Subrogation Agreement

insured, who is virtually certain to have their lawyer involved in a subrogation matter, is attempting to negotiate a custom subrogation agreement with the insurer.

Negotiate Ahead of Time
Of course, since it is impossible to know the circumstance of a loss before it happens, a subrogation agreement cannot be negotiated before the loss takes place. But it should be negotiated before the final settlement of the claim, once the insured's losses have been established and the insurer has paid its obligations under the insurance contract. At this stage the insured still has leverage in arranging a pro rata agreement.

Whenever it appears that a third party might be responsible for a loss, the

claim should be prepared and adjusted with subrogation in mind. This means carefully following all of the steps associated with a thorough proof of loss review, giving particular attention to the cause and origin investigation, how the physical and economic losses are documented, and making sure that actual damages are carefully noted in the final settlement agreement.

An Essential Element
In the final analysis, it is ironic that a subject about which most insureds need to know more is something they would not have to be concerned with at all if insurance programs could be ideally constructed and implemented; that is, so that all aspects of all risks were always fully covered. Then, the insurance settlement alone would bring full restoration.

It goes without saying that the agent/broker deals with the practical rather than the ideal. That means sometimes helping clients cope with risks that are uninsurable—and losses that are intentionally or

unintentionally underinsured or uninsured. As emphasized earlier, in these instances, the subrogation process can be critical to the client's recovery—and possible survival. This makes the introduction of subrogation an essential element in the broker-client relationship. It's another important way you can put your knowledge to work for your client!