Opinion: Downtime and Subrogation

By Kelsea Eckert

Attorney

Eckert & Associates PA

This Opinion piece appears in the Oct. 11 print edition of Transport Topics. Click here to subscribe today.

Insurance companies and motor carriers pursue subrogation aggressively today. It was not always so. In years past, the focus was on adjusting claims, getting vehicles back on the road and closing files as soon as possible. Now, however, we are coping with a slow economy, and companies are looking for creative ways to increase revenue.

Although the term “subrogation” technically means the right of one party to step into the shoes of another and pursue their lawful claims, subrogation in the transportation industry often is really first-party claims — collecting money from at-fault parties that caused damage to motor vehicles and cargo, as well as downtime loss of income to fleet vehicles.

This type of collection has become big business.

Although downtime claims for commercial fleet vehicles often are pursued, downtime claims by individual owner-operators and drivers have not been pursued at the same pace. And yet, these smaller claims often are just as worthy of collection.

The following accident case history, which involves subrogation and downtime, is a good example.

Owner-operator Dave was driving his tractor-trailer on the interstate, delivering a load of concrete to a local port. During that leg of the trip, a van crossed the grassy median and came toward him. Dave hit the brakes and swerved, but the van slammed into his tractor. Neither driver was seriously hurt, but the same couldn’t be said of Dave’s rig.

Dave filed a claim with the van driver’s insurance carrier for repairs on his truck, but for whatever reason, no payment came. Frustrated, Dave filed a claim with his own insurance company and got paid right away. With this money, he was able to repair his truck and get back on the road.

Before turning to his own insurer, Dave spent a month waiting for the other driver’s insurance company to pay up and wound up out $4,000 in lost operating income. He also had out-of-pocket expenses of $2,000 that included hotel bills, replacing his laptop and renting a replacement tractor. Dave didn’t have a policy for downtime losses with his own insurance carrier, so he wasn’t able to file a claim with them. He didn’t have the means to go after the adverse carrier and didn’t know what to do.

Dave’s insurance company did its job properly and immediately noted in the case’s file that it had subrogation potential. The insurance company’s subrogation department then filed a claim with the insurer for the driver who was at fault in the accident.

After reviewing clear evidence that their insured was liable, the van driver’s insurance company reimbursed Dave’s insurer for the property-damage payments they paid Dave, plus the deductible.

At this point, Dave’s insurance company has been reimbursed, he has a repaired truck and his deductible payment is back in his pocket — but he still is not whole. What about the lost income from the time he was out of work because of the  out-of-service truck? Shouldn’t the van driver and his insurance company be responsible for compensating Dave for this lost income?

In the transportation industry, “downtime” and “loss of use” are often interchangeable, but this isn’t entirely the case: “Downtime” means time during which a commercial vehicle is not available because it needs repairs, while “loss of use” means loss of the ability to use a vehicle commercially.

If an automobile driver — who uses his vehicle for nothing more commercial than driving to and from work — is in an accident requiring his vehicle to stay in the repair shop, not being able to use his car because of property damage is an inconvenience easily remedied by a rental car.

Owner-operators and motor carriers who lose the use of their trucks following an accident, on the other hand, are stripped of their income-making capacity, which plays havoc with their livelihood. Large losses can build up quickly.

In many jurisdictions, the at-fault party is responsible for reimbursing those losses, and yet drivers are told by their own insurance carriers that if they don’t have a downtime policy, there’s nothing they can do for them.

Drivers in this unfortunate situation sometimes pursue the matter further by consulting a law firm. Many law firms, however, will handle these matters only on an hourly basis — with a hefty retainer. An owner-operator or independent truck driver who has just experienced a large loss may not have extra money set aside for such expenses. Many times, the unfortunate driver simply throws up his or her hands and drops the matter.

An alternative to giving up and going unpaid is presented by subrogation-collection law firms willing to work on a contingency fee with no large retainers paid upfront. Those considering this approach should look for a firm that will help the driver calculate the money he or she is owed and assist with assembling supporting documents and analyzing the numbers for both the downtime and out-of-pocket expenses.

It is important for a driver to provide his attorney with a breakdown of income and expenses, settlement sheets and tax returns. If the accident occurred during a high-income time of the year for the driver or small carrier, the claim should emphasize the higher numbers reached directly before the accident. The attorney then can calculate lost profit on a daily basis and multiply this loss by the number of working days lost to downtime to arrive at the true financial damages — giving Dave the driver a far better chance of successfully being reimbursed for his losses.

The law firm Eckert & Associates PA, Orange Park, Fla., handles cases for motor carriers, insurance companies, truck drivers and owner-operators nationwide.