How Subrogation Audits Reduce Workers Compensation Premiums

When an employee is injured due to the negligence of someone else, they have the legal right to pursue a claim against the person or company that caused them the injury. However, in most situations the employee will elect to pursue a worker compensation claim against the employer. When it is said an insurance company or self-insurer has the “right of subrogation”, it means that the insurer, upon payment of a claim due to the negligence of someone else, is substituted for the employee in the right to pursue the recovery of damages from the person or company who caused the injury. Some of these subrogation claims will be product liability actions against the manufacturer of equipment that injured on which an employee was injured.

Subrogation is based on the principles of negligence and tort, or better understood as “someone else is at fault and they should pay for it.” Workers compensation adjusters who are cross-trained as liability adjusters seldom miss the opportunity to pursue subrogation against another party. Unfortunately, in today’s insurance world, most workers compensation adjusters are specialists in work comp and have little, if any, background in liability claims. This results in the work comp adjusters often missing subrogation opportunities.

The workers compensation adjusters normally recognize subrogation in situations that occur frequently like car accidents. The work comp adjusters know that another person caused the car accident and they can recover from the driver (or the insurance company) of the other car. It is unique or unusual situations where subrogation is often overlooked by the work comp adjuster. Some actual examples of missed subrogation include:

1. The deliveryman bitten by the homeowners dog

2. The meter reader who stepped in a hole in the yard

3. The policeman assaulted during the arrest of a criminal suspect

4. The electrician shocked / electrocuted by the faulty work of a prior electrician

5. The factory worker injured by a machine malfunction

6. The construction worker injured due to a ladder failure (or the failure of scaffolding)

7. The carpenter injured by a nail gun that malfunctioned

8. The office worker who tripped on new carpet that was installed incorrectly

9. The strip club dancer whose dance pole collapsed unexpectedly

10.The preacher who banged his hand on the pulpit to emphasize a point and the pulpit splintered, puncturing his hand

11.The grocery store clerk who opened a newly delivered box of produce and was stung by a scorpion

The above list of missed subrogation opportunities is only a very small example of possible subrogation recoveries. The actual list of subrogation possibilities is almost endless.

There is one major benefit to the insurance company or self-insurer from the pursuit of subrogation – every dollar recovered through subrogation goes straight to the bottom line of the company’s financial statement. The amount paid on the claim is immediately apart of the money going out – the liability has been incurred and paid. When a dollar is recovered through subrogation, it is profit added immediately to the bottom line.

With the financial aspect of subrogation, you would think the insurer or self-insurer would carefully search for subrogation opportunities. However, when the work comp adjuster is reviewing the file, if they do not understand tort law, they will not recognize the potential for subrogation. Unfortunately, the work comp adjuster’s supervisor or claims manager will often not recognize subrogation either, as their claims background and expertise is in workers compensation, not liability claims or tort.

To find the missed subrogation opportunities, the workers compensation claims office should bring in an outside, independent claims auditor who has both an extensive background in work comp claims and an extensive background in liability claims. It takes this dual knowledge to perform a subrogation audit successfully.

The subrogation audit will identify missed subrogation opportunities and maximize the recoveries of the money paid on the workers compensation claims. The sooner the subrogation opportunity is identified, the easier it is to document the claim with the proper investigation needed to pursue the subrogation. However, to maximize the recoveries, the subrogation audit should include not only the open files, but also all closed files that are still within the statute of limitations.

If you are interested in a subrogation audit for your company, please contact us as we have experienced, independent subrogation auditors that are willing to assist you in the recovery of previously missed subrogation opportunities. Our subrogation auditors can work on site or remotely with electronic files, whichever is best for your situation. The auditors can review all files of just the files over a pre-determined dollar threshold. Most subrogation audits can add money to your bottom line.

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