Subrogation and Claims Assistance Nevada

By: Kevin L. Pike (Property Causality 360) May 2016

A left-turn at the light with oncoming traffic; the collision occurs and now you are headed to intercompany arbitration on the subrogation claim as the parties dispute who was at fault.

An all too familiar scenario for those adjusting auto losses, but an increasingly relevant fact pattern in the world of subrogation recovery. While 85-90% of all subrogation claims are resolved between carriers and self-insureds without a problem, it is the other 10-15% that can make the difference to the bottom line for insurance organizations.

The tenet that negotiations can become the hardest when the dollars are the smallest holds true in intercompany arbitration, where everything from liability to the actual damages paid can be contested. Success at the arbitration hearing directly affects a company’s financial goals and objectives.

Here is a look at five areas for success when it comes to the intercompany arbitration process:

1. Evidence

Essentially, there are seven kinds of evidence that come into play in intercompany arbitration cases.

It is often said, “It is not so much what you think happened regarding the loss, but what you can actually prove!” That comment cannot be underestimated and is why evidence is so critical. Within the realm of police reports, witness statements and photographs of the loss scene or vehicle, advocates in arbitration can and should categorize these seven types of evidence and then apply strength and weakness tests to each. This allows them to subsequently compose their most effective argument before the arbitrator, highlighting the positive while respecting and attempting to overcome the negative.

To be specific, the seven kinds of evidence seen prominently in subrogation arbitration cases are: Real, direct, documentary, demonstrative, hearsay, circumstantial and opinion.

Each has built-in advantages and disadvantages that need be considered when attempting to prove a case before the arbitrator. An advocate looks at these as building blocks and aligns them sequentially in order of prominence or chronologically to the fact pattern to best support his or her theory. In spotlighting the benefits and overcoming the challenges that exist within each category of evidence, advocates are able to construct a case presentation that has every opportunity for success before the arbitrator.

2. Case presentation

As many insurance professionals know, intercompany arbitration is unique in that parties (for the most part) present their cases through written contentions without oral argument.

This places a premium on being able to formulate persuasive reasoning and rationale descriptively, while incorporating essential evidentiary proofs if one is to succeed. While formal rules of evidence do not apply, there is also a distinct dynamic to not having exchanges of evidence (by rule) unless the parties consent to do so. A degree of intuitiveness then naturally comes into play in constructing one’s contentions without being able to see what the transcribed recorded statement of the adverse party’s insured says.

It is incumbent on the arbitration advocate to have an innate ability to recognize what is not present in the adverse party’s case in addition to the information offered. Has the adverse party proven what they have so assertively stated?

Case presentation or construction of the contentions in intercompany arbitration need to follow fundamental arbitration practice and procedure. The use of theory and theme is basic arbitration advocacy, and should be used on every case whether applicant (recovery focused) or respondent (defense positioned). This essential approach to arbitration reminds one to leverage proof within the liability/damages evaluation, while also painting the all important narrative.

3. Strategy

To borrow from noted physicist and inventor Albert Einstein, “You have to learn the rules of the game. And then, you have to play better than anyone else.”

The process of arbitration is governed by agreements and rules. Successful companies and advocates look at the procedures strategically, both from a global view (a portfolio of claims making their way to arbitration) and from a docket or case-by-case perspective. It is an outlook where these are the rules by which we present the case, and these are the rules with which the adverse party must comply. How do we take the rules and look at our claim and accompanying evidence strategically for the optimal result?

Strategies can involve allowing the other party to file first (so you rebut and counterclaim); using adjournments to secure additional evidence; leveraging rules that allow one to implead other potential tortfeasors; to even the intentional non-inclusion of evidence that is detrimental to the case.

The focus and inference is that those successful at presenting intercompany arbitration cases (whether applicant or respondent) acquire an instinctive sense of using the rules and the arbitration process to their advantage strategically. The reason some arbitration specialists prevail at a higher rate than others is the nuanced difference of looking at the process strategically on every file within the framework of the fact pattern and evidence.

4. Numbers

Intercompany arbitration is not a zero-sum exchange. Those who take the approach of win some/lose some shortchange their opportunity to truly contribute to the bottom line success of their organization.

There is a basis for why some companies outperform others when it comes to results. The outcomes on the 10-15% of disputed claims that make their way to arbitration can have a significant impact on year-end goals.

It is success “on the margins” that is critical for a subrogation department. The average auto physical damage subrogation case being resolved through arbitration stands at $4,100. Whether returning those subrogation dollars to the organization with a favorable ruling from the arbitrator or not having to pay out money to another company on an unfavorable award, understanding the numbers of arbitration is essential advocacy.

Concepts such as winning percentage, ratio of recovery, ration of payout, and date of loss to date of filing are all intrinsic to successful arbitration reporting and monitoring.

Analysis of these indicators traditionally opens the door to further data review, which identifies areas of opportunity. Performance matters. Arbitration is a competitive environment and increasingly important to the bottom line. Encourage individuals to know their numbers, and companies should know where they rank, where they benchmark in the industry, and what indicators and reports to seek out to improve intercompany arbitration performance.

5. Specialization

In today’s communication environment of e-mail and electronic platforms, persuasive writing is an increasing specialty among claim professionals.

The due diligence that goes into assessing a fact pattern, taking a dispassionate look at the evidence and then presenting a constructive case that influences a neutral arbitrator to one side is a distinct talent. A claim professional requires a unique combination of skill sets to be successful at presenting arbitration cases. It involves being able to create and write a logical rationale theory that urges the arbitrator to acceptance based on the evidence, while painting a picture the arbitrator believes as the “correct” narrative.

The volume of disputed subrogation files going to intercompany arbitration continues to grow and as companies determine how best to handle the volume, it becomes clear that arbitration is efficient and gets results. Success requires an understanding of arbitration rules and procedures; assessment and development of evidence; construction of persuasive argument and theory; and insurance organizations that recognize these skill sets and train their teams appropriately. The difference between a carrier winning 65% of its cases versus 50% can translate into millions of dollars in recovery.

Property Casualty 360