Every insured product failure is an obligation and an opportunity. Often, the responsibility to get your customers paid can seem like the only priority. With seemingly simple losses like appliance and component failures, it may be tempting to save time by selecting a “no subro” option.
This misconception overlooks an opportunity to pursue subrogation against a manufacturer responsible for a potential known product defect. Failure to embrace this option in property loss claims could widen the gap between what you pay and what you’re able to recover after a loss.
Armed with this knowledge, the idea of pursuing subrogation can still seem daunting; however, the process is simple if you know what you need to make the right decision for your claim and customer. When it comes to appliance and component failures, having the necessary resources is the most important element in the subrogation process.
What Makes Subrogation Difficult?
There are multiple factors to consider about a product failure that can be obstacles to deciding whether to subrogate. The serial number, manufacturer, and date of installation all factor into a product’s eligibility for subrogation consideration. And while this information may be easy to access, the cause of loss can be determined only through an expert review and inspection. While many states have statute of repose laws, these are legal considerations only, and for simplicity labs often consider a 10-year lifespan when investigating failed products.
Another common difficulty in pursuing subrogation is additional damages unrelated to the product failure. Shipping damage can occur when items are not properly packaged, loaded, unloaded, or secured during transport. Damage such as denting, crimping, and cracking can prohibit a failure analysis. Shipping also creates an opportunity for evidence to be lost during transportation, especially when a reliable chain of custody is broken during the process.
An improperly applied strap during shipping can cause excessive denting or other damage that compromises an inspection.
Starting the Decision-Making Process
It may seem obvious, but the lynchpin of every subrogation decision is the evidence. Documentation and retention are the first crucial steps toward accurately determining a cause of failure.
As close to the first notice of loss (FNOL), document what occurred to cause the loss. Photos of the loss are helpful, though this is not required or always possible. Note the serial number, product number, and any statements about the loss from the policyholder.
Next, secure the evidence. If the failed component is small, this may be as simple as placing it in a padded envelope with the above information enclosed. For larger items, such as refrigerators or dishwashers, a shipping company will be necessary.
A reliable shipping company and documented product information are important first steps of an efficient subrogation-decision process.
It is essential to choose a shipping company that will respect the value of your evidence. A full-service shipping company can provide safe packaging, photographic documentation, and an unbroken chain of custody that ensures the evidence reaches its destination without additional damage. For instance, Loss Logistics is an all-inclusive shipping company that has eliminated lost evidence and damaged evidence.
Taking these initial steps will keep the process moving smoothly toward a lab inspection that will lead to a confident decision about whether to pursue subrogation.
What a Lab Can Offer
A reputable lab, such as Donan’s Component Testing Lab (CTL), is key to several necessary elements of an informed subrogation decision. Experts at these labs have access to databases that provide historical information on product failure trends. Their experience through volume of inspections and the findings in their reports also help clients with the decision whether to pursue subrogation.
Forensic lab experts use the scientific method and specialized equipment to determine each product’s independent cause of failure. A scientifically backed cause of failure is important to your subrogation decision because not all losses will result in successful subrogation.
Forensic experts use specialized tools and customized lab spaces to apply the scientific method to each failure analysis inspection.
Forensic experts rarely have access to claim files in which they know what a subrogation claim may be worth. This is a deliberate decision so as not to sway the expert’s opinion. However, a scientific determination based on an inspection and data indicates the likelihood of success based on multiple factors.
Most importantly, you can make your decision surrounding subrogation with confidence, knowing that you have unbiased results backed by experts in evidence. This will save you the cost of pursuing needless claims and provide you confidence in the pursuit of returns on those claims you choose to pursue.