Workers Comp Liability Subrogation – Vehicle Accident Steps

December 3, 2020 By JL Risk Management Consultants

Workers Comp Liability Subrogation – Seven Steps For Vehicles

What Is Workers Comp Liability Subrogation for auto accidents? Let us take an example I have on my screen in front of me. The insured employers and adjusters working on this together allow for quicker recoveries from any third party in case of an automobile accident that results in a Workers Comp claim.

Truck workers comp liability subrogation pic

Wikimedia Commons – Celica21gtfour

A great subrogation example and definition can be found here.

This article points to use by adjusters. Insured employers and others can help the claims staff do their investigation by assisting the adjuster. Any time anyone can help the adjuster do their 13 job duties, the claims Total Incurred will be lower which will result in lower premiums.

Self-insureds, you should pay attention as this article can assist you to return cash to your budget.

One of my huge concerns right now in the insurance industry adjusters used to be trained in all lines of coverages such as:

Automobile – we are talking about this one today
Premises Liability
Product Liability
Contractor/Subcontractor Liability
Miscellaneous lines of insurance

The Seven Steps For Automobile Accidents

Improving your Workers Comp Liability Subrogation Investigation

Let’s go over the seven steps together – easy peezy. One extra step is that if you feel you are in over your head then review it with your claims supervisor or manager and possibly local legal counsel or your staff legal counsel.

Consult your claims manual in case it differs from my suggestions (not legal advice). You can do this without having to use a service to do it for you.

Do not dismiss the workers comp liability subrogation accident. Just because it does not look like a third party is not possibly responsible, do not just check the No box. I have a claim right here in front of me where the adjuster did just that. What the adjuster missed was the next step. I am not being picky.
Obtain the police report. This used to be a huge task. With the advent of the internet, this step became easier. Read the police report. The address of the possible responsible third party shows up somewhere in the police report – very important. Review who was ticketed. If you cannot tell who is the third party’s insurer from the police report, use the Index Bureau (should be in your system.)
Take Statements – preferably recorded, or have the person write down what happened, sign, and mail it to you. A file note that you talked to someone is not sufficient. People tend to forget the specifics of the accident months or years later. Caveat – if you take a recorded statement – offer to send a copy to the person giving the statement.
Do everything in writing, not by email. You may need to explain the actions you took on the file to a court or your attorney. Priority Mail automatically tracks your letter or use Certified Mail. Once you discover what insurer the possibly responsible party has for coverage, write them immediately, time is of the essence.
Very important – once a third party has accepted liability, then adjust your reserves accordingly. Do not leave unnecessary reserves on the table. The rating bureaus, agents, actuaries, data reporters, and the insured employer will thank you later for keeping the appropriate numbers.
Make sure any funds recovered are posted to the file – should you leave the file open for the recovery? Consult your claims manual or supervisor. Reopening the file and forgetting to close a file that had a huge reserve can be very harmful to the insured – see my next article on that situation.
Big secret one that may save the subrogation – Call the Assistant District Attorney in the local county where the accident happened if the third party was ticketed. Tell them who you are and that you have a subrogation lien on the file before the date of the hearing. Why? Because if the Assistant DA dismisses the ticket then your subrogation lien just faded away. This suggestion should be reviewed by your supervisor and staff attorney before you make the call. Do not run afoul of the local law in that jurisdiction or your own jurisdiction.

These seven steps will help any adjuster with the Workers Comp liability subrogation of automobile accidents. Insured employers may want to keep a diary of the file – see this article to accomplish that task.

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Waiver of Subrogation Endorsement – Excellent Analysis Chart

October 11, 2019 By JL Risk Management Consultants

Misunderstood Waiver of Subrogation Endorsement – Why You Should Read Your Workers Comp Policy

The Waiver of Subrogation Endorsement appears in almost all workers’ comp policies. Almost all workers’ comp personnel and insureds do not ever read any policies. Who wants to read 40 pages of droning on when the Dec Page covers everything one needs to know concerning a policy? Please think again on that point. Endorsements can change the face of a policy dramatically.

picture waiver of subrogation insurance office

Wikimedia – François GOGLINS

Many articles appear in this blog on Subrogation. The search for those articles can be found here.

If you check out a few articles written on endorsements, the need to be aware increases for any Endorsements which insurers add at the time of policy inception (start) or during the policy period. Check out this article on the parts of a policy and this one on Endorsement.

The Waiver of Subrogation Endorsement always meant (in my opinion) the carrier desires to retain the right to bring a lawsuit against any third parties. The insured employer signs over those rights at the time the beginning of and during the policy.

The insurer wants an unfettered ability to recover any claims monies spent out with adjusting a claim. Of course. the insured would receive a credit for any recovered subrogation funds. The carrier is Supposed To file correction reports with the rating bureaus (NCCI, WCIRB, etc.) that may result in a lower E-Mod for the employer.

Each employer willing to waive their right to recover from or litigate receives a credit. Pull out your current policy or an old premium audit bill or statement. The credit appears in both, along with a nominal refund of sorts.

Understanding and applying the waivers may be of great benefit to employers. Some states do not allow the carrier to bring suit against a responsible third party directly. The carrier must ride on the coattails of the injured employee instead of moving the employee out of the way and litigating the responsible third party directly.

A great multi-state law office MWL and Counsel Gary Wikert, combined all the Workers’ Comp Waiver of Subrogation considerations in all 50 states. Adjusters and their supervisory staff should keep a copy of the Waivers of Subrogation at their fingertips. Insured employers should understand their rights under a Waiver of Subrogation. Download that PDF file here.

Their introductory paragraph reads as:

Most state workers’ compensation laws, or cases construing them, allow the employer and its carrier to waive its right to subrogate against a third party that caused or contributed to an employee’s injury. The purpose of a subrogation waiver is not well understood and is a subject of some confusion in the marketplace. Most frequently, contracting parties agree to contractually require the inclusion of a waiver of subrogation endorsement in a workers’ compensation policy simply because the requirement is contained in the form contract, and has been for many years.

A recent NCCI Symposium in Virginia covered Workers Comp mega-claims. The number one mega-claims by far were automobile accidents. Auto accidents remain the easiest claims for a work comp claims adjuster to subrogate the funds paid on a claim.

Sending a letter to the auto adjuster to retain the carrier’s lien is very easy. Monitoring the status of the subrogation lien becomes critical. I have reviewed more than a few files where the workers’ comp adjuster notifies of the lien and then lets it go at that point. The injured employee’s liability claim attorney may not pay one-third of the funds because of one letter.

Many WC adjusters tend to just specialize in one line of claims. The specialization is fine except when subrogation potential appears in a claim. When I started my insurance career in the 1980s, adjusters were almost exclusively multi-line. In other words, the adjuster knew just exactly how to pursue a third-party Workers’ Comp matter as he/she had adjusted claims outside the Workers’ Compensation arena.

Download the above PDF. You can thank me later.

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Subrogation Letter Is Just First Step in Recovering Workers Comp Funds

July 24, 2018 By JL Risk Management Consultants

The Subrogation Letter Should Not Be Solely Relied Upon To Recover Workers Comp Payouts

A quick subrogation letter remains one of the stalwarts in recovering workers compensation funds back to a file whenever there is a responsible 3rd party involved in a Workers Comp accident.

carrier pigeons carrying worker comp subrogation letter

Wikimedia Public Use License – Carrier Pigeons

The best example is an auto accident with another driver at fault. One has to watch saying “at fault” as that has to be left up to the traffic court. However, if the other party is ticketed for a violation, then they should at least be considered a responsible party.

I have recommended the Subrogation letter to the responsible 3rd party’s insurer as soon as possible with a certified return receipt letter. One rather disturbing trend that we have seen in files over the last few years is the workers comp carrier is ignored when pursuing a reimbursement.

Was the workers compensation adjuster ignored on purpose?

A recommendation is now made that the adjuster email or call the 3rd party’s insurance claims adjuster every month to inquire on the file status and to make sure that the current adjuster knows there is a legitimate lien on any file disbursements to the injured worker by the 3rd party carrier.

Man reading subrogation letter on his computer

by StockUnlimited

Why? Adjuster switch files often – it is the nature of the beast in the insurance industry. Usually in an auto liability carrier’s online file, there is a blank or two about any liens on the file.

The workers compensation adjuster has to make the auto liability carrier’s “lien blanks’ are completed with the workers compensation insurer’s information. The workers compensation adjusters often change, also. Tracking a reimbursement can become complicated as the online systems need to be relied upon very heavily.

Having a 30 day diary item to contact the auto liability adjuster (recommended by email) will enable the workers compensation insurer or TPA to keep up with who is on the file on both ends.

Over the years, I have had to provide general liability and auto liability adjusters with copies of the timely subrogation letter with the certified return receipt as a reminder of the lien on the file.

Of course, I started with an insurance all lines training and license, so I was not just a Workers Comp adjuster. This training enabled me to track and follow the liability lien portion of the file.

When I first started adjusting all lines files, I was sent to what amounted to a subrogation camp. The hotel fire alarm went off at 1:30 am until 5 am, so my absorption was a little slow and subrogation was what I thought at the time was an “outlier subject.”

As I have said often, most Workers Comp adjusters are now trained in just Work Comp adjusting. That is OK, except when one has to put on their liability adjuster hat.

Employers should take on some of the responsibility and track the subrogation claim through their own Workers Comp subro diary on a claim.

Even if the Workers Comp carrier of TPA has a subrogation unit, a subrogation diary by the Workers Compensation adjuster and employer is also recommended.

For more subrogation topics, click here for a full Google website search on subrogation.

The whole process starts but does not end with the subrogation letter.

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North Carolina Work Comp Subrogation Takes Weird Turn

August 18, 2016 By JL Risk Management Consultants

North Carolina Work Comp Subrogation Re-re-reverses Course

The subject of North Carolina Work Comp subrogation has frustrated carrier and Third Party Administrator claims staffs over the years. This case could be a model for changing subrogation laws in other states – possibly.

Stamp Of North Carolina Work Comp Subrogation Badge

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One of my concerns is that Workers Comp adjusters have not been trained that well in liability claims. This is understandable but sometimes funds can be left on the table, so to speak. Subrogation is one of the areas of concerns that pops up in our claims reviews.

This case has virtually nothing to do with an adjuster mistake of any kind. I try to inform the WC community on a case that may make a difference or be used in future ligation.

97-10.2 is the North Carolina Statute for subrogation.

The case is Dion v. Batten, No. COA16-63. The North Carolina Court of Appeals published the case on 08/02/2016. The case can be found at this link. It is a PDF file 2016-16-63

Law Scale On Hand North Carolina Work Comp Subrogation Clock And Dollar Sign on weighing on scale

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As I am not an attorney, I do not ever try to comment on legal matters. Below are a few excerpts from the NC Appeals Court decision. It may be a great idea to download the case from the link above and read the complete decision.

The file was an accepted file involving a traffic accident with heavy subrogation potential.

“Plaintiff was employed by Neuwirth as a servicing agent. In the course and scope of his employment with Neuwirth, Plaintiff was driving on Oriole Drive in Wilmington, North Carolina on 20 March 2008, when the vehicle he was driving was struck by a vehicle driven by Defendant, who had failed to stop at a red light. As a result of the crash, Plaintiff sustained multiple injuries. Because the crash occurred during the course and scope of Plaintiff’s employment with Neuwirth, Plaintiff was entitled to, and filed a claim for, workers’ compensation benefits pursuant to Chapter 97 of the North Carolina General Statutes.”

The trial court performed a series of very interesting calculations.

The trial court further concluded that although Neuwirth and Brentwood paid workers’ compensation benefits to Plaintiff totaling $528,665.61, “their workers[’] compensation subrogation lien [could not] exceed $285,000.00, that being the total amount of the [j]udgment obtained by [Plaintiff] in this lawsuit in compensation for his injuries.” Accordingly, the trial court found the amount of the workers’ compensation subrogation lien to be “$190,000.000, which is calculated by subtracting attorney’s fees ($95,000.00), interest ($74,291.50) and court costs ($160.00) from the judgment amount obtained by Plaintiff [] by [j]udgment in this lawsuit ($359,451.50).” Plaintiff, Brentwood, and Neuwirth appeal.

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There was a standing case on subrogation that reversed the prior case law.

An examination of Easter-Rozelle reveals that the quote Appellant’s urge us to follow is obiter dictum.

The NC Court of Appeals agreed with the trial court.

Appellants contend that N.C.G.S. § 97-10.2(j) mandates a finding by the trial court regarding the “amount of costs of the third party litigation to be shared between the employee and employer” (the “cost sharing consideration”), and that, in the present case, the trial court’s order is incomplete for failing to make any findings of fact regarding the cost sharing consideration. While we agree with Appellants that, under our precedents, an order must contain a finding of fact regarding the cost of the third party litigation to be shared between the employee and employer, we conclude that the trial court’s order in the present case adequately addressed this required consideration.

As mentioned previously, this is a case to print out and read if you as an adjuster have any North Carolina Work Comp subrogation files that you are handling, or as an employer involved with a subrogation case. You may hear of this case again in the near future.

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Liability Adjusting Is Part of Workers Compensation Claims

December 31, 2013 By JL Risk Management Consultants

Liability Adjusting Enables Great Workers Comp Adjusting

One of the more complex liability adjusting components of Workers Comp claims is subrogation.

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Subrogation rears its ugly head (or the lack thereof) on a large percentage of Workers Compensation files. The percentage referred to is the lack of knowledge by WC adjusters on identifying and pursuing subrogation. Subrogation is basically placing the liability of the risk on a third party.

There are many subrogation articles in this blog. The reason is that many carriers and TPA’s just do not fully train their adjusters on the nuances of liability adjusting other than WC. Carriers and especially TPA’s can become very single-minded in the handling of WC claims. This is not an indictment of any single carrier of TPA. The problem is more systemic in nature.

A very good subrogation attorney published an article recently in the Insurance Journal. One of the internal links provided a great summary of subrogation laws. When one steps outside the comfort of WC liability, the process can become much more complicated.

One of the better subrogation websites included a national map of the various subrogation laws in every state dealing with whether the state is a:

Law graphics Liability Adjusting With Gavel

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Contributory negligence state (bars recovery with only 1% of fault by the plaintiff) or
Comparative negligence state (recovery by plaintiff is reduced or prohibited based on the percentage of fault attributed to the plaintiff), and
Pure comparative or modified comparative state.

Kudos to the author Attorney Gary Wickert as it is one of those articles you should keep handy. An accident may occur in other states than just the one where the WC file will be handled. The list is not exhaustive, but well worth the read.

The reason for this article is sometimes the WC adjuster can write one letter and receive a subrogation recovery. The key is to make sure the adjuster handling the liability file (auto, premises, general liability, etc.) is put on timely notice. A letter by certified return receipt mail has been used as legal proof of a timely subrogation notice. It is the best $5 an adjuster can spend to preserve the right to recover.

Liability adjusting on WC files is a training issue that needs to be addressed to recover funds that carriers and TPAs sometimes leave on the table.

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Workers Comp Reserve Reviews And Subrogation – Three Concerns

March 10, 2013 By JL Risk Management Consultants

Workers Comp Reserve Reviews And Subrogation

Our Workers Comp Reserve reviews uncover many concerns on claims handling. Subrogation refers to an insurance company seeking reimbursement from the person or entity legally responsible for an accident after the insurer has paid out money on behalf of its insured. In Workers Compensation, we often see three different areas of subrogation that should be of concern to employers.

Picture Of Hand Workers Comp Reserve Reviews Holding Seedling Plant

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First, we sometimes find in our file reviews for employers that there was likely a third party that was or at least was partially responsible for the Workers Comp accident.

As the file adjusting for Workers Comp claims has become more specialized, insurance carriers and TPA’s have sometimes not trained their claims adjusting staff in the steps to pursuing subrogation.

We do often see that the adjusters have pursued subrogation properly if there was an auto accident involved with the claim.

The second area of concern is that when subrogation funds have been received by an insurance carrier or TPA, there is sometimes no procedure on how to handle these funds inside of the Workers Compensation file. This is an area that may not exist in most claims manuals.

The third area of concern is when subrogation funds have been received and credited to the file. We do see in premium audits for employers that the adjustment of the total incurred was never reported back to the NCCI or State Rating Bureau. This can have a great effect on an employer’s E-Mod/X-Mod if the subrogation recovery was significant. As up to 45 months of data go into the E-Mod, a subrogation recovery must be credited on the day of receipt to the file and the correction reported to the NCCI or State Rating Bureau immediately.

Money Bags And Coins Workers Comp Reserve Reviews Vector

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I am not saying that this situation exists in all the files that we see. However, it is of a large enough concern that all employers should monitor if the recovered funds did make it to their E-Mod or X-Mod.

Further note – The X-Mod is the same as the E-Mod. The Experience Modification Factor is called the X-Mod in California.

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NCCI Report On Auto Accidents Has Interesting Subrogation Numbers

December 19, 2012 By JL Risk Management Consultants

Auto Accidents Report Has Interesting Side Statistics

The NCCI report on Auto accidents. NCCI (National Council on Compensation Insurance) is the largest rating bureau in the nation. Their statistics cover 21 or more states. One of most dangerous places to work is in your automobile according to their report.

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Surprisingly, the number of auto accidents that result in injury has been reduced by 37% since 1966 while the number of miles driven has tripled. This was likely due to safety enhancements over the past 35 years.

One interesting area of the report is subrogation. Subrogation is basically pursuing a third party that may be responsible for all or part of an accident.

According to NCCI, at 60 months after date of injury, about 1% of all claims involve subrogation. For motor vehicle claims, the percentage involving subrogation is almost 25%. The 25% figure is not an unexpected amount. Unless the accident involved a single car, there would be an element of subrogation to the accident.

The astounding figure is the average amount of subrogation is over 20% lower for motor vehicle claims than for all claims at 60 months ($8,570 for motor vehicle claims vs. $10,871 for all claims). There was no direct explanation as to why auto accidents are not more expensive.

One reason is that if a claim is subrogated for other than an auto accident, the injuries sustained must have been more severe. Another reason could be auto insurers are much more aggressive and knowledgeable on pursuing third parties than Workers Comp insurers.

If the auto adjuster pursues another party for an injury, Workers Comp insurers can subrogate their claim and “go along for the ride.”

This indirectly proves Workers Comp claims adjusters are rarely, if ever, trained in spotting third parties that may be responsible for an injury. For instance, if a machine in a lumber yard malfunctions and causes an injury, subrogation opportunities are being passed over quite often.

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The basis of the subrogation claim should always be the recorded statement taken by the Workers Comp adjuster. The adjusters gloss over the malfunctioning machine in the example. This can leave big Workers Comp $$ behind.

Many years ago, I was trained on subrogation very heavily. However, I was an all-lines adjuster. I was not specifically a Workers comp adjuster.

Should more than 1% of all non-auto claims be subrogated against another party? I would have to say definitely yes.

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Waiver Of Subrogation – Very Popular Term in Workers Compensation

December 9, 2010 By JL Risk Management Consultants

Term Of the Day – Waiver Of Subrogation

The WC term of the day waiver of subrogation clause is very popular in insurance policies and rental agreements. This type of waiver is when one party gives up the right to pursue another third party for paid damages if the third party was at fault. Often an insurance carrier will put themselves in place of their insured to pursue the third party for monies paid on a claim. The subrogation waiver will not allow the carrier to pursue the third party.

Picture of Two Contractor Doing Waiver Of Subrogation Agreement

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

November 23, 2010 By JL Risk Management Consultants

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 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.

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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.

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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 their 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 asking for legal advice.

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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 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.

Irregardless – Workers Compensation adjuster receive scan 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.

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Does Workers Comp Subrogation Exist- Is it Worth Pursuing?

October 27, 2010 By JL Risk Management Consultants

Workers Comp Subrogation Can Be Money Left On The Table

Does Workers Comp subrogation exist in Workers Comp claim department? Subrogation is one of those under- the-radar terms in Workers Compensation.

Picture Of Hand With Wallet Subrogation Exist Showing Money

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It is the act of recovering the amount paid for a loss by an insurer from the entity that is legally responsible. Subrogation is either granted by the terms of the policy itself or by law.

Also abbreviated to subro, it allows carriers to recover losses in the case of a second party’s liability in the claim. Subrogation reduces the amount of the loss for the carrier and the insured and can therefore reduce the insured’s insurance liability.

Update – I have been reviewing a large number of claims files over the last few months. The main weakness I have found is the investigation and notifying the responsible third party of a pending Workers Compensation claim and the payouts.

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Workers Comp Subrogation – Risk Management Diary Recommendation

April 13, 2010 By JL Risk Management Consultants

Risk Management Diary For Workers Comp Subrogation

The Workers Comp Subrogation handlers should have a risk management diary. A few posts ago I analyzed the Workers Compensation adjuster situation in handling third party liability claims. In defense of the Workers Comp adjuster, a requirement for the job is NOT a background in liability claims. That is an understood fact.

Graphic Of Risk Management Workers Comp Subrogation Infographic

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What can a Risk Manager or company officer do to possibly track the outcomes of an accident where a third party may be liable for a reimbursement for all or part of a Workers Comp claim? I would suggest setting up a subrogation diary to track the outcomes of a liability claim against the third party. As I said in the last post, we have noticed in our file performance reviews that subrogation or subro is/has not been properly handled in the claims.

The subro diary can be easily interfaced with any of the diary programs such as Microsoft Outlook(r). The main thing is to track if and when the subrogation claim is being pursued and how the funds have been handled along with how the insurance carrier has reported the reimbursement to the rating bureaus.

Some of the areas to track are:

When did the adjuster send the original notification letter to the responsible party’s insurance carrier? Make sure that letter went out to all responsible parties’ insurance companies.
Did the adjuster for the responsible party acknowledge and respond to the notification letter?
Negotiation status on settling the workers’ compensation lien
Important – Legal proceedings – if lawsuit filed
Was a subrogation check received by the Workers’ Comp adjuster. If so, were the funds credited back to the file?
Did the insurance carrier (if not self-insured) report the reserve reduction to the rating bureau?

I recommend not contacting the adjuster for the third party directly. Let the Workers’ Compensation adjuster do their job.

I try not to do very long posts. I will stop there. If you have any more questions on a subro diary, please use the Contact Us page to reach us.

Subrogation – Workers Comp Money Left On Table

April 7, 2010 By JL Risk Management Consultants

Workers Comp Money – Subrogation Concerns

Sometimes Subrogation turns into the Workers Comp money left on the table. I have covered subrogation a few times in prior posts. I am bringing it up again due to our recent Workers Comp file reviews. One area that we have noticed a lack of training or knowledge in Workers Comp files is subrogation.

Wikimedia Commons – DEA Emploee

One of our trucking clients had left $240,000 on the table due to the TPA not pursuing subrogation before the statutes tolled. Many of my readers will likely know the definition of subrogation. I will not use the classic definitions as they are confusing.

An example of subrogation is when a delivery driver is rear-ended in an auto accident while making his/her deliveries. He/she suffers injuries and files a Workers Comp claim for benefits. The driver of the other car is responsible for reimbursement of the benefits to the Workers Comp carrier. The Workers Comp carrier has the responsibility to protect their client’s interests and to pursue subrogation. This is an easy example.

There are many instances that we find in files where the situation is more complicated, or the initial notice letter to the responsible party is sent, but then there is no follow-up. We also see where the subro check is received by the carrier, but is not properly credited to the file. This can cost an insured many times over as their E-Mod would be affected.

Picture Worried Businessman at Table with Wad of Cash in Mouse Trap Subrogation Concerns

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Why does this happen? I think it is that Workers Comp adjusters have such a hybrid job to do from a regular liability adjuster. How often does a liability adjuster have to make sure that an injured employee’s weekly check made it to them? The volume of communications or mail is huge for a Workers Comp adjuster.

The bottom line is that they are so busy, it is just part of the file that cannot be tended to in their normal job duties. I have also noticed that liability adjusters receive a large amount of training in subrogation while the Workers Comp adjuster does not receive that much training in third party liability.

I think that I may have come upon a solution. Check back with me on the next post. I try not write posts that are too long as insurance is not the most exciting subject.

Subrogation – Mystery Workers Comp Premium Refund

February 7, 2009 By JL Risk Management Consultants

Subrogation – The Silent Workers Comp Premium Refund

A Workers Comp premium refund that no one talks about is subrogation. I have posted on subrogation in the past. I would re-post the standard definition for subrogation, but it is one of the most confusing definitions in all of Workers Compensation.

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My definition of subrogation is when there is another party besides the employer that was partially or fully responsible for the incident occurring to the employee. Workers Comp adjusters sometimes overlook the possibilities for recovering part of the claim payouts using subrogation.

Why would this occur? A Workers Compensation adjuster is not a liability adjuster and may only be trained to handle Workers Compensation. General or auto liability is a totally different segment of the insurance world and the Workers Comp adjuster may not be trained in the intricacies of liability other than Workers Compensation.

If the subrogation recoveries occur within six years after the accident, the money should be credited back against the file. The correction should require recalculation of the E-Mod and a refund of premiums. Sometimes, the money will be recovered by the insurance carrier and credited against the file. However, there a few steps that are required to result in a premium refund. This is a somewhat complicated set of steps that will likely recover some of the overpaid premiums on that specific file.

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What should your company do if there is a possibility of recovering some of the funds paid out on one or many Workers Comp files? Your company should inform the adjuster when the claim is reported. Some type of diary system should be instituted to track the subrogation claim. One of the main things to look for at the start of the process is a letter from the adjuster to the third party putting them on notice. Without this letter, your subrogation claim will be deemed worthless.

Subrogation takes a large amount of patience. Your company’s efforts will pay off in the long run. If you feel that the subrogation claim is becoming too complicated or the carrier is not pursuing the third party enough to recover funds, it may be in your company’s best interests to bring in a consultant to help with the subrogation claim.

Subrogation – Under The Radar in Workers Comp Claim Reviews

March 29, 2008 By JL Risk Management Consultants

Subrogation Not On Radar Screens In Work Comp Files

The topic of subrogation is one of the most misunderstood areas in insurance, and especially Workers Compensation, that we see costing insureds millions of dollars a year.

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Subrogation: Prevents the insured from collecting loss payments from his or her own insurer and from the responsible third party for the same loss. Once the insurer pays a loss caused by a third party, the insurer takes over, or is subrogated to the insured’s common-law right of action against the negligent third party.

What does this mean to the employers? If there are any accidents where another party is responsible (critical – or even partially responsible) for an on-the-job-injury, your Workers’ Comp carrier should be pursuing funds from the third party’s insurance carrier. This is one area where we see so much of the employer’s money go down the drain.

Unfortunately, with the specialization of the various lines of insurance adjusting, many WC adjusters do not have the specialized liability training to spot and pursue any type of subrogatable funds.

We have always recommended that independent adjusting agencies, TPA’s, and insurance carriers train their adjusters in other lines besides WC. The Associate in Claims (AIC) is perfect for training in other lines of claims.

Two Questions to Ask your Workers Comp Adjuster

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There are two questions that you will need to ask the Workers Comp adjuster who is adjusting the file.

They are:

Have you sent a notice letter to the carrier of the negligent third party, and may I have a copy of that letter?
What is the status of the subrogation lien?

There is a much longer list of questions, but these are the two basic ones that a Workers Comp employer should be asking often if there is a possible lien on the file.

Picture Woman Holding Blackboard Subrogation Question Marks

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There are time limits for giving a third party insurance carrier notice. The Workers Comp adjuster may be absorbed into the Workers Compensation file and may have overlooked putting the third party carrier on notice. Any amounts recovered by your Workers Compensation carrier must be immediately entered into the file. Almost all Workers Comp adjusters do not have a background in Auto, Premises, General, or other type of liability coverages.

There are quite a few tricks and traps in Subrogation. Remember, when the Workers Comp Adjuster’s lien is negotiated down, that is your money that is being lost. Not following the subrogation of your Workers Comp lien can ruin a great avenue to recover funds that will bring down your E-Mod.

Subrogation is one area where I recommend that you use an adjusting expert. Subrogation can be very complicated and confusing even to the adjuster that is on the file. We have had to assist the Workers Comp adjuster on quite a few claims in recovering the funds from a third party liability carrier. The largest one we have had so far is over $1 million.

Next Up – Another definition from www.cutcompcosts.com/definitions.html A list of free definitions that you can download.

Work Comp Subrogation – Third Concern When Ignored By Adjusting Staff

September 19, 2007 By JL Risk Management Consultants

Work Comp Subrogation Additional Concern

Work Comp subrogation has a kind of quirky standard definition.

Vector Graph of Man Work With Helmet work comp subrogation without Helmet

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To me, it is the possibility of another party having to share the monetary responsibility of an insured incident or accident.

I give the example in my manual of a company salesperson on sales calls being hit by another car in the back bumper and sustaining Workers Compensation injuries.

The driver of the other car should pay for the damages sustained and reimburse the Workers Comp carrier.

We usually see two errors being made during our file reviews:

We often see the subrogation funds being added back into the file after the file has been closed. However, the amounts reported to NCCI may not change. The funds could greatly affect a company’s Workers Compensation E-Mod.
The Workers Comp adjuster may not have enough time to pursue subrogation or may take a small % of the liability settlement.

Both instances are E-Mod killers. As I pointed out in my manual, there are 13 basic functions of a claims adjuster. This area is one of the lower priority tasks.

In the 1980s, adjusters became much more specialized. I was lucky enough to have experience as an all lines claims adjuster.

Workers’ Comp adjusting evolved to become a very specialized type of adjusting in the 1990s. Each state has its own set of laws and regulations on handling WC claims. Some similarities exist between the states.

Insurance carriers and TPAs rarely have an auto or premises liability adjuster cover workers’ compensation claims. Over time, their employer rarely trained a workers’ comp adjuster in liability adjusting.

The ability was seen as unneeded and a time-waster. Bottom line – workers’ comp adjusters need more training in subrogation liability. Without it, large amounts of money will be left on the table that could be refunded back to an employer’s file and eventually their E-Mod or LDF.

The employer will likely have to monitor the subrogation follow up in most situations. There are many articles on how to track work comp subrogation in this blog.

Will Workers Comp Funds Recovered Lower Our Mod?

March 23, 2007 By JL Risk Management Consultants

Will A Workers Comp Funds Recovered Lower Our Mod

Will a workers comp funds recovered lower our Mod this year?

Calculator Money Phone Funds Recovered Lower Our Mod Concept

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This question was emailed in from a blog reader from Virginia. The rest of the employer’s question pointed out that the file was six years old. The answer to the question is it depends on the timing of the recovery.Virginia, as in most states does not allow a Mod (Experience Modification Factor) revision from more than four policy years into the past. As the Workers Comp file was more than four years old, the subrogation money will be credited to the file. However, a Mod from six years ago cannot be promulgated again.The funds are known as “in the money” for the Workers Comp carrier. Strangely enough, the money is in a way pure profit for the carrier.

Self insureds are another matter. The money should be immediately returned to the employer as the Third Party Administrator (TPA) had paid the claim from an account, not an insurance policy. The funds that were recovered due to subrogation cannot be applied to the Mod after four policy years maximum. This is due to the way that Mods are calculated by NCCI or the State Rating Bureau.

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In almost all cases, the Mods are promulgated from policies four, three, and two years prior to the current policy year. The Workers Comp claims from the policy that expired in the previous year will not be charged to the Mod until the following year.

Over the past few years, there have been a number of lawsuits pursuing the Mod recalculations even though they were from files that were older than four years. The lawsuits are/were alleging the carriers were too slow in recovering and applying the funds which caused higher Mods.

This situation is exactly why the employers should be very vigilant in tracking subrogation or any type of file refund such as an overpaid medical bill. It is not recommended that your company leave it to the carrier to recover and apply the recoveries or refunds to the Mod.