Hello again. This is Clark Schoeder with Cerberus Subrogation Professionals, LLC with another article about trucking insurance issues. Over the last few weeks, we discussed a few topics that should help you and your company recover the damages that result from an auto accident. We discussed what a driver should do when they are in an accident to protect their recovery opportunities and we discussed what an insurance company owes you when you are in an accident. This week we are going to discuss the term “subrogation” and why you and your company should care about it. Let’s get to it.

Let’s start with the definition of “subrogation.” “Subrogation” is a legal concept under common law where one party transfers their rights of recovery to another party granting them the right to recover damages from a different third party tort-feasor. Not much help? I understand. Think of it like this. When you are in an accident and your insurance company pays for your damages, your insurance company gains your rights to pursue repayment from the party that caused the accident. Just like you would have the right to sue the at-fault party, your insurance company gains the same rights under the law that you have to pursue repayment.

Let’s look at an example to further clarify the concept. Let’s say that you are driving down the middle lane of I-10 when a reckless driver speeds onto the freeway and tries to cut into your lane without checking their blind-spot. The other party crashes into your truck damaging your steps, fuel tank, wheel, tire, axle, fender, bumper, and hood. Let’s say that there is $7,000.00 in damage and you have a $2,000.00 tow bill and $500.00 storage fee. Assuming that you have collision coverage, your insurance company will pay for all of these expenses minus your deductible and then seek to recoup their payment from the party that caused the accident. The insurance company will often try to recover your deductible as well. This process is called subrogation. By paying for your repairs, the insurance company acquires your right to seek repayment from the person who hit your truck or their insurance company.

What happens when both parties try to pursue subrogation against each other? Most insurance companies then proceed to file arbitration cases against each other. Arbitration is a form of alternative dispute resolution where both parties agree to forgo traditional litigation and to let an arbitrator hear the case. Both sides prepare a legal brief outlining why they feel the other party is responsible for an accident. An unbiased 3rd party then reviews the briefs and decides which party was at-fault. In the world of insurance, most companies belong to a special arbitration group called Arbitration Forums, Inc. That group is only for insurance companies and the self-insured companies. These companies agree to join this arbitration group because arbitration is much cheaper and much faster than traditional litigation. It costs at least $20,000.00 to take a subrogation claim to trial and it can take as long as 6 years to resolve depending on the venue. Arbitration only costs $40.00 to file and is typically resolved within 3 months. Since insurance companies are involved in so much litigation they have a strong incentive to join arbitration to reduce the costs of litigation. Cerberus Subrogation Professionals has found a loop hole that allows us to join this arbitration group despite the fact that we are not an insurance company. This access to arbitration allows us to provide all of the benefits of arbitration (higher recovery, faster recovery, and cheaper recovery) to our clients, even if they are not members of arbitration themselves. Our clients get a cheap and efficient way to force recovery from another party but the other party has to incur the time and money expenses associated with traditional litigation if they want to pursue our clients. That creates a large economic defense for our clients. No one is going to spend $20,000.00 to collect $8,000.00.

Why should you care about subrogation and arbitration? After all, your truck is fixed and you are back on the road. Let me tell you how subrogation and your insurance company’s ability to handle subrogation affects your business.

  1. When your insurance company pays out on a claim, your “loss run” goes up. A loss run is the amount of money an insurance company pays on a policy within a given policy term. The higher your loss run goes, the higher your premium goes. By subrogating your collision claims and successfully denying liability claims against you, your insurance company reduces your loss run. If your insurance company does not successfully pursue subrogation on your claims or properly deny claims against you, they are forcing your loss run to go up. Higher insurance costs means less money for you.
  2. The higher your loss run goes, the harder it is for you to change insurance companies. Once you are tagged as a “high risk” trucking client, your insurance options are few and far between. The lack of companies willing to insure you and the laws requiring that you be insured allows them to charge astronomical premiums.
  3. If your insurance does not properly defend claims that are filed against you, they eliminate your ability to recover your “uninsured interests.” Your “uninsured interests” are discussed in more detail in #4. Once your insurance company accepts liability, the other insurance company will not pay you a dime.
  4. You are responsible for subrogating/recovering all of the damages that are not covered under your insurance. These interests are called “uninsured interests.” Your insurance company will not collect these damages for you nor do you want them too. The insurance company will bargain with YOUR uninsured interests so that they can collect ALL of THEIR damages. What are your uninsured interests? Let’s expand the example given above to show what these “uninsured interests” are. As a result of your vehicle being damaged you were unable to deliver your load and lost the revenue associated with that load. Your vehicle was inoperative while it was in shop so you lost 4 weeks worth of work. Some of your personal items in the truck were destroyed and your insurance doesn’t cover them. You live in Howell, MI but were involved in an accident in Houston, TX. Did you have to stay in a motel until your truck was fixed? Did you have to fly home? These are all losses that you incur but your insurance will not cover. These are your uninsured interests. They add up to a considerable amount of money and significantly impact your financial success. Don’t let your insurance company hinder your ability to recover these damages.
  5. Successfully subrogating or arbitrating a claim can prove that a driver was not at-fault for an accident in regards to his driving record.

What should you take away from this article?

  1. The manner in which your insurance company handles your subrogation and arbitration cases directly affects your money and your business.
  2. You need to be involved in the claims process with your insurance company. You need to dictate which claims you want pursued in subrogation and which claims you want denied. Your insurance company works for you. Make sure they know that but please be respectful about it. You will have to work with these claims people again and again. Don’t make enemies. Over the next few weeks, I am going to do a series of articles about common trucking accidents that need to be denied by your insurance company. Be sure to check back for those articles and let your safety department and your insurance team know about them.
  3. Most insurance companies are really bad at commercial trucking subrogation and arbitration. I blame it on a ridiculous misconception among insurance professionals that commercial vehicles are always at-fault for accidents. I think that is BS! If you feel that your insurance company thinks this way and is not handling your subrogation claims or defending you in the right way, tell them that you want Cerberus Subrogation Professionals, LLC to handle YOUR subrogation and arbitration claims. They will listen if you tell them. We cost less than they spend on an appraiser to come write an estimate for your truck. Cerberus has success rates that blow the competition away. We have recovered over 92% of the money we have pursued in subrogation. We have recovered over 93% of the money we have pursued in arbitration. We have defended our clients in arbitration and barred over 85% of the money pursued against our clients. Those are all commercial trucking claims. Don’t let your insurance company lose any more of your money. Cerberus Subrogation Professionals, LLC can help you. www.cerberussubro.com

Be sure to check back for our Next article “Right-Hand Squeeze – Is your insurance company doing enough to protect you?” and please be sure to email our articles to all of your friends, family, and colleagues in the trucking industry.

If you have any questions, comments, or suggestions for future articles, please leave a comment on this site and I will be sure to address them. Thanks for reading.

Clark Schoeder is the President and CEO of Cerberus Subrogation Professionals, LLC. Cerberus Subrogation Professionals, LLC is subrogation firm that specializes in the commercial trucking sector. They have helped their clients recover millions of dollars in insurance claims and have developed several innovative strategies specifically designed for commercial auto subrogation and arbitration. Those strategies have achieved unparalleled results. If you are interested in applying the Cerberus Advantage to your subrogation and recovery processes, visit their website www.cerberussubro.com .

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