What Is Subrogation in Workers’ Compensation
In workers’ compensation, subrogation allows an employer or insurer to recover 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.
When a third-party claim exists, the American Longshore Mutual Association (ALMA) holds a lien on any recovery. Through its partnership with The American Equity Underwriters (AEU), ALMA uses its rights of subrogation to recover costs and reduce future compensation exposure.
At AEU, subrogation has generated significant savings for members. To date, subrogation efforts have helped recover and prevent more than $95 million in claims costs across the program.
Key takeaway: Subrogation under the Longshore Act directly lowers claim costs while protecting employers from ongoing exposure.
Why Subrogation Matters for Longshore Employers
Subrogation is not just a legal process; it is a critical risk management strategy. Employers that proactively identify third-party liability can 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.
- It reinforces accountability by ensuring that third parties responsible for an incident share in the cost.
When subrogation is handled effectively, both the injured worker and the employer benefit from a fair and balanced resolution.
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 can determine whether recovery is possible.
Follow these best practices:
- Investigate immediately. Interview all witnesses and gather every relevant detail about how the incident occurred.
- Identify all potential third parties. Was a vendor, contractor, or equipment manufacturer involved? Each may have partial responsibility.
- Preserve all evidence. Secure and store any products, tools, or materials related to the incident.
- Document visually. Take multiple photographs from different angles to capture the scene, the equipment, and any contributing factors.
- Notify AEU early. If a third-party claim may exist, report it promptly so AEU can coordinate subrogation efforts.
Common mistake: Many recoverable claims are lost simply because third-party involvement was not recognized at the outset. Awareness is the first step toward recovery.
How to Preserve Evidence for a Successful Subrogation Claim
Evidence preservation is essential for building a strong subrogation case. If a product, part, or tool contributed to an injury, it must be maintained properly.
Evidence preservation checklist:
- 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 unless AEU’s claims team advises otherwise.
Proper evidence handling strengthens the legal position and ensures the case can proceed efficiently if a third-party lawsuit develops.
The Financial Impact of Subrogation
Subrogation creates measurable financial value for Longshore employers. Through the recovery of paid benefits and the reduction of future liability, the subrogation process contributes directly to:
- Lower overall claim costs
- Reduced loss ratios
- Improved program performance
For ALMA Members, AEU’s dedicated subrogation specialists have achieved tens of millions in savings through effective case coordination, third-party recovery, and lien enforcement.
Partnering With AEU for Subrogation Success
AEU’s subrogation team works closely with members to identify third-party opportunities, coordinate investigations, and ensure proper evidence handling. By reporting potential third-party cases early and maintaining open communication, employers can help AEU maximize recovery and minimize exposure. A little diligence at the start of a claim can 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.
