Winning a subrogation case can recoup some or all of the claimed loss amount for the insurance carrier, but the improper handling of a subrogation case can result in zero recovery dollars. Below are some important guidelines to follow to successfully navigate a subrogation claim.
From the time the claim is submitted until the subrogation efforts have been completed, here are some points to consider, as well as pitfalls to avoid:
What type of loss is being claimed?
Different losses call for different approaches, but retaining the proper expert may be the first step in a successful subrogation claim.
Whether you are dealing with a fire loss, electrical switchgear loss, or HVAC loss, waiting too long to bring in an expert may prevent successful subrogation. In my experience, I have been retained to investigate losses where the evidence has been altered or removed. This can make subrogation efforts very difficult if not impossible to achieve. In order to avoid these types of setbacks, you should consider working with the following types of experts for the subsequent types of claims:
If it’s a fire loss, retention of an origin and cause investigator may be required. This may also require additional experts, such as electrical, mechanical, or structural engineers.
If a loss involves electrical switchgear or transformer failure, you may just need an electrical engineer.
Likewise, an HVAC loss may require just a mechanical engineer .
Make sure your expert or claim handler can collect the necessary evidence properly
Once you’ve hired the appropriate expert it may be beneficial to perform a non-destructive preliminary investigation of a loss site. This will familiarize the claim handler or expert with the loss, and it will allow them to interview the necessary people and obtain as much background information as possible. It is important that the loss site (or area of origin) is secured and protected.
Also during the preliminary investigation, it should be a priority to determine if there are any potential liable parties that may have contributed to the loss event. In fire investigations, this may require some excavation of the scene, but in other investigations it may be very straightforward. These liable parties may include contractors that have recently worked at the loss site, or manufacturers of a consumer product that may have failed. If possible, this is done as early as possible to avoid possible spoliation of the scene. In many cases, there may be more than one potentially liable party to notify. Failure to notify potential parties can result in spoliation claims as well as delays in the investigation.
Schedule and complete a joint scene examination of the loss site
After the preliminary investigation is done, scheduling of the joint scene examination of the loss site can be coordinated by counsel, by the claim adjuster, or by the experts involved. The joint examination is a necessary step that allows all potentially liable parties to inspect the loss site. Background information may be shared at this time along with other pertinent claim details.
During the course of the joint scene examination, it may be necessary to destructively examine the evidence. Cutting of electrical conductors or disconnecting a gas pipe are examples of destructive examination or alteration of a scene. In some instances, alteration of the scene may be done prior to a joint scene examination due to safety concerns or other considerations. If this occurs, make every effort possible to photo document or even videotape the scene while the alterations are occurring. This will help reduce the potential for spoliation claims.
Retain all evidence necessary to properly subrogate your claim
Before concluding the joint scene examination, the evidence retained should be agreed to by all parties at the joint scene examination. It is vital to make sure that whoever is retaining the evidence, whether it is an adjuster or an expert, maintain the proper chain of custody. This should help ensure that the evidence is retained, protected, and does not change hands. If the evidence is transported to another party after the joint scene examination, make sure that the party receiving the evidence signs the chain of custody document.
After the necessary evidence has been retained, it is often at this time that the scene is released back to the insured so that restoration may begin. Therefore, it is imperative that your expert or claim handler retain the proper evidence. This may also include exemplars that may be installed or present throughout the loss site. Exemplars can prove to be invaluable in successfully subrogating a claim.
Determine whether or not subrogation is still a viable option
It is not uncommon that new information is presented or uncovered during a joint scene examination that will affect subrogation possibilities. It may not be economically prudent to continue with an investigation or incurring storage fees, especially if the new information reduces the possibility of a successful recovery. Examples of this would be finding that a failed product is outside the statute of limitations, or learning that the information previously provided by the insured is incorrect making the subrogation case less viable.
In some cases additional steps may be taken once the evidence has been retained. Non-destructive examination, such as radiography, may be done that will assist in the investigation. It is good practice to notify all involved parties if this is going to be done.
Conduct a joint laboratory examination
If the experts, attorneys, and claim handlers agree that further inspection of the evidence is warranted, all relevant parties would be notified of the examination. Typically, these examinations are destructive in nature. It may be advisable to supply a protocol for the examination when the notifications are given to all parties.
Hopefully, the laboratory exam and/or any further research and investigation will finalize whether or not you may have a successful subrogation case.
Recouping your losses
By familiarizing yourself with these guidelines your chances of recovering funds of covered claims will greatly increase. Just keep in mind that it’s important to investigate the claim thoroughly, retain the necessary evidence, and keep all potential liable parties notified.
I hope you found this information helpful, and if you ever find yourself in need of a forensic engineering expert to support you with claims involving subrogation, contact Amset Technical Consulting and find out how we can help.
About the author:
Matt Thurow, BSEE, CFEI, CVFI Sr. Technical Loss Consultant
Matt Thurow holds a Bachelor of Science degree in Electrical Engineering from Northern Illinois University, and has been with Amset since 2000. Over Matt’s 17 years of technical consulting experience in the insurance loss industry, he has handled complex fire investigations as well as large loss equipment failures. His passion for providing thorough customer service is shown in his ability to anticipate a client’s needs from start to finish during the claims process.
Matt is a Certified Fire and Explosion Investigator (CFEI) through NAFI, and a Certified Vehicle Fire Investigator (CVFI) also through NAFI. He is currently a member of the Institute of Electrical and Electronics Engineers (IEEE) and the National Association of Fire Investigators (NAFI).