There are five essential steps to the subrogation recovery process, each of which is subject to its own types of pitfalls, and is amenable to specific remedies:
Step One: Identifying the claims to pursue for recovery. This is the most crucial step in the entire process, and itself consists of careful evaluation of three factors: the kind of accident, the state in which it occurred, and the location of the damage.
- Accident type. In descending order of frequency, CEI sees four main types of accidents: rear-end, intersection, sideswipe, and head-on collisions. However, in terms of the percentage that has subrogation potential, we find the order reversed: head-on collisions more often have recovery potential, while rear-end collisions have the least. This order reflects the extent to which the fleet driver is responsible for the accident, which range from 0 percent responsible to 100 percent, and everywhere in between.
- Location by state. Standards for recovery are established by state law and fall into four general categories, depending on the degree to which a fleet driver’s negligence is responsible for the accident. Some states prevent a fleet from recovering any damages if its driver is 50% negligent or more; below that level, a fleet can recover. Other states bar recovery if your driver is 51 percent negligent or more. Then, there are states that bar a fleet from recovering if its driver is a little as 1 percent negligent. Finally, some states allow recovery under the principle of “pure comparative negligence.” This means that as long as a non-fleet driver bears some responsibility for the accident, the fleet may be able to recover damages.
- Damage location. A critical factor in determining whether and to what extent a fleet driver involved in an accident was negligent depends on where on his or her vehicle the damage occurs and comparing it to the accident description. For example, in an intersection collision where the fleet driver was attempting a left turn, damage on the front right quarter panel is more likely to mean the fleet driver was negligent, whereas damage on the rear right quarter panel points to the other driver’s negligence.
Step Two: Identifying the liable party. There are three possibilities: an insurance carrier, a self-insured company, or an uninsured driver. Normally, this step is relatively simple and straightforward, as long each driver obtains accurate driver and coverage information at the accident scene, and it’s relayed on a timely basis to the subrogation team. It’s helpful to offer a mobile phone driver app or pre-printed accident data form for fleet drivers to keep in the glove compartment, and to be sure drivers are instructed in how to complete the information. Fleet drivers must obtain the name, address, and phone number of each driver, their insurance policy information or, in the case of drivers of self-insured fleets, the company’s name, and appropriate contact information.
Here, it is also worth knowing that it is possible to collect from uninsured drivers, as long as they are employed and live in states that permit wage garnishment. In those cases, knowing which states and having the know-how and time to pursue it is rare among recovery non-professionals.
Step Three: Preparing and sending the recovery demand. Printed recovery demands can be extremely lengthy. They include a claim letter that clearly states the amount being sought and the reasons, police reports, estimates and/or bills, and photographs. Accurate and complete documentation, along with a sound argument, are critical to recovering the optimal amount in a timely manner. How the documents are sent also makes a difference: electronic documents and use of the internet to transmit the demand can eliminate the costs of paper and postage, significantly reduce labor costs, and recovery cycle time.
Step Four: Negotiating the recovery amount. More often than not, there is initial disagreement over the demand. Typically, differences arise over the extent to which each driver was negligent, as well as whether the cost of repairs is reasonable. Differences over repair costs can arise not only over whether the most cost-effective methods and parts were used but over regional differences in parts and labor. The more experienced and knowledgeable the subrogation agent is, both in the latest trends in repairs and claims settlement by state, the more likely that their view will prevail.
Step Five: Collecting the settled amount. Even after a recovery amount has been agreed upon, it can still take effort to receive timely payment. Multiple follow-up communications are often necessary, and having a systematic way of tracking receipts is essential. Sometimes an agreement will not come and arbitration will be necessary.
Recovering damages from third parties responsible for collisions with fleet vehicles should be a high priority for every fleet operator. Money left uncollected should provide an incentive for fleets to take another look at their recovery programs. The benchmark is recovery, over the long run, of 25 to 30 percent of total fleet accident physical damage expenses. If your fleet isn’t close to that, there is much to be gained by upgrading your recovery program.