Thoughtful consideration must be given to adding subrogation to your law firm’s practice areas. There are many positive things about the practice of subrogation. The clients are sophisticated and typically send repeat business, which permits the development of long-term relationships. Subrogation is generally recession-proof, because there is either insurance on the other side, or if uninsured, people still need their driver’s licenses. Subrogation provides the opportunity to do some good in the world by holding wrongdoers accountable for their actions. The variation and complexity in the practice makes the work interesting.
There are many nuances in the subrogation recovery industry. Its multiple lines of business include auto recovery, fire/property recovery, health and workers’ compensation. Balances vary widely within each line of business, which can alter the approach to subrogating a claim. States across the country apply the law differently. Within each of these areas, there is an additional distinction as to whether the subject of recovery is insured, partially insured or uninsured.
Starting a successful subrogation practice can be a challenging endeavor. Three things require careful analysis and emphasis in order to improve the likelihood of success:
- Know your business,
- Know your clients, and
- Understand the required investment.
Know Your Business
It is a fallacy to consider all contingency fee work equivalent. Adapting an existing operation to a new line of business requires careful attention to the needs of the client and the legal work required on the files. Understanding your current core strengths and having an honest assessment of weaker areas will help to identify the actions that must be taken in order to have a successful subrogation practice that is efficient, staffed appropriately and able to communicate case status effectively.
Know Your Clients
Knowing your client and adapting to your client’s changing needs are necessary skills for any law firm, no matter the nature of the work. Even if you focus on only one line of business for recovery, understanding the subrogation clients from whom you receive the work is fundamental for long-term success. No two insurers follow the same strategies in handling their subrogation claims. The amount of effort the client expended prior to referring the file, how much collection activity is requested without filing a suit, the volume of placements anticipated, and the necessary reporting requirements are all questions to be answered as you bring on a client. Even after the claims are sent out, carriers have different approaches to subrogation, between outsourcing completely, running their own legal network, or a combination of both. You can expect this to evolve over time as carriers’ corporate goals and philosophies change along with the economy, and as their internal management changes.
The reporting expectations of a client are especially important. Some carriers require basic, event-based reporting, and others want to know every step that happens on a file. Some have a very centralized model, and others permit each representative in their subrogation department to determine what is needed from its counsel. Understanding the carrier’s requirements for reporting and information transmission is key to knowing whether your current structure is compatible with that work, or whether internal changes are needed.
Understand the Required Investment
Finally, understanding the investment and ensuring that your partners are supportive is critical to the success of your subrogation practice. Industry norms include a contingency fee arrangement with no retainer. Several internal expenses may be built into the price, including skiptracing, phone, copying, and travel. Many carriers also require advancing court costs on their behalf to be paid back in 30-60 days. Alternative fee arrangements are possible, but are unusual.
Outside networking and educational resources can help you reach your goals. The National Association of Subrogation Professionals (NASP) provides resources and training at the national and local level. In addition, companies such as The National List are resource-rich and can provide connections and mentoring opportunities between lawyers. Using these resources and others can alert you to changes in the industry, provide opportunity to learn from others that have done it, and keep you up to date with the legal and claims issues that are so important to your subrogation client base.
Growing a profitable subrogation practice is possible, but it requires planning, understanding and commitment. Give it time. Subrogation is an investment, and the rewards can be worth reaping.
by Kimberly L. Rathbone & Jason M. Sullivan, Rathbone Group, LLC
1100 Superior Avenue, Suite 1850 Cleveland, Ohio 44114
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(216) 535-1845 Client Relations Team
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