Each year VML Insurance Programs (VMLIP) recovers more than $1 million in workers’ compensation and property and liability losses through subrogation.
Subrogation, by definition, means “to stand in the place of,” or “to substitute.”
“When we subrogate a claim, we are taking the place of, or being substituted for our member/injured member employee,” says VMLIP Recovery Specialist Pam Pitts.
Pitts has more than 30 years of experience in the insurance industry, 21 with Cigna Healthcare and ten at VMLIP. She has spent the last seven years at VMLIP subrogating claims.
For members, the work that Pitts does everyday results in lower insurance premiums due to the recovery of funds already paid out and the return of deductibles that had been applied to claims which were successfully subrogated.
For example, if a member employee is involved in an automobile accident involving a member vehicle – VMLIP may have both workers’ compensation and property damage claims.
“In that scenario we would begin paying workers’ compensation benefits and auto/property damage repair/replacement costs,” says Pitts. “At the same time, we would begin the subrogation process.”
The process begins by putting the carrier for the at-fault driver on notice of our lien in cases of workers’ compensation claims, and notice of our intent to recover losses in the case of auto or property damage claims.
Many times in a case such as the example above, the injured member driver may decide to file a personal injury claim against the person who was at-fault and retain their own attorney to represent them. In cases such as those, Pitts will also put the attorney on notice of VMLIP’s lien.
In Virginia, a workers’ compensation lien is statutory and by law, any settlement undertaken without VMLIP’s knowledge and consent would jeopardize the employee’s workers’ compensation benefits.
“Since workers’ compensation cases continue until the injured employee is released from care, generally the lien amount isn’t finalized until treatment is complete,” says Pitts.
By law, VMLIP must pay statutory attorney fees and a pro-rata share of the attorney’s costs, which typically amounts to a one-third reduction of our lien amount. In some circumstances, VMLIP may choose to reduce or waive the lien in exchange for a full and final settlement of the workers’ compensation claim.
Usually, subrogation claims that involve property damage are closed much more quickly.
“When a car is damaged, it’s damaged. You fix it. You subrogate.”
Pitts subrogates a typical auto claim by examining the police report, which will usually provide information on the party at fault, including their address and the name of their insurance carrier. Most, if not all, liability policies will contain a clause that limits liability if an accident is not reported within a specified time frame. Therefore, Pitts first contacts the carrier to ensure that the accident has been reported.
“A lot of people don’t want to file the claim if they are the one at fault for the accident,” says Pitts. “So I will contact the insurance carrier, obtain the name of the adjuster working the claim and let them know that we are involved and expect to be reimbursed.”
There are situations, however, that hinder VMLIP’s ability to subrogate. For example, Virginia subscribes to the one-bite rule, which makes subrogation more difficult in cases in which a member was bitten by a dog, and the animal does not have a documented history of biting or attacking.
“It’s very important for members to make sure that a biting dog is reported and recorded on the Dangerous Dog Registry so that if that dog bites again, we know it’s not the first time the dog has bitten,” says Pitts.
Virginia also follows the contributory negligence doctrine, which prevents subrogation and recovery if the injured person contributed even slightly to the accident. By contrast, some other states follow the “Pure Comparative” negligence rule, which reduces the amount the plaintiff, or injured person, can recover based upon the percentage their own negligence contributed to the accident or injury.
Still other states follow the “Modified Comparative” negligence rule, which also affects the amount of recovery based on the injured party’s percentage of fault.
“In Virginia, if our member is even one percent at-fault in an accident, we lose our right to subrogate on that claim,” said Pitts.
While Pitts does not handle all subrogation for VMLIP – most property and liability adjusters handle some of their subrogation claims – she does handle the majority of subrogation for the pool. Her typical day includes time on the phone contacting other insurance carriers, writing letters, following up and keeping in touch with attorneys on the status of cases and settlements.
“My largest recovery was about $90,000,” says Pitts. “However, Scott Martin once recovered nearly $1.5 million on a single general liability claim subrogation.”
Pitts’ most exciting subrogation involved a claim she followed for more than five years until a $60,000 check finally came through.
“That made it worth it,” she says.
The amount of funds VMLIP subrogates each year fluctuates. A down year could actually be a good thing.
“In order to recover a lot, you have to have lost a lot – so if we keep claims down through loss control we will subrogate less, and that’s a good thing,” says Pitts.
For more information on how VMLIP saves members money, continue following this blog as new posts on medical management savings, pharmaceutical savings, loss control savings, and more are posted.
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