23 Jun What You Need to Know About Subrogation and Recovering Costs

Accidents are costly, but recoverable subrogation revenue can help offset losses. A 2023 study revealed that in 2021, insurers recovered $51.6 billion in auto damage and liability claims, but $15 billion was lost each year due to overlooked subrogation opportunities.

Subrogation and recovering costs might seem complex, but understanding the basics is essential for your fleet’s financial health. This blog explains how subrogation works and how timely action can maximize recovery after incidents.

Understanding the Subrogation Process & Its Legal Basis

First, let’s tackle the legal principle at play. What is a subrogation claim, and why does it matter for recovering costs?

Subrogation is a legal process in which an insurance company recovers the costs of paying out a claim of an insured individual or entity from a third party responsible for a loss.

Example If a fleet vehicle is damaged in an accident caused by another driver, the fleet’s insurer may cover the repair costs. Through successful subrogation, the insurer can then pursue the at-fault driver or their insurance company to recover the necessary amount.

Legal Recognition and Enforcement

Subrogation follows a multifaceted framework for application and legal validity. Let’s quickly look at what this framework covers.

• Common Law Systems — Courts often allow insurers to recover costs from the at-fault party on behalf of their insured.
• Statutory Provisions — Some areas have specific laws outlining when insurers can seek reimbursement.
• Contractual Agreements — Insurance policies often include clauses granting the insurer the right to recover payments.
• Jurisdictional Differences — Subrogation rules and enforcement vary by state or country.

Understanding common law, statutes, contract terms, and jurisdictional nuances is key to navigating subrogation rights and recovery.

The Safety Net: MCS‑90 Endorsement 

The MCS-90 endorsement plays a significant role in assuring compensation for those injured in motor carrier accidents, regardless of fleet size. It guarantees payment even when standard insurance coverage gaps exist.

However, MCS-90 is not primary insurance, so insurers who pay claims under this endorsement often seek subrogation efforts to recover costs from the responsible party. 

Types of Recoverable Costs

Once the right to subrogate is established, the next crucial question is: What specific losses are eligible to seek recovery? They include, but are not limited to, the following:

• Physical Damage — Recovery for repairs or replacement of damaged property.
• Loss of Use — Compensation for the inability to use property (e.g., rental vehicle costs during repairs).
• Diminished Value — The loss in resale value due to damage history, even after repairs.
• Medical Bills — Covers healthcare costs paid by the accident victim’s insurance company for injuries sustained due to another party’s negligence.
• Downtime & Revenue Loss — Applies to businesses or commercial fleets experiencing financial burdens due to disruptions.
• Administrative Fees — Covers claim processing costs, legal expenses, and other subrogation-related administrative tasks.

The Subrogation Workflow 

Now, let’s look at how the subrogation process works. What are the steps involved in pursuing this recovery? 

1. Prompt Loss Reporting — Quickly capture initial accident information.
2. Liability Investigation — Gather evidence (police and accident reports, photos, witness statements) to determine fault.
3. Demand Package Preparation — Draft formal demand letters with cost breakdown.
4. Negotiation & Settlement — Effectively communicate with the adjuster to reach an agreement.
5. Receipt & Reconciliation — Track payments received and finalize the claim.

Best Practices for Maximizing Recovery Rates

To significantly improve your success with subrogation and recovering costs, consider these best practices.

• Expand damage assessment. Don’t just look at repairs; claim loss of use and diminished value as well.
• Optimize recovery timelines. Set internal timelines for each subrogation stage. 
• Leverage carrier‑to‑carrier services. Utilize industry platforms and agreements that streamline subrogation claims directly with other insurance carriers. 
• Navigate state-specific laws. Customize your claims to comply with local regulations for maximum recovery.
• Preserve strong evidence. Use digital photos and telematics data to bolster liability claims.

How Fleet Response Can Help

Navigating the complexities of how subrogation works and maximizing your recovery can be challenging. At Fleet Response, we offer expert solutions and dedicated support to streamline this process for your fleet.

Dedicated Subrogation Specialists	Our subrogation managers identify recovery opportunities, establish liability, and compile demand packages, providing personalized service with a dedicated representative.
Comprehensive Carrier‑to‑Carrier Subrogation	We specialize in FMCSA regulations, especially those governing financial responsibility for motor carriers. This allows us to recover costs directly from the responsible party’s insurers.
Advanced Technology Platform	VISIBILITY, our web-based portal, provides real-time subrogation updates, reports, and a document repository. It offers 24/7 data access for unparalleled claims management.
Seamless Integration with Claims & Risk Management	We ensure our processes stay aligned with evolving regulations through ongoing policy reviews, team training, and data-driven refinements.

Takeaway

Grasping the mechanics of subrogation is the initial, crucial move toward successfully implementing subrogation and recovering costs. It establishes a strong defense against fleet-related financial losses, securing your fleet’s future.

Partner with Fleet Response to pursue subrogation and maximize returns. We leverage proven expertise and advanced technology to deliver significant results, optimizing your recovery and protecting your fleet’s profitability. Contact us today to get started.