February/March 2010 / Features
Self-Insureds Can Often Recover Losses
It may make financial sense for a company to self-insure, but that doesn’t mean it should absorb casualty losses caused by third parties. Instead, the writer says, it should implement a recovery process comparable to the subrogation programs undertaken by property and casualty insurers. In such claims, the property owner’s insurer stands in the shoes of its insured for purposes of reimbursement from legally responsible individuals or companies. Self-insured property owners can pursue recovery directly.
Some self-insured companies may be adept at identifying recovery opportunities in situations involving torts or breach of contracts. Unusual events such as floods and wildfires are more difficult. So are insolvencies or bankruptcies on the part of customers and contractors, who either default or cause harm by doing work improperly. Nevertheless, there may still be recovery opportunities.
For instance, notwithstanding a bankruptcy filing, the bankruptcy debtor’s liability coverage is unaffected. Legal action against a bankrupt debtor can be pursued by securing relief from the automatic stay, which typically is granted if the creditor agrees to pursue recovery solely from applicable liability insurance proceeds, rather than the debtor’s estate. In situations involving fraud, recovery from trust funds for professionals can be pursued. Funds have been established in many states for real estate brokers and other professionals, such as accountants and attorneys.
