The year 2020 is coming to an end. Many would say it can’t end soon enough, but that’s a topic for another day. You’ve done a great job with your goals of implementing or continuing your safety meetings and using safety strategy tools, and you’re almost there to have a claim free year!
Then one morning your employee arrives to work and jumps into your company vehicle to go about his daily service calls, just like any other day. Driving between jobs he stops at a traffic signal. Out of the blue he feels the truck move and realizes it’s been hit in the rear. Thankfully he’s uninjured, but the back of the truck has considerable damage. He follows the company procedure to notify the supervisor and complete an accident report. Your insurance contact files a claim with your carrier, and the claim process begins.
When you purchase a commercial auto policy and choose to include physical damage coverage, an accident like this will generally be covered for you even when the accident wasn’t your fault. The two types of physical damage coverage, comprehensive and collision, include a deductible. So, while the policy does respond and pays out the few thousand dollars for the repairs, you will also have to contribute to the cost of the expense to repair your vehicle through the application of a claim deductible. You’ll also have the claim noted on your loss runs, now ruining your claim-free year. Doesn’t seem quite fair for something that wasn’t your fault and couldn’t be avoided by your employee, now does it?
The process of subrogation is the mechanism insurance uses to have the liable party ultimately be the one to bear the cost of this accident. Subrogation generally happens behind the scenes and is reviewed in every claim and for all types of claims, including auto, property, general liability and even workers’ compensation. Subrogation involves three parties — the insurance carrier, the insured party and the liable or responsible party. Even in property claims related to weather the adjuster will make a quick note that there is no subrogation opportunity.
Once an insurer pays out any loss expense, they will attempt to determine if another party has liability for that loss, and they’ll try to collect those funds from them. In the subrogation process the insurance company has assumed the legal rights of the insured for whom expenses have been paid. When the funds are successfully collected through this process, the deductible that was paid by the insured will usually be fully returned. However, there are different laws in each state, and the remaining funds will be credited against the claim, which will then show less on the insured’s loss run, as well.
Every accident and every claim has its own unique set of circumstances. In this type of rear-ending example given above, liability appears quite obvious. However, there may be situations where the determination of liability isn’t so clear-cut. Liability may be apportioned to both parties — again, state laws may be a factor in this determination — and then each carrier would subrogate against the other for expense at those percentages. Some claims may require an expert opinion to review the facts of the loss and make a determination of liability, such as in the occurrence of a fire, a faulty install or a suspected manufacturing defect claim, just to give a few examples.
The Telcom claims department understands that there may be special circumstances, such as the relationships with your customers, that could potentially cause ill will when pursuing subrogation. They will work together with you as a team to decide whether or not to have the insurance carrier to subrogate. For instance, subrogation may be waived on smaller, low-cost claims, such as a dog bite.
Many contracts or agreements may ask you to sign waivers of subrogation clauses before a claim even occurs, which could also require a policy endorsement in order to do so, because the insurer is agreeing not to pursue. You’ll want to communicate with your agent to stay informed and understand the impact of waiving of subrogation when a loss occurs. Ultimately, the claim dollars spent under the terms of your policy can to some degree impact the premiums you pay.
Claims can and do arise when they’re least expected. Whether one of your employees is the liable party or someone else has caused damage to you, we continue to encourage you to report your claims early, as often as you need to. And remember, in any claims situation, the Telcom claims department is committed to be here to help you every step of the way. We’re only a phone call or email away if you have any questions or need additional information or resources. Please feel free to contact me at 800-222-4664, ext. 1081, or bwm@telcominsgrp.com; or Marilyn at 800-222-4664, ext. 1085, or mab@telcominsgrp.com.