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Subrogation – Where Did The Money Go – Can You Still Get It Back?

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Where Did The Money Go – Subrogation Bleeds Work Comp Funds

Where did the money go with your subrogation?  I have posted on this subject often such as in this article. Workers Comp subrogation seems to be one of those subjects that is passed over often. Self-insureds need to be vigilant in this area as this is $$$ that can be directly assessed back to a file or files. There are two areas of even greater concern for Workers Comp policyholders.

Graphic Of Money Go Flying
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They are:

  • Were the funds recovered actually credited back to the individual file?
  • Once credited, was the file correction reported to the Rating Bureaus (State Rating Bureau or NCCI) timely?

We have seen in our premium audits for employers or file reviews that there sometimes may not be a solid mechanism to have the funds credited back to the individual file timely. All Workers Comp insurance carriers do have your company’s best interest at heart when crediting the Workers Comp file with subrogation funds recovered. We sometimes find the funds credited back to the employer in general, not to the individual file. It is critical that the subrogation funds are credited to the individual file.

The file reserves must be reported back to the Rating Bureau immediately, not at the next Unit Stat date. See this article for the Unit Stat Date explanation. Why is this so important? Workers Comp E-Mods and X-Mods are calculated after your policy inception date for the next policy period. In other words, everything is on a time clock. Sometimes even a few days of not reporting the subrogation recovery to the rating bureaus can cost your company dearly.

Graphic Of Money Go In Green Background
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If your company wishes, you may want to contact the Rating Bureau a few days after your carrier recovers the funds to make sure the corrected amount was reported. This seems to be where the breakdown occurs in getting the recovered funds back into your E-Mod.

Each state has its own rules on reporting any changes to a Workers Comp file that has already been reported to the Rating Bureau.

Remember – subrogation never really existed unless the Rating Bureau knows about it.

Subrogation funds may not be.  I posted on this subject last week. I received a few emailed questions. I thought that I would address them today.

Why as a self-insured or first dollar insured employer be so concerned with subrogation? Is that not the job of the Workers Comp adjuster? Workers Comp adjusters are very overloaded, especially with the cutbacks in claims staff over the last few months. Adding to that is the fact that most insurance carriers do not train their Workers Compensation adjusters in liability adjusting. Subro is basically liability adjusting. In our file reviews, we often see a subrogation letter was sent to the liability carrier of the responsible party. The follow-up is often lacking. The negotiations over what is owed can be foreign territory for Workers Compensation adjusters.

How do I track any subrogation on the claims? You will need to use a diary. Check out this article.

Business Friends Subrogation Toasting At Bar
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Our company is self-insured for Workers Compensation. Why should I worry about subrogation? Your Workers Comp is being spent directly from your company budget. Subrogation is money that is in other companies’ bank accounts that should be in your company’s operating budget. It should be looked at as an uncollected receivable and given that status in your accounting procedures.

Will the responsible party pay us subrogation funds directly? They will pay your Third Party Administrator if you are self-insured. The monies should be funded back through the claim to your Workers Compensation account. The insurance carrier – if you have first dollar insurance – will refund the monies to your Workers Comp file. The correction should be immediately reported to the State Rating Bureau or NCCI. The recovered funds will likely lower your company’s E-Mod. Depending on the situation, you may be owed a refund from the carrier.

Do we need to hire an attorney? No, the carrier or TPA will usually be able to negotiate with the insurance carrier of the third party. If needed, they have their attorneys that they will consult with on the claims. We never discourage anyone from asking for legal advice.

Hand Presenting Subrogation Monitoring
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What is my first step in monitoring my company’s subrogation on Workers Compensation? You will need to do a loss run and first report of injury review.

This seems like adding a ton of responsibilities to my job duties. If you are responsible for your company’s insurance budget, then it is found money and should be a critical area. There are quite a few articles in this blog that you can use by using the search box and typing in subrogation.

How do I know which accidents have the potential to be subrogated?

Subrogation takes years of training to be able to analyze the claims to see if there are hidden possible subrogation claims. It took me a few years to understand the complexities.

My first carrier employer sent me to a conference my first month of adjusting work on subrogation.   My head was spinning as I had no idea what the topic meant for claims – other than auto.

Regardless – Workers Compensation adjuster receive scant if any training on the process of investigation and pursuing subrogation.

As always, you can email me at [email protected] or call me at 800-813-1386 if you have any questions.

2021 Update – Predictive Analytics

With the advent of predictive analytics, there are two new concerns even though you may not receive a Mod reduction or premium refund.

  1. Insurers now look back up to 20 years to see what E-Mods an employer has at the rating bureaus.   Crediting subrogation funds to a claim from more than four years ago may be worth the attempt.  At some of the NCCI conferences that I attended, the maximum number of years that subrogation can be credited back to an employer was 10 years.
  2.  If your company is self-insured, there is no time limit to receiving funds that are credited to the file by your Third Party Administrator.  Make sure that you track that refund back to the file and then request a refund.

In both #1 and #2 above make sure that the loss runs reflect any refunds you may have recently received from the TPA or the carrier.  Those need to match – remember predictive analytics now looks at 20+ year time spans.  Always ask for updated loss runs after a subrogation recovery is received.

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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