Articles
FOCUS ON: Smith Debnam's Insurance Subrogation Practice
February 3, 2004
What is Insurance Subrogation?
Insurance subrogation is the process by which an insurance company seeks to recover money it has paid its customer following an accident or loss. While claims from hurricanes and natural disasters are often unrecoverable losses for the insurance company, many claims are attributable to negligence or intentional acts of someone other than the insured person. Upon paying a claim to its customer, the insurance company usually "stands in the shoes" of its customer and thus has the right to pursue the claim itself. The customer may be satisfied, but the paying insurance company has a right to pursue the entity or person that is legally at fault for the incident which caused the loss.
A Common Scenario:
For example, let's say that Niceguy Insurance Co. finds that its customer, Mr. Gooddriver, has been rear-ended at a stop light by Mr. Leadfoot. Mr. Leadfoot's insurance company, Denial Insurance Inc., denies that Leadfoot caused the accident or claims that his policy lapsed two days before the accident. In either case, Niceguy Insurance Co. will be forced initially to foot the bill in order to get Mr. Gooddriver back on the road..
Niceguy Insurance, pursuant to the terms of its policy with Mr. Gooddriver, acquires the rights to the claim and can sue Mr. Leadfoot for the damages caused by his negligent driving. It hires a lawyer and seeks to collect directly from Mr. Leadfoot. While Denial Insurance Company may not be very friendly, it did not cause the damages and itself has no liability. While Mr. Gooddriver is happy to have his car repaired, his policy also requires that he assist Niceguy Insurance as a witness to the accident, if necessary. A subrogation lawyer represents the insurance company in its pursuit of the Mr. Leadfoots of the world.
Complex Scenarios:
The above example illustrates the basic concept of subrogation but does not present the more complex problems. A negligently manufactured microwave may be the culprit of a fire which destroys a two-million dollar home. In such a case, the insurance company that pays to rebuild the house may have quite a complicated road ahead. The manufacturer of the microwave may blame the home's electrician, or the manufacturer of another appliance. The litigation against a Fortune 500 manufacturing company might require numerous experts and exhaustive analysis. The subrogation lawyer must be prepared to pursue various avenues of recovery.
The Role of the Subrogation Lawyer:
The subrogation lawyer serves his client in several ways. He analyzes the potential for subrogation by seeking to determine and identify parties that may be liable and ascertains both legal and collection potential. He deals directly with the insurance company and its customer in order to understand the loss and the facts of the case. He attempts resolution and proceeds with litigation, if warranted. Once the case is won, the subrogation attorney then must often assist the client with enforcement of its judgment and extract payment from the responsible party or parties.
