Subrogation: Optimizing Recovery Efforts After a Weather Event
The aftermath of catastrophic weather events can impose significant financial burdens on those affected. Insurers play a crucial role in helping policyholders recover from covered losses by paying damage claims. When an insurance company provides payment for covered losses, it can seek reimbursement from the parties responsible for the incident. This process, known as subrogation, allows insurers to recoup costs from those responsible for the loss and facilitates an appropriate distribution of financial responsibility. Insureds may also have an opportunity to recover those damages if there is a culpable third party.
After severe weather events, it’s important to identify the parties responsible for losses. These parties may include construction firms and utility providers. However, pursuing subrogation can be resource-intensive and time-consuming. Experienced insurance carriers may engage subrogation recovery experts that bring specialized skills to help identify and act on subrogation opportunities and allocate resources efficiently, and optimize outcomes.
“Acts of God” don’t negate subrogation potential
There’s a common misconception that insurers cannot subrogate losses from weather events like hurricanes and floods, often referred to as ‟acts of God.” However, subrogation is possible if a third party’s actions or negligence contributed to the loss. A deep understanding of and expertise in subrogation is crucial for recovering losses that might otherwise be overlooked. Pursuing subrogation can help insurers and insureds reduce their financial costs by ensuring the costs are fairly assigned to the responsible parties. This can help lower out-of-pocket expenses and potentially impact premiums over time.
Here’s how subrogation works for insureds:
- Weather event happens: A severe storm damages your roof, and you file a claim with your insurance company.
- Insurance pays you: Your insurance company pays for the covered repairs to your roof.
- Recovering costs: If it turns out the storm was caused by a weather-related event where damages also involved negligence, your insurance company can pursue reimbursement from that party or their insurer for the damages paid. This is called subrogation.
In essence, subrogation allows the insurer and insured to recover losses from the parties who are ultimately responsible.
What to look for when considering subrogation for weather events
When is subrogation possible? Examples of weather events that may have subrogation or recovery potential include:
- Hurricanes that cause major damage through wind and flooding: Subrogation or recovery professionals may target third parties responsible for issues like poor construction, installation or weak flood barriers that caused or exacerbated damages from the storm.
- Wildfires that destroy homes: Liability may fall on utility companies, landowners or others if there’s evidence of poor management or faulty equipment that led to wildfires.
- Freezes that burst pipes: If subpar insulation or defective plumbing is evident, contractors or manufacturers may be potential targets for subrogation when a pipe bursts during inclement weather.
- Storms that cause tree damage to property: If property is damaged by a neighbor’s fallen tree, there might be a case for subrogation if there is evidence of poor upkeep or negligence by the tree owner.
Initial assessment
When assessing the potential for subrogation, consider these factors:
- Timeliness: Act immediately. Subrogation processes can be lengthy, but time is of the essence to retain facts and evidence. Statutory constraints, discarded evidence and unpreserved scenes of loss can make or break subrogation, so the process must move quickly.
- Liability: Third parties may be responsible. Checking contracts, maintenance records, warranties and local building codes and regulations can help find subrogation targets.
- Evidence: It is important to collect and preserve evidence with thoroughness and efficiency. Sources of evidence include the site of the loss, the product or item that failed or was damaged, witness statements and Origin and Cause analysis.
Other considerations in the initial assessment include the monitoring of local forecasts and the actual strength of storms and investigation of area building codes to determine whether potential construction failures are due to certain standards and statutes not being met. An astute and capable recovery provider, such as QuantumSubroSM, can take care of this entire process.
Consider some hypothetical scenarios that help illustrate the potential for subrogation in the wake of catastrophic events.
Case study: A municipality’s failure to maintain levees leads to flood damage
A local hospital suffered severe flooding when heavy rains overwhelmed the municipality’s inadequate drainage systems. Poor maintenance allowed water to surge into the hospital, damaging critical infrastructure and disrupting patient care. An investigation found that a third-party contractor hired by the municipality used substandard materials and failed to follow building codes. The municipality’s negligence in levee maintenance and the contractor’s faulty construction were identified as the causes that led to unnecessary damage and risks to public safety.
Case study: A building collapsed during a hurricane due to substandard construction practices
Investigations found that the contractor used improper building materials and failed to meet hurricane safety standards. The municipality also neglected key infrastructure. This caused clogged storm pipes and unmaintained trees, which worsened the damage. Subrogation pursuing the contractor may include a claim that poor construction practices created the conditions for the collapse of the building in severe weather. It can also pursue the municipality for its negligent maintenance.
Case study: Failure to secure construction as hurricane approaches
A hospital in the path of a hurricane under construction suffered extensive damage due to a construction company’s failure to tarp the roof before the storm. Rain and wind entered the building through the exposed area, damaging equipment and facilities. The claim, citing negligence and breach of contract, says the contractor’s failure to secure the site exposed the hospital to the risk of extensive damage.
Case study: Property damaged from a fallen tree that was not properly maintained
A severe storm caused damage when a large tree fell on a home. The tree, which had been visibly sick and leaning for months, was near a neighbor’s property. The property owner ignored multiple weather warnings. He failed to either maintain or remove the tree. A deeper investigation revealed the property owner’s history of negligence – ignoring safety protocols and arborists’ advice on the tree. Since the property owner took no preventive measures, when the tree fell on the neighbor’s property, it caused extensive damage.
Case study: Loose equipment damaged nearby businesses
A storm damaged nearby buildings due to a business owner’s negligence in securing outdoor equipment. The business had been warned of the approaching storm, but it failed to secure machinery and loose equipment in the outdoor storage area. As the storm intensified, winds lifted the equipment. The equipment crashed into neighboring buildings, damaging windows, walls and vehicles. The business owner’s negligence in failing to secure the equipment was revealed during investigations. A claim was made against the business owner for negligence in following safety protocols.
Maximize subrogation recovery
Understanding subrogation is vital for insurance companies, policyholders and businesses, especially in the wake of weather-related events. By effectively identifying and pursuing third-party liability, parties can recover costs and reduce losses. This process not only safeguards the client’s interests but also ensures that responsible parties are held accountable.
To find out more about how QuantumSubro can help you recover from weather-related losses, contact Lori Oswald, JD, Business Development Director, at 262.825.9219, Christopher Havey, CSRP, MBA, Claim Product Director, at 262.957.2350, or QuantumSubro@travelers.com.
