Surogation, Diligence & Professionalism

written by Kathleen Smith CSRP for PULSE magazine

The role of a Subrogation Specialist is to identify claims in which a third-party is responsible for a loss sustained by an insured and then pursue the recovery of claims payments through identification of and communication with the responsible third-party or their insurance carrier. To be successful in this role requires professionalism, a strong understanding of the concept of liability and an ability to effectively communicate information that may be technical or complex in nature to a variety of different people. Skill sets of an effective Subrogation Specialist include persuasiveness, assertiveness, perseverance, tenacity and most importantly, a strong desire to achieve positive appropriate subrogation outcomes.

The pursuit of Subrogation can be wrought with frustration in so many ways. It often requires ultimate patience, and abundance of diligence in digging through claim documents, and making endless phone calls to obtain the information and supports which may not have been gathered during the claims process, but are necessary to establish and prove a subrogation claim.  And even when all the data has been meticulously bundled together, and a Subrogation Demand produced and sent to the responsible third party, or their liability insurance carrier, it can be further exasperating when the Demand is ignored or denied. 

Optimally, tenacity and perseverance will take over and defeat the frustration, bringing satisfaction to all parties involved, however successful outcomes in the arduous subrogation process can be met with barriers and hurdles along the way.  While it is the subrogation professional’s obligation to convince the adverse party or carrier as to why the claim facts and supports warrant a recovery, that factor is sometimes the easiest piece to the equation, while there can be a whole myriad of other barriers that must be overcome.  To name a few, lack of cooperation from the insured, previously executed releases between the insured and third party, insufficient support documentation, subrogation waivers, spoliated, lost or destroyed evidence, low insufficient policy limits, and several other factors can test the patience of even the strongest subrogation professional.

Typically, the subrogation specialist expects the policyholder to cooperate in the recovery process in accordance with the terms and conditions of the insuring agreement, as the insured is often contacted to assist in providing facts and supporting documentation crucial to successful subrogation.  Unfortunately, even when the subrogation representative entices them with the prospect of recovering their deductible in addition to the paid loss by the carrier, there remains a lack of cooperation.

As frustrating as it can be, not taking the time to have these conversations with the insured will lead to subrogation failure as without their cooperation in obtaining the names of potentially responsible parties, or making the necessary arrangements to obtain the evidence for testing there is little chance for subrogation success.

Equally as frustrating are instances where the policyholder executes a release for damages other than those their carrier is paying under the insuring agreement, which unfortunately in most instances precludes subrogation recovery from the adverse party or carrier.  Of course, with hindsight always being 20-20, the best scenario would have been to speak with the policyholder before a release is executed to explain that while they might be getting their deductible reimbursed they are precluding their insurance carrier from recovering the gross paid loss.  In these instances, it is important to check the date the adverse party or carrier was placed on notice of the subrogation claim as compared to the date they negotiated a release with the policyholder. If the adverse carrier was placed on notice before they settled and sent the release to the insured they may still be responsible to pay the subrogation claim presented.

One of the ultimate frustrations for a recovery professional is spoliated evidence!  Probably one of the worst cases recently encountered involved a Property claim where the insured’s pool exploded releasing 10,000 gallons of water into the policyholder’s finished basement! Contact with the insured revealed that the pool most likely had been improperly installed the year prior to the loss.  While these facts would indicate probable subrogation recovery against the manufacturer or installer, there were unfortunate intervening causes preventing subrogation.  Apparently upon realizing that the liner was ripped and water beginning to flow into the finished basement, the insured and several family members jumped into the pool and starting ripping holes in various other places in the liner in a failed attempt to redirect the water flow.  When this action failed, they took hammers and tried to bang a hole in the opposite end of the pool in yet another failed attempt to divert the water flow away from the house. Needless to say, the evidence was so mutilated that it became impossible to determine if the failure was due to a manufacturer’s defect or installation error.  These unfortunate events and actions by the insured to mitigate a loss destroyed any possibility of recovering the $31,000 paid.

Other less dramatic instances of spoliation often involve not protecting the “evidence” during the clean-up or reconstruction effort.  Evidence may be mishandled causing it to be altered or even destroyed.  Preserving the evidence quickly and making sure it has been properly identified and protected so arrangements to have it inspected is “key” to successful outcomes.  Evidence without any identifying manufacturer, serial numbers or codes will also be an impediment to a successful recovery.

The bottom line is that although any given day in the life of a Subrogation Specialist can be quite challenging.  For some, the challenges may be too great, the state statutes too arduous, the pitfalls too frightening, but for the seasoned subrogation expert not only is it exciting to overcome the obstacles but tremendously satisfying to bring well-earned recovery dollars to their company or to their client. 

With perseverance, teamwork, strong communication, early intervention and subro awareness, obstacles can be overcome, the recovery process can be strengthened and success achieved.  The rewards of subrogation success for an insurance carrier or self-insurer include improved financial stability, proper allocation of insurance premiums, better underwriting processes and increased customer satisfaction, which are all worthy endeavors, and achieved with patience and perseverance.

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