First Things First: What Is Subrogation?

First of all we have to loosely define subrogation, so. . .

It is the “stepping into another’s shoes” scenario that comes about when one party pays (due to legal or contractual obligation) for another parties wrongdoing.

A simple example can be seen in auto insurance. For example, let’s say you are in an auto accident and forced to file a claim under your own policy of insurance because the person that caused the accident (tortfeasor) either refuses to provide insurance information or simply doesn’t have insurance. In this scenario, your own insurance company has to pay for the wrongdoing of the tortfeasor and by virtue of their payment to you, they step into your shoes and inherit the right to sue the person that caused the claim.

Whew! Did you catch all of that?

Okay, so whether you did or didn’t follow the whole scenario is beside the point. Let’s just assume you get it, and so at this point if we use the above scenario, your insurance company could present a claim to “Mr. Accident Causer’s” insurance company (if he had insurance).

When your company makes this type of claim, it is called a subrogation demand.

How Does Auditing Come Into Play?

So now the company receiving the demand could possibly use a subrogation demand audit. The audit is just that, an audit of the demand made by your company.

Normally, an experienced adjuster or attorney will review the claim documentation and weed out any overpayment or cost difference based on administrative, statutory, or precedent based rules or laws. The auditor will search out the seemingly petty details that relate to claims cost and return a report to the claims office that received the subrogation demand.

The result of a thorough subrogation demand audit is normally a substantial savings for the company receiving the demand. Differences in contractual obligations and civil obligations can make a big difference, and such things as parts availability or the failure of a company to utilize sound economic claims handling can also make a substantial difference in the amount demanded and the amount actually owed.

Now you know what a subrogation demand audit is.

Sometimes it’s just in the petty details!

Posted in: General Claims