Maximizing Subrogation Recovery

This article is for the do-it-yourselfers. Let's face it-the best way to maximize recovery through subrogation is to not have to share a portion of the recovery with lawyers. Now, I am not talking about larger, complex, losses, which require the attention and skill of legal professionals. I am talking about the thousands upon thousands of cases where the losses total less than $100,000. For one thing, on many of the smaller cases, once you have paid expenses and legal fees, hardly anything is left to be termed a "recovery." But more importantly, there are many things that you, the subrogation professional, can do to bring smaller claims to a successful conclusion on your own. Too many small losses are turned over to attorneys at the first signs of resistance from the other side. After the company you work for pays its insured on a claim, and someone else is deemed to be responsible for the loss, the subrogation department normally sends out a form letter advising the third-party or its insurance company that they are responsible for the loss. Not surprisingly, very few check marked "paid in full" come back by return post after such a notice. But this is not the time to give up and turn the case over to an attorney. There are additional things you can do to break the log jam and, at the very least, discover whether the loss may be subject to arbitration. It is, you may already have everything at your fingertips to bring an arbitration to a successful conclusion. Here are a few tips to help you maximize your recovery.

When you are advised of a loss, make sure the damage documents are in order.

Even if liability facts are great, your chances for recovery are only as good as your damage documentation-and I don't mean copies of cancelled checks, either. From the beginning of every new file, your focus should be on both liability and damages. If the file shows that the insurance company paid $X for damage to contents, is there corroborating documentation from an adjuster? If policy limits were paid for building repairs, are there back-up estimates and invoices? Does the file contain a subrogation receipt? Proof of payment is only one piece of the damages puzzle. There must also be proof that the payments were reasonable and in line with prices of that particular town or region. Pay special attention to payment related documents. Otherwise, you may discovery at the last minute that you only have documents to support eighty percent of what your company actually paid.

Arbitrate smaller cases yourself.

One of the best ways to maximize subrogation recoveries for your company is to arbitrate the smaller cases yourself. Hundreds upon hundreds of insurance companies are signatories to various arbitration agreements administered by Arbitration Forums, Inc., located in Tampa, Florida. The arbitration process is relatively simple, if not a bit unruly for the uninitiated. Do not be afraid to arbitrate cases, since you can, oftentimes, do as good a job of putting your case together as an attorney. Because arbitration rules do not allow for discovery of additional evidence, a lawyer's role is largely limited to filing out an application and appending pertinent exhibits, which are usually culled from the documents sent over by a subrogation recovery specialist.

Property damage claims for less than $100,000 can be arbitrated if both insurance companies-the insured's and the third-party tortfeasor's-are signatories to the Property Arbitration Agreement. If the tortfeasor's insurance company is not a signatory to the Agreement, it can still agree to submit the dispute to arbitration if it does so in writing. To start the arbitration process, an application is filed with Arbitration Forums, naming as respondent the tortfeasor and its insurance company. Prior to filing the application, contact the third-party's insurance company and obtain a claim number, which you will include with the application. The respondent has thirty days to file a response, after which time the case is set for hearing. Supporting evidence is submitted to the arbitration panel only and no discovery is permitted by either side, as it is in litigation. You may attend the hearing in person and argue the case, but need not. Panels are composed of one or three arbitrators, and are required to render their decision within thirty days of the hearing. If you win, you should receive payment within thirty days of the decision. There are procedures to collect the judgment if it is not timely paid.

Often, the most difficult step is finding out the identity of the alleged tortfeasor's insurance carrier and then determining whether that carrier is a signatory to any arbitration agreement. The person against whom you wish to subrogate may not always disclose the identity of his or her carrier. There are several things you can do to discover the identity of the other side's insurance carrier. Many building and construction trades are regulated by a state agency. For instance, in Texas, HVAC installers, who are sometimes the culprits in water leak and mold cases, are regulated by the Texas Department of Licensing and Regulation. As part of the requirement for obtaining a license, license holders are often required to provide proof of insurance, which the Agency maintains in its files. This information is discoverable under most states' open records laws. A letter to the proper regulatory agency is all that is usually required to obtain a copy of the license and insurance information for the person or company against whom you wish to subrogate. Then, it is just a matter of determining whether that insurance carrier is a signatory to any of the arbitration agreements and, if so, filing a claim with the carrier and proceeding to arbitration. The best way to find out whether a particular trade is regulated by a state agency is to search the internet or to call the reference desk at the state's legislative law library. I have found reference librarians to be extremely helpful in finding this type of information.

Another way to discover the identity of an insurance carrier is to conduct pre-suit discovery. Granted, this will require employing an attorney. But you may wish to employ the attorney for the limited purpose of discovering the identity of the carrier, at which point you can take over, if that carrier is a member of Arbitration Forums. Pre-suit discovery usually involves deposing the third-party and subpoenaing his insurance policy. Once the policy has been produced, it is relatively easy to determine both coverage and the arbitrability of the dispute.

Once you have submitted the application and supporting evidence, your work is mostly done. All that remains is for you to attend the hearing and present your best case.

Arbitration will not serve your needs where there is more than one wrongdoer and the insurance carrier for one of the wrongdoers is not a member of Arbitration Forums. You can still file an application against the member company, but your claim will be kicked-out without consideration under a rule that requires all potential wrongdoers to be part of the case.

Be careful not to destroy or lose evidence.

Nothing will diminish the recovery value of your case quicker than destroyed or discarded evidence. Destruction of evidence, otherwise known as spoliation, can result in anything from the dismissal of your case altogether to a jury instruction that you destroyed the evidence because it was unfavorable to your case. There are things you can do ensure that spoliation does not happen or to minimize its adverse effects:

1. Communicate with your claims department. Constantly remind your claims adjusters (and tell them to remind any independent adjusters and cause and origin investigators they hire) not to discard or destroy any evidence which is potentially related to the cause and origin of the fire. It is easy to retain something that is mobile for later inspection. But if the damage was caused by poor workmanship, instruct the adjuster to preserve the loss site until potential defendants are put on notice of the loss.

2. Put all potential defendants, even if they have a slight relationship to the loss, on notice and them give a chance to inspect the loss site. If there is an initial indication of a product defect or faulty installation or workmanship, the best way to prevent future claims of spoliation is to put the potential defendant on notice of a claim and to permit that defendant to inspect the scene immediately after the fire. It is not possible to preserve the fire scene indefinitely. Owners want their property rebuilt, and rebuilt quickly. But, if the identity of a potential defendant can be established during the initial investigation, do everything you can to put that defendant on notice and give it a chance to investigate and photograph the scene. Call the potential defendant's corporate office and ask to speak to someone in the legal department. If they do not have an in-house legal department, ask to speak to the president, vice-president or risk manager. Get an address, telephone and fax number and send a notice of potential claim, giving the other side a week to ten days to inspect the damage. So long as you gave notice of the loss, and the other side fails to inspect the loss site before it is rebuilt, you will avoid claims of spoliation.

3. Do not permit retained evidence to be discarded or sold for scrap until after you have a chance to consult with subrogation counsel. Too often, counsel receives a file months after the loss, only to find out that evidence which has been retained no longer exists. It is very difficult to prove a defect or some wrongdoing without the crucial evidence. Remind your colleagues, and yourselves, not to destroy or discard evidence where there is potential for recovery through subrogation.
Give timely notice of claim to government entities.

There are times when an insured's property will become damaged by a broken pipe or sewer line maintained by a government entity. While a governmental entity, like a city, enjoys immunity from both suit and damages for its activities, many states have waived this immunity on a limited basis. In Texas, and in many other states, for instance, a governmental entity may be held liable for property damage, personal injury, or death, that arises from the operation or use of a motor-driven vehicle or motor-driven equipment during the entity's performance of a governmental function. In every instance, liability hinges on giving proper and timely notice. In Texas, Arizona and Colorado, for instance, this means sending notice to the government entity no later than six months after the date of the incident. Some states, like New Mexico, have shorter notice periods (90 days), while others require that notice be given within a year of the event (e.g., Oklahoma and Utah). The notice has to describe the damage or injury claimed, the time and place of the incident and the incident. If the notice is not timely, the claim is waived. You should review the notice requirement in your individual state's Tort Claims Act.

Proper Selection and Use of Technical Experts

More often than not, the success of your case depends on the opinion your expert is able to give and support. Choosing the right expert can make all the difference. Many of you may already have established relationships with cause and origin experts and engineers that you use time and again. But when those individuals do not have the type of expertise you are looking for, finding an expert who does may be the most important move you make.

The internet may be the best place to begin your expert search. First, find out whether there is an association for the type of specialist you are looking for. For instance, if you are looking for a safety engineer, you may be interested to know that there is an American Society for Safety Engineers. There are societies and groups for a myriad of professions and activities, most with web-sites and on-line member lists. It should come as no surprise that people know others in their profession. So, even if the first several people you call cannot assist you, they may know someone who can. Then, it becomes a matter of tracking down leads and finding someone who has the type of expertise you are looking for.

After you come across someone who "sounds" like the person you need-be it an air conditioning technician, electrical engineer or OSHA specialist-request a copy of that person's CV, list of cases they have testified in and the names of references. This information is not as crucial if you are thinking of putting your case in arbitration, but if you think the case may end up in court, it is imperative that you find someone with not only credentials, but also balance and experience. Let's face it, experts are hired guns. Unless you find someone who works in the industry and testifies on the side, most of the "experts" you will come across offer opinions for a living. Still, you want to retain someone who has testified on both sides of the docket. Hire someone who has testified too heavily on behalf of plaintiffs or defendants and you risk having bias color that person's opinions. Again, the expert's background is not as important if you are going the route of arbitration, but is something to keep in mind.

Other places to look for expert witnesses include findlaw.com, claims.com,witness.net and experts.com, among others.

Conclusion

We wish you continued success on your road to recovery!