The Hows & Whens of Subrogation Notice

By July 8, 2013 October 25th, 2018 Insurance Blog, Kevin Price

Kevin J. Price

Hear Ye, Hear Ye. . .

One of the more frequent questions that I receive from my insurance subrogation clients relates to the “hows” and “whens” of sending a notice letter to a potentially adverse party. The short answers are “in writing” and “now.”  The long answers take, well, longer.

First, the basics: When an adjuster identifies the subrogation potential in a claim, he or she should immediately identify the potentially liable party and notify them of the loss and their role in it. Early notification helps to prevent a later claim of spoliation of evidence, which can be a major issue in any subrogation case. How early? While the ashes are still warm. Before the fire department rolls up their hoses. There is no “too early,” but there is most definitely a “too late.”
What if you can’t narrow it down between two or more potentially adverse parties?  Then notice them both– postage is cheap, and later you can sort out the good from the bad.
The best notice is an old fashioned written letter, sent to the agent for service of process or president, if dealing with a corporation. If dealing with an individual or sole proprietor, their home address or its principle place of business will do.
The letter should be formal enough to serve as an exhibit in subsequent litigation, so proofread and include enough information to put the recipient on notice of its possible liability. The letter should be sent by overnight mail (requiring a signature) or certified with a return receipt. In addition, fax or email a copy to make sure that you get their attention promptly.
The letter should contain the date and location of the loss, the type of loss, and a brief description of the theory of potential liability.  Include the approximate amount of the loss and suggest that they turn the matter over to their liability insurance carrier, if they have one.  The letter should also instruct the recipient to preserve all documents and any other evidence that relates to the loss.  For example, if the party is a contractor, they should be advised to preserve the job file, notes, contracts, invoices and written communications related to the project.
Finally, include a closing paragraph requesting that the recipient provide any information in its possession regarding any additional third party who may be liable for the loss.  Should that party later attempt to shift the blame to an “empty chair,” you’ll at least have it on the record that you requested third party information early on.
A good notice letter will reduce the possibility of a spoliation claim, and may allow an insurer to shift some of the burden and cost of preserving evidence to an adverse party.  This provides more certainty to a subrogation claim, and prevents some of the tricky issues which might otherwise arise in the future.
Send notice letters like they vote in Chicago: early and often!  Your attorney will thank you later.