Workers compensation subrogation can be a double-edged sword, especially for a self-insured business. No employer wants to be labeled as the big, bad company who takes money away from an injured employee. According to many state statutes, however, it is the employer’s right to recover their costs when a third party is responsible for an employee being injured in the course and scope of their employment. By being involved from the beginning of the claim and spending time putting the proper processes and people in place, your company will reap the benefits of lower premiums and greater returns.
The importance of workers compensation subrogation for the self-insured is fairly straightforward. First and foremost, the money recovered is “your” money and the more you recover, the more there is to reinvest in the business. You will also have greater control over the investigation and could benefit from good employee relationships that may pave the way for easier recoveries. For example, in one situation, an employee had no intention of pursuing a recovery against a third party. In many states, the recovery would languish since the employee was not pursuing a claim. But, the relationship the injured worker had with an employee in risk management, proved to be beneficial for the company. The injured worker called the insurance company and indirectly pursued a claim on behalf of the employer. They told the claims adjuster that they wanted their employer to recover the money they had spent.
To increase the likelihood of a successful recovery, incorporate the following best practices:
1. Involve risk managers from the very beginning of the subrogation process. As a self-insured, you have the best knowledge of the suppliers, vendors, procedures and the company culture, which you can use to your advantage. Many times you may find yourself making a business decision versus a policy decision. You will be faced with questions such as: what is the right thing to do for the company and the employee, do I waive the subrogation lien in order to settle the workers compensation case, and do I bring that vendor into the lawsuit? When faced with these questions, never underestimate your internal knowledge and ability to navigate the business relationship with the defendant. This alone could be the key to an increased recovery.
2. Identify which claims to pursue. In order to identify the potential for recovery add coding in the claims system to trigger escalation of claims involving a piece of equipment (including safety), third party involvement (vendor, supplier, another individual, manufacturer), any auto claims (if applicable) and potential fraud (something unusual when reported). The subrogation adjuster should then receive and review a list of all potential subrogation claims based on the above criteria and the workers compensation adjuster should be trained on what a claim looks like with subrogation potential. All claims should be reviewed with an eye towards recovery as they may identify a subrogation claim during their investigation. This is an additional safety net to assure no claims fall through the cracks. For instance, take a situation where an employee receives an electric shock from a piece of equipment. The assumption should not be made by the adjuster that it was no one’s fault nor that it is not recoverable. During the course of the investigation, a deeper probe into the details of the piece of the equipment and who was responsible for its maintenance, and an examination any and all contracts could lead to an unexpected recovery.
3. Ask for dedicated subrogation adjusters for your account. If you cannot get any dedicated adjusters, at the very least, limit the number of adjusters working on your account and subrogation files. Invest some time and resources in training the subrogation adjusters handling your files. Arm them with as much knowledge as possible about your company, and help them see the business through your eyes and understand what it is like to be an employee. Take them on a tour of the employer’s facility, plant, or store and explain to them your company’s subrogation handling philosophy and culture. This will help the adjuster become more engaged and feel like a part of your company.
4. Subrogation requires teamwork. Any subrogation claims should be reviewed on a quarterly basis with the risk manager, the subrogation adjuster and potentially the workers compensation adjuster. This will allow the strategy of the file to be discussed and incorporate any timely changes. All notice requirements, subrogation laws and any specific policy, practice or company culture should be kept in mind during the review of the files. By utilizing the team approach, all bases should be covered. Any questions concerning notice requirements, state laws or likelihood of success in the court system should be directed to a subrogation attorney. It is important to retain either a national counsel, if you handle multiple states, or a local counsel for those specific legal questions or cases you need file to obtain the recovery.
5. When hiring counsel, select one that solely handles subrogation or a large percentage of subrogation cases. It is easy to retain a workers compensation defense attorney to handle the subrogation file. But you may find that the opposing attorney will measure his or her opponent and begin mentioning case law that does not apply to your situation or try to bully the company into waiving the lien, noting the big, bad company scenario and leaving less money for the injured employee. Chances are they figured out that you do not have local knowledgeable subrogation counsel and if you are not careful, you may lose your recovery. By hiring local, experienced subrogation counsel, you have raised the playing field and stand to increase your recovery.
6. Continue with the hands-on approach when it is time for negotiations. Discuss negotiations with the adjuster and an attorney if one has been retained. Utilize the team approach to analyze every angle to determine if is it the right thing to do for the company, the employee and the workers compensation case if it is still pending. You should be involved with the final say on the lien settlement amount.
7. Think about hiring an independent, outside company to review all pending workers compensation claims with any subrogation potential. There might be the chance of a second injury fund recovery or a third party subrogation claim that lacks the final piece.