Successfully Pursuing Subrogation Against an Uninsured Party

Pursuing subrogation against an uninsured party can be a daunting task, even for the most experienced Recovery Specialist.  Challenges are quite different than pursuing recovery from an adverse carrier where the person negotiating the claim has insurance, liability, and investigative experience and understands subrogation.  On claims with adverse carriers if an impasse is reached due to liability, in most cases the matter can be submitted to Arbitration Forums to resolve.  In others the case goes to counsel, but with coverage in place it is likely the matter will be resolved prior to trial.

There is no ‘understanding’ of any kind when trying to negotiate a settlement with an uninsured third party, especially if that entity is an individual rather than a corporation.  In addition to needing to explain who you are, a further explanation concerning why you represent the insurance carrier for the party they caused damage to, the basics of the subrogation process, as well as how they have violated the State Financial Responsibility Laws.  It’s always a bit tricky getting to the part of the conversation where you need to advise an uninsured party as to the consequences for non-compliance.  When a party is uninsured, getting that person to understand and agree that they caused the loss, or at lease caused some degree of the loss as well as explaining the amount of damages being pursued is not an easy task.  Most individuals, in general, are not familiar with repair costs for automobile or property and are often horrified at the amount they are being told they owe.  Discussing their obligation and payment expectations can be especially precarious while simultaneously attempting to develop a professional rapport with the individual that will make them somewhat comfortable and willing to cooperate. 

In speaking with several Subrogation Recovery professionals at Spartan they shared some successes they had to encourage an individual to cooperate.  We like to call it gently prodding with empathy, strength and facts.  Advising an uninsured person involved in an automobile loss of not only their financial responsibilities, but also that failure to resolve the matter could result in a license suspension and ultimately dealing with counsel to litigate can be a motivator if handled gently but firmly.

In times when money is tight, homeowners often choose to utilize a “handyman” rather than incurring a higher cost by retaining the services of a licensed and insured professional. Unfortunately most of these helpful and talented individuals have not insurance and tend to disappear after a loss occurs.  In addition, when such a person is local to a community the insureds are usually less than cooperative in sharing information about the individual who they often perceive as a friend more than a third party.

Regardless of what type of uninsured loss occurred, the real art is in gaining the uninsured person’s trust, by showing the empathy needed to make them feel just a bit of remorse for not having the insurance they were obligated to have, followed by getting them to admit they caused some or all of the damages.

Initially the warm friendly approach works, but not always.  There are many instances where a firmer voice is needed, but the recovery representative must realize that most uninsured persons are uninsured for a reason; they most likely did not have the money to pay for their insurance coverage.  No one fails to pay their insurance premium and expects to cause a loss.  Most individuals believe they can catch up financially and purchase the coverages they need.  With this in mind, the recovery representative needs to ask questions about their current employment situation and negotiate a meaningful but comfortable monthly installment payment, and obtain a promissory note to protect the statute of limitations.  The recovery representative might also suggest the uninsured might ask for financial assistance from a friend or family member rather than putting themselves in a precarious position incurring legal fees to defend an action which might be brought against them.

Currently there are 49 out of 50 States who have financial responsibility laws for automobile insurance with New Hampshire being the exception, but even with the law on our side the number of uninsured motor vehicles seems to increase annually.  Getting a judgment may sound like the answer in situations where no insurance exists, but investigation often reveals a person has several previous judgments and there is no point in getting in line for a payment which will never come after incurring costs for the client to file suit and obtain the judgment.  However, if an assets check is performed prior to sending a case to counsel that does not show any prior judgments, it is more likely that a settlement can be reached, in addition to the person not wanting to lose their license.

In situations where the uninsured third party is a contractor, they may not legally have to have insurance coverage and often the business cards they hand out do not claim they are licenses or insured so they may feel that if damages are done accidently that a person’s homeowners insurance will cover it, not believing they would need to reimburse the homeowner’s insurance carrier when a subrogation claim is presented.  Insurance for a general handyman doing contracting work is not always affordable which is unfortunate when they cause damages to premises they are working at. It’s fairly common for a local handyman to change the name of the company and phone numbers and just move on ignoring their financial responsibilities.

Regardless of whether the damages were caused in an automobile loss or a property loss when confronted with a demand for payment the uninsured party might suggest that they will just file bankruptcy, and often they do just that.

One key to successfully pursuing and obtaining recovery from uninsured individuals and corporation is to know who you are dealing with.  Obtaining information through a reliable asset check is a good start.  Finding various addresses where past and present might assist in finding relatives who are able to contact the adverse party and suggest they reach out to discuss and resolve the loss. Research into other possible insurance in a household or business can be very helpful in resolving a case, and contact with a carrier who may have improperly denied coverage to the adverse party can sometimes result in getting the policy reinstated or negotiating a settlement with the carrier to avoid litigation and a policy suit.

So, know your uninsured subject, gather as much information as possible before contacting them after sending out a Demand Letter, be wisely empathetic while enforcing the laws available to you, and hope when an uninsured party initiates payments that they continue to do so until the loss is paid in full.