Accidents happen. The cost of even minor damages to trucks, trailers, and other commercial equipment can add up quickly. As a fleet operator, it’s important to consider the significance of small-dollar damages caused by at-fault parties. In this article, we’ll explore how subrogation can help fleets recover money for repairs and why pursuing even small claims is worthwhile. As a fleet operator, paying attention to these seemingly minor expenses is crucial for maximizing financial recovery.
Understanding Subrogation
What Is Subrogation?
Subrogation is typically the process of an insurance company stepping into the shoes of its insured (the fleet operator) to pursue claims against an at-fault third party. Often, when a fleet’s equipment is damaged due to another driver’s fault, the fleet’s insurance company will pay for the repairs. The fleet’s insurance company will then pursue reimbursement from the at-fault party and their insurance company.
Example – Fleet Files a Claim with Own Insurance Company:
1. Best’s Trucking’s Trailer v. Doreen’s Toyota Camry:
- Best’s trailer (insured by Great West) is rear-ended by Doreen’s car (insured by GEICO).
- Great West pays for the $5,000 in repairs to Best’s trailer.
- Great West then brings a subrogation claim against Doreen and GEICO to recover the $5,000
- Great West paid to fix the trailer (basically Great West is asking for reimbursement).
Subrogation Handled In-House
With skyrocketing insurance costs, many fleets are raising their deductibles and are becoming essentially self-insured on their smaller claims.
Example- Fleet Does Not File a Claim with Own Insurance Company (opposite to the example above):
1. Best’s Trucking’s Trailer v. Doreen’s Toyota Camry:
- Best’s trailer (insured by Great West) is rear-ended by Doreen’s car (insured by GEICO).
- Great West does not pay for the repairs to Best’s trailer. Instead, Best’s Trucking pays for the repairs to their own trailer because the damages are $5,000, which is under Best’s higher deductible of $10,000 with Great West.
- Best’s pursues reimbursement of the $5,000 paid from the adverse party Doreen and GEICO. While Best’s insurance company is not involved and therefore the action is technically not ‘subrogation’, some trucking companies use this term to describe their collection pursuits in getting reimbursed for repairs paid for in-house.
Small Claims Matter
1. Cumulative Impact:
- Small-dollar repairs may seem insignificant by themselves, but when multiplied across a fleet, the money really adds up.
- Regularly assessing losses prevents small claims from snowballing into significant financial losses over time.
2. Contingency Fee Basis:
- Hiring an experienced transportation subrogation firm to pursue claims can be an effective method of collecting losses.
- Many subrogation firms work on a contingency fee basis, meaning they only get paid if they successfully recover funds for the client.
- Many low-dollar claims become worthwhile when pursued under a contingency arrangement.
3. Reviewing Past Claims:
- Look back over the last couple of years. Has your claims department filed away claims that could still be collected?
- Create a streamlined method to identify instances where your fleet paid for repairs, even though they were someone else’s fault.
- Work with an expert to evaluate whether pursuing subrogation for these claims is feasible.
Practical Steps for Fleet Operators
1. Prompt Action:
- Report accidents promptly, as required by your insurance company.
- Confirm your insurance company is handling subrogation and settlement negotiations.
- For in-house claims, pursue reimbursement from the at-fault party and their insurance company as soon as possible.
2. Collaborate with Repair Shops:
- Work closely with repair shops for proper repairs and minimal downtime.
- Mechanics should document damages in case liability is disputed by the at-fault party.
3. Mitigate Damages:
- Always make reasonable efforts to limit downtime.
- If possible, rent replacement vehicles during repairs.
- Document how you mitigated damages in order to make the losses as small as possible.
Protect Your Dollar
Small-dollar damages matter, especially for fleets. They add up quickly. By understanding insurance and subrogation, assessing past claims for subrogation potential, and acting promptly, fleet operators can maximize recovery and protect their bottom line. Remember, even the smallest claims can make a significant difference when considered as a whole.
Small claims? Don’t throw them away. Send them our way!