The Total Loss Guideline
In 2016, we are featuring a series of E-Bulletin articles to highlight individual E-Subro Hub industry guidelines that went active on February 15, 2016.
In this third article of the series, we will review the guidelines that consider the total loss and supplement workflows of the subrogation process.
The total loss guideline states:
Where there is a total loss, a demand should not be issued until the salvage is resolved.
Note: A demand may be issued prior to salvage resolution if applicable case law or statute may impede recovery. When doing so, the Demander must update the demand once salvage supports are available.
During the E-Subro Hub member workflow review conducted in 2015, two methods of handling total loss scenarios were identified: (1) a demand is issued when a total loss evaluation has been completed, but the salvage is waiting to be concluded and (2) a demand is issued when the total loss evaluation has been completed, and resolution of the salvage has been included in the settlement amount.
The total loss E-Subro Hub industry guideline recommends that a demand not be issued until the salvage has been resolved, and the salvage amount can be included in the Salvage entry field of the Damages and Liability tab. It was clear when members were surveyed during the workflow review that most, if not all, Responders will not consider a claim involving a total loss until the salvage amount is known.
This guideline is extremely important because it directly impacts two relevant claim handling concerns: how often a Demander and Responder need to "touch" a claim to bring the matter to resolution and how cycle time will be impacted.
If a demand is issued prior to salvage resolution, it will likely lead to unnecessary "touches" of that demand by both the Demander and Responder. The Demander will need to access the demand a second time to edit the salvage entry, and the Responder will need to "touch" the demand once upon initial review and a second time when the salvage has been entered. Ideally, the Demander should only open the demand for issuance, and a Responder should only access the demand to move the matter to resolution (Accept, Counter, or Deny).
Cycle times increase if a demand is issued prior to the salvage being resolved. The cycle time clock starts ticking when a demand is issued. If we assume a demand cannot be resolved until the salvage amount is known, then that demand's cycle time will increase, at minimum, by the days from the issue date until the date the salvage entry is entered. If the demand is issued with the salvage entry completed, that gap is removed from the cycle time.
The supplements guideline, and the issues one might encounter with it, are very similar to the total loss guideline.
The supplement guideline states:
Supplements are an accepted part of the subrogation process, and issuing demands where there are known supplements is discouraged. Doing so commonly leads to more work for both Demander and Responder — and often does not result in faster payment.
Note: A demand may be issued prior to all known supplements if applicable case law or statute may impede recovery.
Again, this guideline is extremely important because it directly impacts two relevant claim handling concerns: (1) how often a Demander and Responder need to "touch" a claim in order to bring the matter to resolution and (2) the cycle time associated with a demand before it is actually resolved.
If a demand is issued and there are pending claim amounts, the Demander will have to access that demand multiple times to edit the claim entry. The Responder will have to access the demand to evaluate the new items. Again, the cycle time clock starts ticking once the demand is issued and continues to count through the supplement process.
If the demand is issued when all known payments have been completed, the Responder will ideally move the matter to resolution with one "touch." Also, the added days between the initial issue date and final supplement will be removed from the cycle time.
Both guidelines do allow for an exception to the recommendation if case law or statute would impede recovery by waiting to issue a demand. The most common example would be "first-come-first-serve" statutes where a Demander would potentially lose a right to recovery by delaying a subrogation claim.
E-Subro Hub members are encouraged to adhere to these and all E-Subro Hub industry guidelines.
Whether you are just joining E-Subro Hub or want a refresher course, we have tutorials and instructional aids that offer valuable information on negotiating demands in the system. Take a look at our E-Subro Hub training resources.