Subrogation Recovery Process Flashcards

Which strategy is most effective when the tortfeasor's assets are limited and a large subrogation judgment is unlikely to be collectible?

Answer: Negotiate a reduced settlement to secure some recovery rather than pursue a judgment

When full collection is unlikely, negotiating a discounted settlement is often more cost-effective than pursuing expensive litigation for an uncollectible judgment.

A property insurer pays $200,000 on a loss. The insured had a $50,000 deductible. The third party settles for $180,000. How should the proceeds be allocated if the insured is not yet made whole?

Answer: The insured receives $50,000 first for the deductible, then the insurer receives up to $130,000

Under the Made Whole Doctrine, the insured's uninsured deductible loss is satisfied first, with the remaining proceeds going to the insurer up to the amount it paid.

What is the significance of a 'loan receipt' arrangement in subrogation?

Answer: It frames the insurer's payment as a loan, preserving the insured's standing to sue

A loan receipt allows the insurer to advance funds to the insured as a 'loan' repayable only if the insured recovers from the tortfeasor, keeping the insured as the named plaintiff.

Which factor most significantly increases the cost-benefit analysis against pursuing subrogation?

Answer: Low recovery potential relative to litigation expenses

When anticipated litigation costs exceed the probable net recovery, the subrogation file should be evaluated for settlement, arbitration, or closure rather than full litigation.

Under the 'common fund doctrine,' what obligation may be imposed on a subrogating insurer when the insured's attorney creates a recovery fund?

Answer: The insurer must contribute a proportionate share of attorneys' fees from its recovery

The common fund doctrine requires the insurer to bear its proportionate share of attorneys' fees from the fund that the insured's attorney created through litigation efforts.

In property subrogation, why is it critical to preserve physical evidence from the loss scene before repairs are made?

Answer: Spoliation of evidence can result in adverse inference instructions or dismissal of the subrogation claim

If physical evidence is destroyed before the tortfeasor can inspect it, courts may impose spoliation sanctions including adverse inferences or dismissal, severely harming the subrogation case.

When a subrogation case proceeds to inter-company arbitration, what is the primary advantage over litigation?

Answer: Faster, lower-cost resolution without court filing fees or formal discovery

Inter-company arbitration programs like those administered by Arbitration Forums provide a streamlined, cost-effective alternative to court litigation for resolving carrier-to-carrier subrogation disputes.