Subrogation – You Get What You Put Into It

In daily life it is normal to hold liable a person who causes you damage. Yet some insurers forgo this recourse all too easily. Opportunities for subrogation exist even in seemingly hopeless cases such as natural catastrophes, provided the proper provisions have been made.

If an insurer has covered a loss, it has a right of recourse against responsible third parties. The purpose of this rule is to avoid the injured party being compensated twice for the loss (by both the insurer and the party that caused the damage). In addition, it prevents the at-fault party from benefiting from the fact that the injured party has insurance that covers the loss. Subrogation thus ensures that the indemnity insurer does not unwittingly also become a liability insurer for the party responsible for the damage.

Not every natural catastrophe is an act of God

The fact that subrogation is a ubiquitous issue, appearing even in the most unlikely of contexts, is exemplified by the California wildfires that caused over US$ 1.5bn in damage in San Diego in 2007. Whereas some insurers assumed that the long drought leading up to the fires had been exclusively to blame, others retained counsel to investigate possible avenues of recourse. The investigation found that the fires had not in fact been pure acts of God but were caused, among other things, by sparks from poorly maintained power lines. With the aid of legal counsel, significant amounts were recovered by subrogation.

Another case revolved around water damage to a school in Arizona caused by a flash flood. During an investigation, it was determined that the school had been built on a site onto which surface water was channelled after heavy rainfall. A diversion gully had been built for this reason, but it was evidently not big enough to contain such large volumes of water. The case went to court, and the contractor responsible was held liable for 90% of the loss.

Establishing the injuring party is key

These two examples show that subrogation issues should even be considered in the area of nat cat damage. The benefits of subrogation are more evident for man-made losses but, even here, insurers face certain pitfalls. Firstly, the question of the at-fault party should be investigated as a matter of routine.

If this party can be established, the next step is to examine whether culpable conduct can be proven and consider the chances of actually recovering the loss. It may involve a sole trader – or a multinational conglomerate with revenues in the billions. Sometimes several parties are involved and are jointly and severally liable. This avoids the risk of winding up in hopeless legal battles that last for years and entail fees that are out of all proportion to the subrogated claims. This is an especially great risk given that the party responsible need not necessarily disclose if and to what extent it has liability insurance or sufficient other financial means.

Difficult conflict-of-interest issues

Even if it is clear that the injuring party has sufficient insurance cover or financial strength, it may not always be beneficial to pursue the recourse. This is the case if a multi-line insurer offers property and third-party liability (TPL) covers and both lines are affected by the same insured event, but for different policyholders. This situation could potentially lead to a conflict of interest. For example, if the injuring party’s liability policy provides significantly more cover than the share of the claim to be paid by the insurer, subrogating the claim would be disadvantageous.

This simple arithmetic approach becomes problematic, however, if the insurer is part of a market in which the other insurers are not faced with the same dilemma. The lead carrier is required to (co)represent the interests of the entire market and thus subrogate even when this would be against its own interests. It is thus better not to let such situations come into being in the first place. All insurers must take the relevant compliance measures to create ethical walls to ensure that information about indemnity limits in the property and TPL lines remain confidential below a certain management level. If doubts arise on the market about whether a company handles such conflicts of interest in an ethical manner, its participation in future insurance programmes is sure to be affected. Demonstrating transparency vis-à-vis one’s co-insurers is therefore recommended in such situations, as is the appropriate resolution of the conflict of interest.

Such conflicts can be resolved, for example, by the insurer’s taking a more observational role within the panel. But unilaterally waiving all recourse is not the answer in many cases. Indeed, the insurer will often even harm itself if it does not subrogate, since the co-insurers who are not in conflict will certainly want to take recourse and, if successful, will pocket the reluctant company’s share for themselves.

In daily life it is normal to hold liable a person who causes you damage. Yet some insurers forgo this recourse all too easily. Opportunities for subrogation exist even in seemingly hopeless cases such as natural catastrophes, provided the proper provisions have been made.

Sometimes certain exclusions are acceptable

Interests of another kind can conflict if the at-fault party is closely associated with the policyholder. This party might be a subsidiary or an official agency that the policyholder depends on for certain permits. Or it might be a key supplier, which then revokes the policyholder’s status as a prime client, thus jeopardising the policyholder’s supply chain. Since subrogation is optional, it can be contractually waived at any time.

Indeed, insurance policies often contain a partial exclusion of recourse. These exclusions are accepted by insurers because, as partners in risk, they are not blind to their customers’ business interests. However, waivers of subrogation require that the scope of eligible parties be clearly defined in the exclusion clause. Universal waivers and clauses conditioned exclusively on the policyholder’s consent are not recommended.

Yet even in such cases, opportunities for recourse are not completely lost, provided the policyholder still has an own interest in holding the perpetrator responsible. This may be the case if the relationship with a supplier is ruined or the policyholder would be putting its reputation at risk if it continued to work with the supplier. Other situations are also conceivable, such as if the policyholder has to pay a high deductible or the loss exceeds the acceptance limit. In such cases, the insurer and policyholder can agree to drop the exclusion of subrogation at any time.

Ideally, the parties would do this with the help of a specialist law firm which they have chosen together, and in the context of a subrogation agreement in which they set out their binding rights and obligations and all other important aspects of their common objective. This includes the sharing of litigation costs and a precise description of how any recovered proceeds are to be distributed. Stock phrases such as “pro rata” or “proportionally” are often not specific enough in this regard, since the basis for performing this proportional distribution needs to be clear. This is particularly relevant where there is a high level of uncovered damage, either due to deductibles, acceptance limits being exceeded, or losses not being insured at all. Indeed, the greater the amount of such damage, the lower the insurer’s share of the gross total loss and, accordingly, the lower its share if the recourse is successful.

Wording such as that found in the model clause of Munich Re’s Industrial All Risks Policy can provide the necessary clarity, even in the context of an agreement made after the loss has occurred. In addition, the contract needs to stipulate in whose name a potential suit against the injuring party would be filed and who would take the final decisions in settlement negotiations – whether in or out of court. One can also stipulate that policyholders cede all their recourse rights. This means that they will not appear as parties and their names will not be included in the proceedings.

If the parties can agree on these key points early on, they can create a greater sense of trust and cooperation and avoid potential conflicts further along in the proceedings. The insurer and policyholder can thus also work more purposefully towards developing a common strategy to prevail against the injuring party. After all, proving guilt is not often easy – it takes time and resources.

Systematic review of subrogation options

In certain lines of business in which subrogation issues often arise, such as motor or health insurance, insurers will typically have a department or a number of specially-trained staff whose job it is to routinely investigate recourse options. However, in property and especially industrial insurance, such systematic investigation is not yet standard. Insurers who baulk at the high costs and effort involved in subrogation, despite the great potential, should consider the possibility of cooperating with an external law firm. This works best on the basis of a framework agreement with a specialist subrogation firm which would review possible claims against third parties as early as possible – ideally as soon as the loss is reported. If this review is delayed until the later stages of the overall claims process, the chances of proving culpability are typically much smaller. It is better to secure evidence early on, using photographs or expert opinions, and to interview witnesses before their memories fade.

Keeping an eye on costs

Framework agreements should stipulate the parties’ rights and obligations, and how costs and proceeds are to be divided. They also include the key processes, thus enabling the tasks outsourced to the lawyers to be integrated as seamlessly as possible into the insurer’s claims procedure. The agreement should also set out, at key junctures, who must inform whom about what, when, and in what form, and stipulate the loss amounts beyond which the law firm’s assistance will be called upon. If the parties can agree on fees that depend on the amount of indemnification (contingency fees), the financial risk to the insurer is kept to a minimum. If performance-related fees are legally not an option – which is the case in much of Europe – the insurer can provide the firm with a set budget per case to initially assess possible avenues of subrogation. Further steps would then be considered only where there were realistic chances of recovery.

It is clear that insurers who are aware of these issues and who have set up structures to deal with them increase their chances of recovering damages. It certainly does not make good business sense for an insurer to flatly reject all claims it assumes have little prospect of success. Smaller insurers in particular quickly reach the limits of their capacity in this regard. Specialist firms and reinsurers such as Munich Re can provide valuable services thanks to their vast experience. They have built up the necessary networks and have the long-term stability required to weather disputes that could go on for years.

Munich Re has drawn up a best-practice clause in its Industrial All Risks Policy that aims to equitably reconcile the various interests in subrogation proceedings. The clause addresses two decisive questions: firstly, who are the main stakeholders and, secondly, how are the costs divided? It stipulates that the insurer will initially advance the costs of the litigation. If the suit is successful, these advance payments are then reimbursed before the sum paid by the injuring party is split on the basis of a considered and clearly defined system: a win-win situation that creates value for both sides. In conclusion, anyone who still has doubts about whether it pays to thoroughly consider subrogation might reflect on a final, simple piece of arithmetic: successful subrogation always constitutes a risk-free net gain. In somewhat simplified terms, this means that successfully recovering €100,000 through subrogation is equivalent to writing a premium (given a 95% combined ratio) of €9.5m.

What Start-ups Should Know About Hiring a Lawyer

Small Business Lawyer
Knowing When and How to Hire an Attorney for a Start-up

Starting a new company reveals a bewildering array of possibilities and decisions and near the top rests a question: “should a lawyer be involved and, if so, when?” Whether the question seems rhetorical or ludicrous, most start-up companies consider the possibility of hiring an attorney at one point or another. Here we cover the basics to know when hiring a lawyer probably makes sense as well as some pointers on finding the best lawyer for your need.

Before we dive into specifics, let us talk about the role lawyers play in a start-up business. Unless the new company is a law firm, a lawyer provides guidance on the laws which exist and their impact on the company. A lawyer’s true wealth of wisdom derives from their knowledge of the way courts and enforcement agencies interpret and respond to laws. Any start-up lawyer can provide examples of laws that exist but don’t get enforced and actions or behaviors enforced but lacking a clear law. Both situations affect a company and only getting the proper counsel reveals the difference between business risks and trivia answers.

Common examples include:

  • Business set-up: creating a corporation, limited liability corporation, or other business entity along with getting initial licenses and accounts established,
  • Tax law: ranges from assisting with setting up tax accounts and defining what taxes will be owed to assisting with decisions about accounting and tax software intended to make reporting and remitting taxes simpler,
  • Contract law: typically focused on creating contractual agreements designed to protect the start-up from the dangers in the business world, and
  • Labor law: employment law covers numerous laws and requirements which warrant legal advice and counsel.

When should a start-up consider hiring a lawyer?

Any business activity which makes management nervous about the potential consequences of doing something wrong, probably creates a reasonable case for contacting an attorney. Considering our sample list alone we find subject areas carrying serious negative consequences which range from fines and penalties to jail time in some cases. For example, incorrectly creating a corporate entity could leave shareholders personally at risk for the new company’s decisions which could be financially disastrous. A start-up lawyer handles such creations frequently enough to prevent most common problems. Securing an attorney taps into a resource to mitigate these risks, potentially even eliminating them entirely.

How should a start-up go about finding the best lawyer for them?

Perhaps the adage, “They don’t care how much you know, until they know how much you care,” provides the best guidance for picking an attorney. Take the time to set an appointment and go with the intention of interviewing them. Make a list of your questions and ask them. During the meeting, be yourself and see how the attorney responds. Evaluate whether they care about your business and you. Afterward, sit down and answer the following questions from your perspective:

1) Did you feel comfortable in the conversation?

2) Did the conversation cover all of the business needs? If not, was the reason because of the attorney diverting the conversation?

3) Is the attorney (or their firm) capable of meeting all of the legal needs you identified? If not, are you okay with multiple attorney relationships in order to have the proper legal counsel?

Being comfortable in the conversation might seem insignificant, but consider that companies frequently discuss embarrassing decisions or oversights with their attorneys in order to get legal advice. Finding the best lawyer only benefits the company if accurate information gets presented. Not discussing things or failing to disclose all the details affects the counsel given and ultimately works against getting the support necessary.

Having comfortable levels of conversation helps, but remember the relationship remains about business. Attorneys typically charge by 6 to 15 minute intervals and these bills can still be in the hundreds and thousands of dollars per month. That bill becomes tougher to swallow when a sizable portion of the time was spent discussing a recent vacation. Depending on your answer to this question, the relationship might not be a “no”, but may instead be one where you have to keep conversations on track.

While there is a need to know the attorney’s areas of expertise, this question comes last because it bears the least impact. Finding an attorney you feel comfortable with and who stays on task becomes a huge asset whether they answer every question or only certain ones. If their knowledge area is too limited, then another attorney might need to be added, but this expands the circle of legal advice. Whether this benefits or not remains a decision for the individual business.

Hiring an attorney may seem daunting, but the process works like any other business relationship. Find legal counsel who works well with your organization, build the relationship, and use their services when it makes sense. The proper attorney relationship provides an enormous return on investment as their expertise positions your company to avoid headaches, penalties, and fines.

The Self Driving Car Craze and Why It May Cause More Subrogation Claims In the Future

Self Driving Car Subrogation

You see them in the movies and on tv. In our wildest dreams, we could not expect self-driving cars to ever become a reality. However, today’s reality is telling a much different story. According to many inside sources, we are a few years away from autonomous cars being a reality, especially in Britain.

As early as last year, the UK was planning for its arrival. What is not so clear is the cause and effect of the autonomous car. Some are predicting a spike in subrogation claims.

The Self Driving Car Accident: Where Will the Blame Be Placed?

That is the big question on everyone’s mind. As of 2021, the UK hopes to have both self-driving cars and semi-self-driving cars on the road. The question remains, who is to blame when an accident occurs?

Cars already have a mix of technology. Cars are able to talk to each other on the road now with some of the latest smart technology. We asked an expert in the field his opinions and here is what he had to say:

“The countries where motor vehicle insurance is necessary will be the first to see the changes. Unfortunately, this will also lead to more autonomous car accidents. There is a lot of data that we need to take into consideration with an autonomous car accident. Some are predicting that the self-driving technology will lead to an accident-free existence on the road. I do not see that happening anytime soon, if at all. People are too reckless on the road.”

The expert we talked to also added this:

“We have seen reports that 95% of car accidents are due to human error, which includes texting and driving. Now if we take this number at its worth, then that leaves us at 5%. This is still a large number because a lot of people will take advantage of the self-driving capabilities. They will let the car do all the work, refusing to take responsibility for their part.”

We inquired with some other experts about the benefits of a self-driving car. We wanted to know whether the benefits outweighed the possibilities of a self driving car accident.

1) Self-driving cars is basically software on wheels. New age cars will have their emissions reduced by 60%.

2) Cars like these will reduce the number of accidents people have on the road, though, many still disagree over this. The autonomous car accident rate might go up.

“I am not completely sold on the idea. The arrival of the self-driving car gives people an excuse to be lazy behind the wheel. It gives people another reason to pay attention to their phones, not the road itself.”

3) Commuters will spend less time on the road.

4) Drivers will reduce the amount of gas they use on their commutes. Maps will provide better routes. The car will know where to go. Traffic congestion will slowly become a thing of the past.

Is that enough to set people’s minds at ease?

1) One disadvantage is that drivers will need to put their faith in a computer to do all the work. Computers mess up, too, and that is not very reassuring to a lot of people.

2) What happens when the car makes a mistake and the software goes down? That will put everyone in the car at risk, especially the driver. This is a clear disadvantage that upsets a lot of people.

3) Autonomous cars travel according to the GPS program, which is not always accurate. I have used the GPS software before and they do make mistakes. Drivers could be sent on a wild goose chase, increasing their chances of an accident.

4) What happens when someone hacks into the system? Cars talk to each other on the road. You need to set up some kind of virus protection, otherwise, someone will hack their way in. Hackers can take your car on a joyride without you knowing it. Drivers do not always think about that sort of thing.

5) What about when a sensor fails? Roadblocks come up all the time. Traffic signals fail. Self-driving cars react to these situations. Your software will be affected when something goes out. Bad weather will cause an instant distress for cars.

Conclusion

Only time will tell what happens with subrogation claims and whether the number will go up or down. What do you think about self-driving cars? Do you think there will be an increase or decrease in accidents?

Leave your comments here.

Finding The Right Lawyer Is Vital for Your HOA Disputes

Any homeowners’ association dispute that you run into could get pretty nasty because the people who run these organizations are usually there most virulent in your community. Homeowners’ association disputes can arise over the smallest thing, and you have to get someone to help you with a property dispute. That is why you need to have an HOA lawyer who will help you because they can handle the whole case from start to finish. They will show you how much easier it is to manage your case when you are worried about what the HOA will do, and you should remember that you can make a lot of good changes to the way that you are managing yourself and your property. These cases can get complex, and they require a lot of research. The only way to fix that is to be sure that you have worked out what you think is the best solution for you.

Cease and desist letters are often sent by your HOA lawyer in your property dispute because you have to stop the people from the community from coming on your property or harassing you. They will do that because they think that they can get away with it, and that is why you have to stop them by getting your lawyer to send this letter. The letter that gets sent out will tell people that they need to respect your wishes, and that will give you some breathing room while you are going through the case.

A homeowners association dispute could become a big problem if you aren’t being proactive from the start. You have to be sure that you have the appropriate level of representation because that is really the only way for you to get the HOA to back off. You need to make sure that you have the lawyer look into what the real complaint is, and they will tell you what the problem is. They will tell you that they have all the best chances to figure out what to do, and they can give you advice that will explain how to survive the case so that you do not run into any extra issues. An HOA lawyer will assist you in finding a solution that will be a lot more beneficial for you, and you can get something that will be very helpful.

You need to ask your lawyer why they need to take the path that they are taking, and they will start speaking for you on the case. You do not have to talk to the HOA because they will try to do things that will trip you up, and you will feel much better about this because you get all the things you need out of the lawyer. They will send you updates, and they will explain how they can help you. They will show you much easier this case can be because they have done their research, and they often fight back with their own legal action to show the HOA that you will not be bullied. This is essential for your survival because you will feel terrible and not want to even go outside if you have not been treated right. That is why it is much better for you to make some choices that will be just right for you, and you will feel better knowing that you can make these choices because of the fact that you have the lawyer working alongside you.

The right choice for your family is to deflect everything onto the lawyer, and they will start digging into the HOA to make sure that they know what is going on. They might have to find a lot of information on these people so that they can plan your defense, and that is why you trust the people that you work with because they are not going to lead you astray. They will actually make the case last longer so that they can defend you well, and they will catch the HOA if they are doing anything that is untoward or illegal. You could not look into this yourself, but your lawyer has the authority to do this every day.

The HOA disputes that you have in your community cannot be solved from one person to another. It would make much more sense for you to figure out what you are doing with help from a lawyer. The lawyer will tell your hat you are doing in the case, and they will tell you where you stand. They can get the HOA off your back, and they can use their authority to look into the case closer so that they know that you are being treated fairly by the people at the HOA.

Business Litigation Lawyers are the Best Option for Business Litigation

court stairs

Finding the right business litigation lawyer is a big part of how you are going to take care of your company. There are a lot of things that you could be in the middle of if you have started out with your business, and you might run into people who are going to make it difficult for you to manage your company. That means that you have to figure out what you are going to do that is going to be much better for you overall. That means that you will be able to have a lot more good times running your company, and you have someone that you can call instantly when you have a problem.

The best thing that can be done is to make sure that you have picked out South Florida business litigation lawyer who knows how to help you. Palm Beach business litigation is going to be a very important part of your company because they need to help you make sure that you can get the things that you need. This means that you have to pick the lawyer you know is the right choice, and you need to give them a chance to manage your needs as soon as possible. The only way to take care of most of these things is to just call them and get them to show you what should be sone. You have to be sure that you have allowed them to manage the case, and you will learn how much easier it is to get past a bad situation.

The things that happen to your company have to be litigated by someone who knows how to take care of a company in the middle of a very hard and difficult time. You can countersue someone if you have to, and you can make it much easier for ou to get the things that you need. You also have to make sure that you have asked them how they thing they can take care fo things for you. The South Florida business litigation attorney that you are going to work with will show you what needs to be done, and they will talk to you about how they think the case can go when you are trying to make your company healthier.

A business litigation lawyer is going to reach out to you and show you that you can make a lot of good choices that will be right for your business. Your company is going to be very good because you have a nice place to come if you ever have any questions or concerns. Think about what you might have to do to take care fo your company, and consider that you have to get a lot of things done that are going to be much more beneficial and simple for you. Your lawyer can file all your papers for you, and they can take care of any problems that you have.

Your Palm Beach business litigation attorney is going to reach out to you and make sure that you can get the things that you need. They will keep track of any issues that you have as a business, and they will make sure that you have a very clear understanding of all the things that you have to take care of. That also means that you have to be pretty thoughtful about the things that you can do. You can get them to draw up papers for any new deals that you have to go through, or you can make sure that you have found something that will help you grow your business by merging with someone else.

The parts of the company that you want to improve are going to be the parts that you need your lawyer around for. Your lawyer is going to show you what can be done, and they will start talking to you about what can be done so that you can have the things that you know you need. You need to make some choices that are going to work out best for you, and you have to make them in the most legally feasible way so that you do not have any problems at all.

You have to be able to call your lawyer when you know that you need help, and you can work with someone who is going to give you a lot of help and feedback that you know you need. You will get them to give you advice that will be very helpful, and you will learn things that you never knew in the first place. You can get the people in the office to show you what they would do in your situation, and you can protect your business every day.

Find the right Lawyer for your Business Litigation needs and call the Law Offices of Stephen Barker at 561-910-4340

How to Find the Best Legal Representation When Filing an Insurance Claim

subrogation recovery

The insurance claim lawyer you use will help you make sure that you know your rights, and they will work on subrogation recovery that will make sure you have the compensation you need. You have to be sure that you have found a Florida property damage lawyer, and they will handle the case from start to finish. You might be in for a short case because there is not much to manage, or you might have to go through a really long process because the insurance  company is not willing to help you get the claim processed and completed.

The insurance claim lawyer that you are working with will show you precisely how much easier it is to get the recovery done, and they will talk to you about the potential of your claim because you might have a lot of choice that will make it easier for you to get the subrogation recovery that you know is right for you. A Florida property damage lawyer is someone who knows how to help you when you have been met with a claim that no one will pay.

The Insurance Company

You have to be able to communicate with the insurance company in the course of the case, but you should not be doing that by yourself. It makes a lot more sense if you just make sure that the company is talking to your lawyer. They will be very happy to step in and talk on your behalf, and they will show you how they are talking to the company because they have to help you make sure that you are communicating your needs without any trouble at all.

The Case Settlement

The case settlement that you are going for has to be used to make sure that you can get the money you deserve. You can work something out that will allow you to get past the case, and you will not have to worry about what happens next because the case will already be over. This means that you have saved a lot of money, and you are not going to be stuck in court for months or even years. You cannot drag out a settlement like the insurance company can drag you through court. Your lawyer can stop that from happening.

Collecting Evidence

Your lawyer will collect all the evidence for the case, and they will make sure that the evidence is used to get you to the settlement or to just make it so that you can get into court faster. The evidence might push the insurance company to give you the settlement, and you rlawyer might do a lot of digging because they are not sure what is going on under the surface.

The Cases Range From Large To Small

You should bring any complaint to your lawyer because they will show you how to manage the case without being stressed out all the time. You should not have to spend too much time on this case, and you should not allow this case to go on for too long. You should be sure that you have talked to the lawyer to see what they can do with the case, and they will measure how much needs to be done to help you.

Your Pain And Suffering

You could have gone through a lot of pain and suffering, and you need to sue for those damages if you have been stumped by the insurance company. The insurance company might have caused you a lot of problems because you did not know how to handle them, but you can get past that if you have the right lawyer.

How Do You Share Your Information?

You have to be totally honest with your lawyer so that they can use that information to file your claim. They will talk to you about what can be done, and they will speak to you about what that information means. You might have to pick out the information for them if they are hoping for you to help them, and you have to be organized so that they can get the case right the first time no matter how complex or simple the case is.

You can talk to a lawyer today who will step in and make sure that you have the representation that you deserve. You will have the case handled by someone who knows what they are doing, and there are many people who did not know that they could sue because they thought they were stuck when they got in a dispute with the insurance company. There are a number of people who will go through this process with their lawyer so that they can have their claims paid and honored by the insurance company in question.