CALA CALA Subrogation and Recovery in Auto Claims 2 — Questions and Answers
Question 1: What is a waiver of subrogation endorsement?
- An endorsement that increases the insurer's subrogation rights
- An endorsement that prohibits the insurer from pursuing recovery against a named party (Correct answer)
- A clause requiring the insured to assist in subrogation efforts
- An endorsement adding uninsured motorist coverage
Correct answer: An endorsement that prohibits the insurer from pursuing recovery against a named party
A waiver of subrogation endorsement prevents the insurer from pursuing recovery against a specified party, often required in commercial contracts.
Question 2: What happens to subrogation rights if the insured settles directly with the at-fault party without notifying the insurer?
- The insurer's subrogation rights are unaffected
- The insurer can still pursue the at-fault party independently
- The insured may have breached the policy, potentially releasing the insurer from the claim obligation (Correct answer)
- The settlement automatically triggers subrogation recovery
Correct answer: The insured may have breached the policy, potentially releasing the insurer from the claim obligation
If an insured settles with the at-fault party without protecting the insurer's subrogation interest, it may breach the cooperation clause and jeopardize the insurer's coverage obligation.
Question 3: What is the statute of limitations consideration for subrogation claims?
- Subrogation claims are not subject to statutes of limitations
- The insurer must file within the same period applicable to the insured's original tort claim (Correct answer)
- Subrogation claims always have a 1-year filing window
- The limitations period begins when the policy is issued
Correct answer: The insurer must file within the same period applicable to the insured's original tort claim
Because the insurer stands in the insured's shoes, the applicable statute of limitations for the underlying tort claim governs how long the insurer has to pursue subrogation.
Question 4: In auto subrogation, what does 'first-party recovery' refer to?
- Recovery from the insured's own insurer under collision or comprehensive coverage (Correct answer)
- Recovery from the at-fault third party's insurer
- Recovery from a reinsurer
- Recovery from the vehicle manufacturer under a product liability claim
Correct answer: Recovery from the insured's own insurer under collision or comprehensive coverage
First-party recovery refers to a claim made by the insured against their own insurer, such as under collision coverage, which then triggers the insurer's subrogation rights.
Question 5: What role does a demand letter play in the subrogation recovery process?
- It officially closes the claim file
- It formally notifies the at-fault party or their insurer of the subrogation claim and the amount sought (Correct answer)
- It requests the insured to provide a recorded statement
- It is sent to the state insurance department to report the at-fault driver
Correct answer: It formally notifies the at-fault party or their insurer of the subrogation claim and the amount sought
A subrogation demand letter formally asserts the insurer's right to reimbursement and specifies the amount paid, initiating the recovery negotiation process.
Question 6: Under the 'collateral source rule,' how does a third-party payment affect subrogation?
- A third-party payment automatically eliminates the insurer's subrogation right
- Benefits received from independent sources do not reduce the at-fault party's liability to the insurer (Correct answer)
- The insurer must share its recovery equally with the insured
- Third-party payments always reduce the subrogation recovery dollar for dollar
Correct answer: Benefits received from independent sources do not reduce the at-fault party's liability to the insurer
The collateral source rule holds that compensation received from a source independent of the tortfeasor does not reduce the tortfeasor's liability, preserving the insurer's full subrogation recovery.
CALA CALA Subrogation and Recovery in Auto Claims 2
What is a waiver of subrogation endorsement?