If someone Else is at Fault, They Should Pay For It
Subrogation is the process and the right of the workers’ compensation insurer or the self-insured employer to recover the money paid on a workers’ compensation claim from another party when the other party is responsible for the injuries to an employee. In civil law, the principle of negligence guides and determines who should pay for damages caused to another. Basically, the simplest way of putting it “if someone else is at fault, they should pay for it.” [WCx]
The most common situation where the insurer or self-insured employer can recover the amount paid from another party is the automobile accident where the employee is injured due to the carelessness of another driver. While automobile accidents give rise to a significant number of workers’ compensation subrogation claims, there are many other events that can produce a subrogation claim.
Some examples are:
- Factory machinery that malfunctions injuring an employee
- Factory machinery that does not incorporate standard guards and safety systems
- Ladders and scaffolding that fails or is defected
- Any piece of equipment that malfunctions causing an injury
- Delivery people injured due to a defect at the delivery location (for example a trip and fall due to a pothole in the parking lot)
- Injuries caused by the faulty workmanship of a third party
Subrogation in workers compensation can arise from any event that would create a claim in automobile liability, products liability, general liability, construction defect liability, homeowner’s liability, medical malpractice, or any other types of liability insurance.
Every Claim Should Be, But Isn’t Being Reviewed for Subrogation
Every workers’ compensation claim should be reviewed for subrogation potential when it is reported. Unfortunately, most workers’ compensation adjusters are experts in workers’ compensation but have little or no knowledge of liability claims. This results in the work comp adjusters frequently missing opportunities for subrogation.
The workers’ compensation adjuster should be taught to incorporate into the initial investigation of workers’ compensation claims to ask these questions:
- What caused the accident?
- How did the employee get injured?
- If someone else had done something differently, would the injury have occurred?
- What object was the employee in contact with when he/she was injured?
- Did the object function correctly?
- Was there another party involved?
- Creator of a defect?
The answers to these questions will assist the adjuster in the determination of the opportunity for subrogation. [WCx]
While the workers’ compensation adjuster can be instructed to ask themselves the above questions, the work comp adjuster will still miss some opportunities for subrogation. There are a couple approaches the insurer or self-insured employer can take to improve the number of qualified subrogation opportunities.
Develop the Subrogation Department
One approach some workers’ compensation insurers and large self-insured employers use is to develop their own subrogation department staffed with liability adjusters and subrogation specialist who can analyze each claim for subrogation potential. A cost benefit analysis of this approach should be undertaken to verify that the additional personnel cost are more than offset by the additional subrogation recoveries.
A different approach to maximizing subrogation recoveries while minimizing the associated cost is to outsource the identification of subrogation opportunities. This is accomplished by hiring an outside, independent claims auditor who has an extensive background in both liability claims handling and workers’ compensation claims handling. An independent claims auditor with multiline claims handling experience will be able to maximize the number of files identified to have subrogation recovery potential. The independent claims auditor should review not only the open claim files, but also all closed claims files still within the tort statute of limitations for the jurisdiction. If you would like assistance in identifying an independent claims auditor to assist you in maximizing your subrogation recoveries, please feel contact us.
Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact: RShafer@ReduceYourWorkersComp.com.
Editor Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: email@example.com.
WORKERS COMP MANAGEMENT MANUAL: www.WCManual.com
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
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