What is the appropriate course of action for an insured and/or their insurance carrier when a third party is responsible for a loss that triggers a claim? In these instances, subrogation provides the opportunity for insurance carriers to pursue a settlement with the responsible party. This practice not only helps the bottom-line of insurance companies but also provides protection for insureds while ensuring the party responsible is held accountable.
What is Subrogation?
Etymologically, subrogation refers to the act of one party standing in the place of another party. Often, the insurance company will pay the insured’s claim for losses directly and subsequently seek reimbursement from the responsible party, or the responsible party’s insurance company. The insured receives reimbursement promptly while the insurance company seeks a subrogation claim against the party at fault for the loss on their behalf.
The Importance of Proper Subrogation Identification
Subrogation is typically a challenging process. Investigations of subrogation can be lengthy, costly, and even combative. The subrogation process is seen as offensive-minded; a challenge in an industry where a defensive and risk-conscious mindset is often the preferred strategy. However, if properly executed, subrogation can provide a significant return on costly environmental claims that may extend years or even decades. Additionally, proper subrogation ensures the party responsible is held accountable for an environmental loss where the health and safety of workers or the public may have been jeopardized. For these reasons, VERTEX’s expertise in the investigative process aims to make clients aware of where subrogation avenues may be present.
Common Areas Where Subrogation is Identified
Subrogation can range from obvious to requiring deeper investigations. In order to ensure opportunities of subrogation have been exhausted, it is important to perform an investigation via the following:
- Interviews – Have the involved parties and regulatory officials given their accounts of the pollution event? This is a starting point to identify where discrepancies or conflicting information may be present.
- Site Observations – Have site conditions been documented for comparison to interview accounts? Is it reasonable to believe the loss occurred without the negligence/assistance of a third party? Have involved parties truly taken notice of all site conditions that may have led to the loss?
- Regulatory Reporting and Compliance – Have cleanup activities been conducted appropriately and within regulatory requirements? Have the cleanup activities exacerbated the pollution event? Do regulatory reports provide additional details critical to the identification of potential subrogation?
- Contracts and Agreements – What level of liability was agreed to by the various parties? Had a party failed to properly fulfill the terms of the contract which resulted in the pollution event?
How Can VERTEX Help?
A thorough review of the above-referenced items is incorporated into VERTEX’s investigations. An analysis of potential subrogation avenues is always included in our investigations, and therefore, is inherently a part of our investigative thought process. Further, if subrogation is pursued, VERTEX is ready to be available as a resource to provide environmental consultation throughout the process.
J. Joseph Hodge
Assistant Project Manager