counsel willing to negotiate fairly? Is the offer being made inclusive of the contingency fee being paid to subrogation counsel? Whatever offer being made at this juncture will be somewhere around one-third less to accommodate the expense of filing suit and coupled with counsel’s contingency fee. The only way to find out if a case can be resolved is to push hard during the negotiations. The key to amicably resolving a claim at impasse is to negotiate it for the highest dollar amount while keeping expenses low. If the carrier or the carrier’s defense counsel advises you that she is offering a nuisance value to “get rid of the lawsuit,” then she probably is not likely to negotiate as she is merely attempting to keep costs down. Specifically, in this instance, her posture would indicate that she is not conceding on liability and is just looking to end the costs incurred. Typically, counsel or the adverse carrier representative usually will make that clear. However, what if she made a comparative offer? These offers usually are a low-ball number to get the negotiations moving along. In these instances, it would be highly unlikely that the claim would resolved for total value; however, the gates of negotiation have now opened and the resolution of the claim with minimal expenses incurred is foreseeable. That’s a win-win.

As you can see, once that perfect claim hits an impasse and intercompany arbitration is not an option, your perfect claim quickly can go from a slam dunk recovery to a possible file closure in the blink of an eye unless you take the necessary next step and work with subrogation counsel to bring a satisfying end to that claim.