The term “subrogation” sounds scary and hairy, and if it doesn’t intimidate you, it likely just makes the eyes glaze over. Learning about subrogation can be about as exciting as reading the IRS code. But being smart about subrogation can protect your business. The loss of one vehicle to an accident where you are not at fault can temporarily impede your cash flow and inconvenience clients.
Simply put, subrogation means an insurance company can pursue a claim with the responsible, or adverse, party(ies) for deductibles, additional damages, or most importantly, the loss of revenues from the time needed to repair or replace a livery vehicle.
The National Limousine Association recently lined up a few exclusive contractors who can offer association members discounts on either insurance or the fees needed to collect on subrogation claims. Operators typically face high insurance costs, and with the tightening economy, affordable subrogation collections can prevent an accident from becoming a business catastrophe.
“We’re trying to use the power of our membership to get a better deal,” NLA President Richard Kane says. “This piece of the insurance procurement process is the one that does not have real oversight by government. It’s more of a legal issue.” Subrogation pursuers know their local laws and are more adept at handling operator claims, he says.
Collecting from an adverse insurer, or at-fault party, often can be as tricky as getting money from a disgruntled ex-spouse. Most operators can’t afford lawsuits, while asking for money from anyone can get dicey. That’s why operators need professional collectors, just like divorcees need aggressive lawyers and auto lenders need repo men.
“We’re using the term loosely; it’s more claim recovery,” says Michael Murdock, president of Great Mountain Insurance and CEO of Blue Leaf Claims of Suffield, Conn., one of the NLA’s subrogation providers. “It’s not subrogation in the purest sense in that we don’t have a contract with a limousine company. We’re being retained to recover payments made by a limousine company on damages to their vehicles.”
A typical situation would involve a limousine operator who has damage, a high deductible, or a lack of physical damage insurance, and who wants a company to do the legwork to get the money back, Murdock says.
Under the agreement with the NLA, an operator-member can come to Blue Leaf Claims and ask the company to pursue the responsible party in an accident for damages and/or loss of use. Blue Leaf Claims keeps 12% of any recovered amount if there is no lawsuit involved. With a lawsuit, the firm gets 30%.
“Our payment comes out of what we recover,” Murdock said. “Out of a $10,000 claim, we would get $1,200. Sometimes there is additional investigation to support a subrogation claim. Those fees would be charged at cost.”
Frank Vaccaro, president of Vaccaro and Associates of Huntington Beach, Calif., says operators often have difficulty assessing the precise loss of use when a limousine is stuck in a body shop before trying to collect from the adverse insurance company. The firm, another one of the NLA’s contracted providers, specializes in handling claims for damaged trucks and limousines.
“After they’ve had an accident and maybe have trouble collecting loss of use from a third party or adverse insurer, we enter an agreement to offer a discounted contingency fee,” says Vaccaro, who also is an insurance adjuster. “If we don’t recover anything, we don’t get paid.” Vaccaro and Associates charges about four to five percentage points below typical collection rates.
Blue Leaf Claims and Vaccaro both have been working on cases from NLA members since November, and received frequent inquiries.
A third contractor to affiliate with the NLA, AmWINS Transportation Underwriters Inc., an insurer in San Diego, will discount vehicle insurance rates 15% for NLA members who sign up. So far, AmWins insures about 2,100 livery vehicles among 900 operators nationwide — about one-tenth of the chauffeured transportation industry, says Edward Maucere, executive vice president of the firm. AmWins represents the Scottsdale, Ariz.–based Scottsdale Insurance Group, which is owned by Nationwide.
Maucere says AmWINS insurance contracts include a subrogation provision that allows the insurer to pursue an adverse party to recover insured physical damages. The policies provide complete liability and physical damage coverage. “We pay the physical damage, less deductible to the insured,” Maucere says. “It’s automatically in everyone’s physical damage contract that National Casualty (underwriter) goes after the other party.” However, AmWins does not pursue loss-of-use subrogation.
“The insured is reimbursed for the deductible, but we can’t go after the other party for loss of use of the vehicle,” Maucere says. “That gets expensive. The limousine operator would have to go after it themselves.”
By taking advantage of insurance policies through AmWins, and the subrogation services of Blue Leaf Claims and Vaccaro and Associates, NLA members can benefit from end-to-end discounted subrogation services. NLA’s Richard Kane has led efforts to get discounted subrogation services for NLA members.
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