Insurance Subrogation


The term “subrogation” is legally defined as ‘one’s payment or assumption of an obligation for which another is primarily liable.’  Subrogation typically arises when an insurance company pays its insured pursuant to a policy; the company then subrogated to the cause of action of its insured.  For example:  the employer is responsible for injuries incurred to his employees, even though the reason for the injury was incorrect manufacture of a product his employee was using.  The employee then may sue the manufacturer of the equipment, and be awarded payment beyond damages of the work injury.  The employer/insurer then has the right to “subrogate” or be reimbursed for any monies spent on that particular claim, as it was not the fault of the employer/insured.

In most insurance policies there is a “subrogation” or recovery from others clause.  This entitles the insurer to recover its workers compensation payments from a party that can be shown to be actually liable for and employee’s injuries.  The insurer, not the insured has the only right to waive this right of recovery.

There are inherent responsibilities for subrogation and the following guidelines should be adhered to in all claims where there is a potential for subrogation.

As is the case in every claim, file notes need to provide documentation of all action taken.  This should include dates of contact, etc., and names of persons contacted along with the information obtained.  This is important in the handling of any claim.

The Statements should be obtain from the insured, the claimant and all witnesses.  The police report (if any), or reports from any other agency to whom details of the injury could be made available, must be obtained and placed in the file.  These documents are crucial when referring a file to Subrogation.

Contact should be made with that company to determine if they wish to handle the loss.  The claim number assigned by that company should be obtained and noted in the file along with the name and phone number of their assigned claims adjuster.  The adjuster should establish liability or a percentage of liability and negotiate a settlement with the adverse carrier.

Subrogation means by definition, the substitution of one person in the place of another with reference to a lawful claim, demand or right, in order that the person who is substituted succeeds to the rights of the other person in relation to the debt or claim, and its rights, remedies, or securities.  Therefore it is imperative that the Claims Adjuster be familiar with state laws and requirements within the Jurisdiction he/she is working.

Recommended Files To Be Sent To Subrogation

1. In a claim where it is found that a person, other than the insured is at fault, totally or in part.

2. Claims involving automobile accidents that occurred during covered times of the employee.

3. Claims that involve a faulty machine or machinery parts.

4. Claims in which the insured has misrepresented information.

5. Claims which are believed to be fraudulent.  

6. Claims involving intentional acts on the part of the insured.

General Information:

The adjuster should place subrogation lien/rights on a file as soon as indicators of recovery are recognized.  Be aware of statutes of limitations. When it is uncertain if a file should be sent to subrogation, the adjuster may wish to discuss or give file to her manager for assistance.  The adjuster should send an initial subrogation letter to the adverse party. A recorded statement should be obtained, including references to subrogation.  

Make sure all outstanding bills have been paid and amounts of recovery agreements are made based on final figures.

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