Fifteen years ago, insurance companies did not pay much attention to subrogation. They gave very little thought to pursuing subrogation and there was little or no expectation on adjusters to consider subrogation when adjusting a first party claim. If insurers actually turned their minds to subrogation, it was usually an afterthought. As a result, opportunities to recover were lost because the steps one would normally take to protect a subrogated claim were not taken. Adjusters were not properly trained to look for subrogation potential, evidence was either not gathered at all, or if it was gathered, it was not properly preserved.
In addition, there was a general reluctance to expend resources on law firms or adjusters to pursue subrogation because there was a view that insurance companies were “throwing good money after bad”. When law firms were retained to pursue subrogation, the firms generally had no particular expertise in subrogation. Insurance companies would simply retain the same law firms that were handling the insurer’s defence files and those law firms carried and prosecuted the subrogation files in the same way they carried defence files. However, those who practice subrogation recognize that handling a subrogation file is very different from handling a defence file and requires a different mindset from practicing other areas of insurance law. Insurance companies are recognizing this as well.
To a large extent, the subrogation landscape has changed significantly over the past 15 years and, in particular, in the past 5 years. For many insurers, subrogation has become an integral part of the business of insurance. Insurance companies realize that recoveries can add significant amounts—potentially millions of dollars—to their bottom lines, and as a result they have invested substantial resources in developing subrogation departments and in training recovery specialists.
In response to the growth of subrogation in the insurance industry, Mason Caplan Roti LLP has also developed its subrogation practice group to the point that it now comprises 24 lawyers, 16 of whom practice subrogation almost exclusively. Our subrogation practice group is currently the largest subrogation practice group in Canada. We take into account the difference between handling a subrogation file and handling a defence file and have lawyers in our subrogation practice group who specialize in different kinds of losses: construction defects; plumbing failures; claims against municipalities, etc. In this way, we are able to offer the kind of specialized attention that subrogation claims require. It is also through our specialization that we are able to develop true partnerships with insurance companies.
One of the most unique aspects of subrogation is that the evidence that will be used to support a subrogated claim is gathered while the insurer is adjusting the first party claim. As a result, the potential for subrogation is a secondary concern for the adjuster dealing with the first party claim. We have developed a practice that assists our clients in recognizing and protecting claims with subrogation potential in the following ways:
In addition, we have regular meetings with our clients to discuss the status of claims. Our clients share their auditing criteria with us so that we are aware of our client’s expectations. In turn, our clients ask us to grade the quality of their work. This has led to a symbiotic relationship between us and our subrogation clients whereby we are able to assist them in becoming better at what they do, which in turn provides us with the tools necessary to provide them with better recovery rates.
In addition, we also offer creative billing options—hourly rates, blended rates, contingency fees and, where appropriate, flat fees
An important thing to remember when dealing with subrogation is the importance of the relationship with the true client: the insured. The insured is an integral part of the recovery process and as a result, in order to properly pursue subrogation, counsel will need the ongoing cooperation of the insured.
In many subrogation files, there will often be an uninsured loss that has been sustained by the insured. Our insurance clients understand very well that they have an obligation to protect their insureds’ uninsured losses and this obligation is passed onto subrogation counsel. In this regard, our clients enter into arrangements with their insureds to enable us to protect their uninsured losses
A recognition of the importance of the insured to the subrogation recovery process also tends to translate into good customer service during the initial first party adjustment process. Adjusters remain cognizant of the part to be played by the insured in the event subrogation is pursued, and as such, treat the insured in a collegial way that leads to better communication with, and better satisfaction for, the insured.
If you have any questions about the article, please do not hesitate to contact any member of our team at Mason Caplan Roti LLP.