What Is Subrogation in Workers’ Compensation
In workers’ compensation, subrogation is a legal doctrine that allows an insurer to recover certain claim costs from a third party responsible for an employee’s injury. Under the Longshore and Harbor Workers’ Compensation Act (LHWCA), an injured worker can pursue both a workers’ compensation claim and a third-party lawsuit at the same time. There is no election of remedies requirement.
When a third-party claim exists, the American Longshore Mutual Association, Ltd. (ALMA) holds a lien on any third-party recovery, and ALMA frequently utilizes its rights of subrogation to recover costs and eliminate or reduce future compensation exposure.
At AEU, subrogation has generated significant savings for ALMA’s members. To date, subrogation efforts have helped recover and prevent more than $95 million in claims costs across the ALMA program.
Key takeaway: Subrogation under the Longshore Act is a valuable tool that can directly lower claim costs and protect employers from ongoing workers compensation exposure.
Why Subrogation Matters for Longshore Employers
Successful subrogation creates measurable financial value for longshore Employers. Subrogation is not just a legal process; it is a critical part of an overall risk management strategy. Employers that proactively identify potential third-party liability can help significantly reduce the total cost of a claim.
- It improves the financial performance of the member’s workers’ comp program.
- It helps eliminate future exposure for ongoing medical or indemnity payments.
- In some instances can generate a return of premium contribution.
- It reinforces accountability by ensuring that third parties responsible for an incident bear the cost comp claim.
How to Identify and Maximize Subrogation Opportunities
A strong subrogation case begins with early action and thorough documentation. The first steps you take after an incident are essential for successful subrogation..
Follow these best practices:
- Investigate immediately. Interview all witnesses and gather every relevant detail about how, why, when, etc. the incident occurred. The faster the better. Memories fade and people disappear.
- Identify all potential third parties. Was a vendor, contractor, or equipment manufacturer involved? Identify anyone that may have any responsibility.
- Preserve all evidence. Secure and store any products, tools, or materials involved in or related to the incident. Be sure to also save and secure any security camera footage that may have captured the incident.
- Document visually. Take multiple photographs from different angles to capture the scene, the equipment, and any contributing factors.
- Notify AEU early. Let your AEU claims specialist know if a claim has subrogation potential. That a claim may have subrogation potential is not always apparent from the face of an LS-202.
Common mistake: The most common mistake is failing to look for subrogation. Viable subrogation opportunities are often lost simply because third-party involvement was not recognized at the outset. Early awareness is the first step toward a successful recovery.
How to Preserve Evidence for a Successful Subrogation Claim
Evidence preservation is essential for building and strengthening a strong third-party case. If a product, part, or tool contributed to an injury, best practices dictate that the item be taken out of service and preserved.
Evidence preservation checklist:
- Set the involved equipment or item aside.
- Store the item in a secure, locked area.
- Clearly tag or label it: “Important Evidence – Do Not Destroy.”
- Maintain and document the chain of custody.
- Do not allow destructive testing or alterations.
- Retain the item indefinitely.
Partnering With AEU for Subrogation Success
By looking for third party involvement and reporting third-party potential to AEU, employers can help AEU maximize recovery and minimize claim exposure. A little diligence at the start of a claim may very well save hundreds of thousands of dollars later.
About AEU
The American Equity Underwriters, Inc. (AEU) is the program administrator for the American Longshore Mutual Association, Ltd. (ALMA). AEU provides claims management, loss control, and underwriting services to ALMA members operating under the Longshore and Harbor Workers’ Compensation Act (LHWCA). For more information on AEU’s subrogation process or to report a potential third-party claim, visit amequity.com.
