Best practice on subrogated recovery claims
Property Insurance Aware 3
An insurer’s right to bring a subrogated recovery claim arises automatically upon it paying its insured’s losses under the policy. The strength of a subrogated recovery claim can, in some cases, stand and fall with the preservation of evidence by a loss adjuster when attending a property in the immediate aftermath of the incident.
There may be incidences when a subrogated recovery claim is not possible such as, albeit not exclusively, when:
- A claim is time barred;
- The policy excludes the insurer’s subrogation rights;
- Insurers cannot recover on behalf of one insured person against another co-insured etc.
However, in the vast majority of claims there is scope to pursue recovery actions arising.
Key issues to consider
Subrogated recovery cases can extend to all forms of property damage. However, the overriding issue to consider in all claims is:
- Is there a recovery target to pursue? Even if identified, the factors below are also key considerations:
- Do we have enough evidence to prove that the defendant is at fault and that his acts/omissions were the key causative factor for the incident?
- Can we secure any evidence to prove the defendant is liable and caused the losses?
- In respect of quantum, what evidence do we have that proves the nature and extent of the losses suffered by the claimant?
- Is the defendant in a financial position to pay the claim either via insurance (ideally) or, if not, does he have financial means to pay for the loss if liability is proven? If he hasn’t means to pay then obtaining judgment against the defendant will constitute noting more than a pyrrhic victory - a costly and ultimately pointless exercise.
What evidence needs to be considered to put the best foot forward in a recovery claim?
When considering the scope of a potential recovery claim, the need to review all salient documentation is paramount. There is a general necessity to consider policy documentation, copies of any contract entered into between the parties, quotations, purchase orders, invoices and/or receipts, as the strength of the recovery can hinge on the preservation of incident parts.
It is also crucial to preserve, say, the pipe relating to defective plumbing work or the appliance alleged to have failed in a fire/smoke damage claim. There is a strong likelihood that you will be unable to prove your claim, so it is also crucial to preserve, say, the pipe relating to defective plumbing work or the appliance alleged to have failed in a fire/smoke damage claim. The reality is that the defendant will want the opportunity to forensically investigate the offending item before commenting on liability.
Other documents/information to consider, depending upon the particular peril:
In relation to impact damage claims, we recommend that the adjuster seeks to obtain:
- Photographs of the damage and plans of the scene
- Party contact details/party insurer’s details
- Details of any witnesses
- All correspondence between the parties and records of conversations.
In relation to fire claims:
- Again, photographs of the damage will greatly assist.
- Consideration ought to be given to obtaining the fire brigade reports as these can be used to support evidence in respect of causation.
- Copies of leases and office copy entries relating to properties - this can help to identify the owner of the property if a fire started from a neighbouring property.
- Copies of any expert report obtained by the insurer or other parties, including reports from emergency contractors who repaired faults, engineering reports and relevant surveys in advance of the faults.
- Documentation to support quantum will ordinarily be obtained by the loss adjuster and the adjuster’s reports may well incorporate tender documents, schedules of works quotations and invoices to support the loss.
Engaging with the insured at an early stage
As the letter of claim needs to be as comprehensive a document as possible, it is beneficial for us to engage with the insured at an early stage and even before quantum has been finalised by the adjuster.
More often than not the insured will also have sustained uninsured losses, including the policy excess, which they will seek to recover. These losses may extend to business interruption, loss of profits and stress and inconvenience. This is why, at the very outset, we always seek to engage with the insured on matters.
A further benefit of having the insured on board at an early stage is that all the matters are freshly recollected and also, as they have not yet had payment through from insurers, they are motivated to assist.
It is more difficult seeking to engage the assistance of an insured who has had the natural inconvenience of dealing with the principal insurance claim some two years prior and doesn’t want to relive the exercise as solicitors seek to recover monies on behalf of the insurers.
In summary, the recovery process is not scientific and matters will alter on a case by case basis.
However, a recovery claim can only be strengthened if key steps are taken on the first occasion an insurer representative attends the site to retain evidence and collate as much information as possible to support a claim against a defendant.
Key steps taken at infancy can bear fruit some months later when putting forward a strong case for recovery of an insurer’s outlay.