Getting into the details early is one of the critical success factors for claims professionals in maximizing recovery of funds from a third party via subrogation.
Subrogation may not be as high profile as risk management or underwriting in the insurance process, but it does fill a specialized – and highly welcomed – role: It recovers funds and helps reduce costs for insureds and carriers, delivering a direct impact on the bottom line in both cases. Subrogation, in fact, is second only to premiums in how insurance carriers bring dollars in the door.
Defined in the context of insurance, subrogation occurs after a claim has been paid and the carrier steps into the shoes of its insured to enforce a claim against a third-party tortfeasor responsible for actually causing or contributing to the loss. The end game is to offset claim losses by recovering funds from the tortfeasor or their carrier. Carriers will then be able to charge a premium commensurate with the risk leading to more accurate underwriting and potentially more competitive premiums.
Engle Martin Claim Administrative Services (EMCAS) – a third party claims administrator and wholly owned subsidiary of Engle Martin & Associates, a national independent adjusting firm – serves as a carrier representative in subrogation scenarios. According to Vivian Conley, Senior Subrogation Specialist at EMCAS, it’s unusual for a TPA to offer subrogation services that parallel the first party claim adjustment. However, EMCAS’ comprehensive approach to claims management includes subrogation as another way to go the extra mile for clients and their insureds.
“From the instant a claim comes in, we dig right into the details,” Conley explained, noting that her subrogation unit applies “tenacious pursuit” strategy to every claim it investigates.
“Even with no liability coverage on the part of the tortfeasor, we wouldn’t automatically close the file,” Conley explained. “We keep investigating because there may be alternative recovery sources.” For example, if someone is driving another owner’s uninsured vehicle and causes a collision and loss to a client’s insured property, the driver of the uninsured vehicle might have their own insurance policy that may provide excess liability coverage.
EMCAS is extremely proactive in its subrogation efforts. In addition to receiving referrals from the claims examiner or independent adjuster, all new claims receive a frontline review to determine if a “deep dive” investigation is warranted. Although EMCAS’s subrogation unit examines a high volume of cases, Conley says her team’s philosophy is to be focused and thorough in each file being worked. “Everything falls into place when you do a good job. The details are crucial,” said Conley.
“We take a lot of pride in our brand of customer service. We always return calls and want to be sure our clients and their insureds understand the process and what we are doing, how the process will work and how it affects them,” said Conley.
Preserving physical evidence is one of the key processes in successful subrogation; it involves reaching out to an insured so they know to preserve evidence along with their carrier’s subrogation rights.
Another critical skill is making sure that existing policy language is thoroughly read, so it’s clear who has recovery rights on the subrogation part of a claim. Conley explained that reading and understanding policy language takes someone with claims experience.
Also, the EMCAS unit is consistently involved with continuing education, as laws change constantly and Conley and her team have to be aware of how those changes directly impact the subrogation process.
“I learn something new every day,” says Conley, an 18-year claims veteran. “It’s never boring.”
EMCAS’ subrogation unit cuts across several business lines, including personal and commercial auto, personal and commercial property, inland marine, builder’s risk, heavy equipment and jewelers block coverage. It also handles large losses in complex areas such as market share claims (also called quota share), product claims, and litigation management.
With market share policies, a group of markets/carriers share premium income and claim losses according to the policy agreement. “A market share policy is underwritten by different entities to make up the entire policy, and it can become complex when it comes to representation for the markets’ recoverable interests,” explains Conley.
Conley relayed the market share example of a builder’s risk claim where a building under construction had substantial damages due to a water valve malfunction. The EMCAS client’s policy was underwritten by multiple carriers, so the claim investigation had to document the scene, retrieve and secure the malfunctioning water valve and place all parties – including the manufacturer, installer and distributor – on notice. EMCAS also coordinated a joint lab exam to determine why the valve failed. In this case, the lab identified a material defect in the valve and EMCAS eventually recovered funds from the manufacturer.
Once it was apparent that the manufacturer was not stepping up to pay, EMCAS recommended and coordinated engagement of subrogation counsel. By partnering with subrogation counsel and forensic experts, EMCAS was able to handle the case from cradle to grave.
Conley says subrogation has not always had a high priority within the insurance claims industry, but that has changed in recent years.
“Historically, claims were sent to subrogation after the claim was closed. By then it’s often too late,” Conley says, adding that the EMCAS subrogation unit is proud of its trademark aggressive style. By having a team dedicated to the details, the claims and subrogation investigations can occur simultaneously. Pursuing subrogation and recovery only on the larger or more obvious losses inevitably leads to lost opportunities and lost money.
“We often have to be creative – opening files early, asking the right questions, preserving evidence, and thinking of alternative theories of liability – because of the complex nature of the many layers involved,” she said. “Successful recoveries from subrogation provide insurance carriers with money they may not have anticipated, so they are very happy when they hear from us. When we recover funds, it’s a great thing for both our client and their insured.”