Did you know? When pursuing subrogation in insurance claims, it’s important to consider uninsured losses – that is, the portion of a claim that is not covered under the policy of insurance. Failing to include and address uninsured losses in the recovery process can have significant implications, including prejudicing the insured’s rights and potentially jeopardising the entire claim.
Why Include Uninsured Loss?
Subrogation enables an insurer to step into the shoes of the insured and pursue the rights they may have in the name of the insured. Generally, however, even though there may be both insured loss and uninsured loss arising from the same incident, in most jurisdictions you cannot split a case so as to bring insured loss in one proceeding and uninsured loss in another proceeding. Additionally, if a third party seeks a release when resolving a matter, they will usually request a full release from all loss and damage arising from the relevant incident – irrespective of whether that loss and damage was insured or uninsured. This is consistent with wanting to ensure finality when there is an outcome via Court or in a resolution. It is therefore crucial to ensure that any uninsured loss is properly included in the recovery process.
If the insurer doesn’t take appropriate steps to recover uninsured loss along with the insured loss, the insured could potentially lose their ability to recover the full amount of their loss. In some cases, insurers may have no obligation to pursue uninsured losses, but any decision made should not prejudice the insured’s right to recover those losses independently. If the insured is left with a settlement that excludes the uninsured loss, it could affect their ability to claim that portion in the future, or the insured might be prevented from pursuing their claim further. This could lead to situations where the insurer, by handling the recovery process improperly, ends up being liable for damages to the insured for the uninsured loss.
When to Include Uninsured Loss
It is best practice to confirm any uninsured loss with the insured early in the recovery process, ideally before commencing any legal proceedings or settling a claim. This ensures that you are not inadvertently limiting the insured’s ability to pursue the uninsured portion of their loss separately. If there is any doubt, this confirmation should be sought before resolving or settling the case.
Key Takeaways
- Always check for uninsured loss before settling or pursuing recovery actions.
- Communicate clearly with the third party that, if only pursuing insured loss, that any recovery is for the insured loss only, and ensure that a settlement does not prejudice the insured’s ability to recover any uninsured loss.
- Be aware of the timing: Confirm the existence of any uninsured loss as early as possible.
The content of this article is intended to provide a general guide to the subject matter. Specific advice should be sought about your specific circumstances.
