Most insurance companies have a strong staff of property adjusters with heavy case loads. Sometimes they find that a case with good subrogation potential will slip through the cracks because evidence was not property preserved, or potentially adverse parties were not promptly notified of the loss. Unfortunately, either misstep can give rise to a defense to an otherwise strong claim. Insurers and their adjusters often benefit from a “refresher course” on subrogation with a few tools to help adjusters spot issues early on and take appropriate action. (Cummins and White routinely provides educational seminars with Continuing Education credits. Click HERE to learn more.
Issue spotting is a skill that some would argue is the single most important skill taught in law school. Many law school exam questions are simply a paragraph of facts followed by the vague instruction: “Discuss.” Students are expected to use whatever they have learned (as well as common sense, hopefully) to spot as many issues as possible within the fact pattern. It is not always necessary that the student be able to answer the questions presented; it is presumed that having spotted the issues, the proper answers will follow. An issue that is not spotted is never addressed, and wailing and gnashing of teeth may result.
The initial investigation of an insurance claim is the same. From the facts of the loss, an adjuster must identify issues that may arise during the loss adjustment process. When it comes to subrogation, the cause of the loss and the cause of the damage (which may be different) are two such issues. The adjuster need not immediately determine the answer, but must identify those issues in order to preserve the subrogation rights of the insurer.
Consider two examples: In each, a plastic water fitting under the insured’s kitchen sink splits open and floods the house with water. In the first example, the adjuster determines that the loss is accidental, but does nothing more. As soon as the adjuster leaves, the helpful insured he demolishes the water soaked cabinets and discards the debris, plastic fitting and all. Of course, any subrogation opportunity is lost.
In the second example, the adjuster recognizes that an unknown product failure is the issue, and questions the insured about it. As it turns out, the kitchen was remodeled several years prior, and the insured has kept a file which includes the owners’ manuals for the fixture, as well as the invoice for the plumber who installed it. The general contractor’s information is also in the file.
The house has to dry out for several weeks before the rebuilding process can begin, and there is therefore no extreme urgency in removing the fitting. The adjuster photographs the scene, blocks off the cabinet with yellow tape and a “Do not touch- evidence” sign which includes her contact information. She instructs the insured to preserve the scene until further notice. Perhaps she makes reference to the cooperation clause in the policy to emphasize the point.
Subrogation counsel notifies the general contractor, the plumber and the manufacturer of the fixture. Within a couple of weeks, the parties attend an inspection at the house where the damaged fitting is removed by the insurer’s expert and retained in evidence. Having given all parties a good look at the scene, demolition and repairs commence.
Notice that no one has yet determined why the fitting failed. Was it a defect? Was it installed improperly? Was it affected by chemicals stored under the sink, or did the homeowner damage it during maintenance? These are all questions that the insurer is fortunate enough to be able to address because the first property adjuster spotted the issues and took the correct steps early on.
For a refresher on subrogation, California fair claims handling, or other insurance matter, contact Cummins & White. In many cases we are able to provide seminars with Continuing Education credits for California and other states