CA CA Subrogation & Recovery Procedures 2 — Questions and Answers
Question 1: In a California auto claim where the insured is partially at fault, which rule affects the amount of subrogation recovery?
- Contributory negligence (complete bar)
- Pure comparative fault (reduces recovery proportionately) (Correct answer)
- Modified comparative fault (50% bar)
- Last clear chance doctrine (full recovery)
Correct answer: Pure comparative fault (reduces recovery proportionately)
California follows pure comparative fault, meaning the insurer can recover a proportionate share of its subrogation interest even if the insured was partially at fault.
Question 2: What is 'intercompany arbitration' used for in the California claims context?
- Resolving disputes between insureds and their insurer
- Efficiently resolving subrogation and contribution disputes between two insurance companies (Correct answer)
- Setting standard premium rates across the industry
- Handling bad faith claims against insurers
Correct answer: Efficiently resolving subrogation and contribution disputes between two insurance companies
Intercompany arbitration, often administered through Arbitration Forums Inc., provides a faster and less expensive forum for insurers to resolve subrogation disputes between each other.
Question 3: A California adjuster pays a homeowner's fire claim caused by a defective appliance. What type of subrogation applies?
- Equitable subrogation against the neighboring property owner
- Products liability subrogation against the appliance manufacturer (Correct answer)
- Contractual subrogation against the homeowner
- No subrogation is available for fire losses
Correct answer: Products liability subrogation against the appliance manufacturer
When a defective product causes a covered loss, the insurer can pursue products liability subrogation against the manufacturer or distributor of the defective item.
Question 4: Which document formally transfers the insured's right to sue the third party to the insurer as part of the subrogation process?
- Proof of Loss form
- Assignment of claim or subrogation receipt (Correct answer)
- Declaration page
- Non-waiver agreement
Correct answer: Assignment of claim or subrogation receipt
A subrogation receipt or assignment of claim is signed by the insured, formally transferring their legal rights against the responsible party to the insurer.
Question 5: What does 'pro rata' recovery mean in a subrogation context with multiple insurers?
- Each insurer bears the full cost of the loss independently
- Each insurer recovers in proportion to the amount it paid toward the total loss (Correct answer)
- The primary insurer recovers everything before the excess insurer recovers
- Recovery is divided equally regardless of amounts paid
Correct answer: Each insurer recovers in proportion to the amount it paid toward the total loss
In a pro rata recovery, each contributing insurer receives a share of the subrogation proceeds proportional to the share of the total loss it paid.
Question 6: When should a California adjuster first identify potential subrogation during the claims process?
- Only after the claim is fully paid and closed
- During the initial investigation, as soon as a third-party cause is suspected (Correct answer)
- After the insured formally requests subrogation action
- When the statute of limitations is about to expire
Correct answer: During the initial investigation, as soon as a third-party cause is suspected
Subrogation potential should be identified during initial investigation so that evidence is preserved, parties are notified, and key deadlines are not missed.
CA CA Subrogation & Recovery Procedures 2
In a California auto claim where the insured is partially at fault, which rule affects the amount of subrogation recovery?