Every day, claims handlers encounter the Indemnity and Subrogation Receipt as part of the routine process of managing insurance claims. When a new recovery case is assigned, one of the first documents to consider is the Indemnity and Subrogation Receipt.

This document provides evidence that an assured claim has been settled. By signing it, the insured will release all subrogation rights to the insurer, enabling it to pursue third-party recovery.

Subrogation is a fundamental process in the insurance industry, allowing insurers to “step into the shoes” of the insured and recover losses from the responsible party.

However, subrogation can often be a complex and time-consuming process that requires:

• Strong negotiation skills.
• Specialized team members and a reliable network of experts.
• In-depth knowledge of international maritime law and technical expertise in areas like hull insurance.

When a claim is managed by a loss adjuster on behalf of the insurer, such as Marlin Blue, the process of claiming against the liable party may start even before subrogation occurs. This proactive approach helps expedite the recovery process.

1. What is an indemnity and subrogation receipt?

The indemnity and subrogation receipt is a commonly used document in the insurance industry to formalize the transfer of the insured’s rights to the insurer after a compensation payment.

While most insurance policies include a subrogation clause, this receipt, a standard agreement in insurance, acts as an additional legal confirmation of the transfer of rights from the insured to the insurer.

2. What information is included in the indemnity and subrogation receipt?

The content and format of the receipt can vary among insurers, but it typically includes the following key elements:

• Insured’s details: Name, address, and policy information.
• Description of the incident: Details of the event, including the date and type of loss.
• Indemnity amount: The amount paid to the insured.
• Transfer of rights clause: A statement confirming that the insured transfers their rights to the insurer to pursue third-party claims.
• Signature and ratification: The insured’s signature and, in some cases, notarization to ensure legal validity.

3. Risks and potential conflicts when signing a subrogation receipt

Although the document is beneficial to both parties, there are important considerations the insured should be aware of before signing:

3.1. Waiver of Additional Rights

By signing the receipt, the insured acknowledges that they have been fully indemnified and agree not to make any further claims for the same incident. This could be problematic if unexpected costs arise after the indemnity payment.

3.2. Lack of Understanding

In some cases, the insured may not fully comprehend that they are relinquishing all their rights to claim compensation. This lack of understanding can lead to disputes, especially if the insured later decides to pursue legal action against the third party responsible for the loss.

3.3. Issues with Partial Coverage

If the insured was only partially compensated (e.g., due to the application of a deductible), there could be confusion about whether they can claim the remaining amount directly from the responsible third party.

4. Frequently asked questions about the subrogation receipt

Q1. Why sign the subrogation receipt?

Signing the subrogation receipt offers several advantages for both the insured and the insurer. First, it allows for a quicker indemnity process, enabling the insured to receive payment without delays. It also shifts the responsibility of recovering the compensation amount to the insurer, sparing the insured from the complexities of legal actions against the third party. However, the insured must be aware that by signing the document, they effectively waive any right to make additional claims related to the incident.

Additionally, by recovering the compensation paid out, the insurer can mitigate the financial impact of the claims, improving the technical results of insurance companies by properly enforcing subrogation rights against liable third parties. This can potentially lead to more competitive premium rates for all its policyholders.

Q2. What happens if the receipt is not signed?

If the insured refuses to sign the subrogation receipt, the insurer may withhold the indemnity payment until the process is finalized. The signature serves as a guarantee for the insurer, allowing them to pursue recovery from third parties without the risk of additional claims from the insured. Not signing may also mean that the insured takes on the responsibility of directly recovering their losses, a process that can be lengthy, costly, and complex.

• The insured might deny the transfer of rights, arguing that they did not understand or agree to it.
• Conflicts could arise if the insured decides to independently sue the responsible third party, complicating the insurer’s recovery efforts.
• The subrogation process could face challenges in jurisdictions where the receipt is a necessary formality for validating the transfer of rights.

Q3. Can the terms of the subrogation receipt be negotiated?

In some cases, it is possible to negotiate specific aspects of the subrogation receipt with the insurer.

Q4. Can you exercise subrogation rights against your own assured?

No, you typically cannot exercise subrogation rights against your own insured. If the insured party (the assured) caused the damage, it doesn’t make sense for the insurer to seek recovery from them. In principle, insurance coverage extends to losses caused by the negligence of the assured. Attempting to recoup a payment through subrogation in such cases would negate the protection provided by the insurance policy.

Q5. Should the receipt be signed if additional expenses are expected?

It is important to inform the insurer of any pending expenses before signing the receipt to ensure that all costs are considered in the indemnity payment.

Q6. What happens if the insured is not fully informed?

In some instances, the insured might not be fully aware of their rights or the implications of signing a subrogation receipt. This could lead to disputes if the insured later attempts to make an additional claim for the same loss.

Conclusion

The bottom line is that subrogation protects your economic interests while ensuring at-fault parties bear their responsibility. So, get your insured to sign a subrogation receipt and cover your bases.

While we’re at it… Why not take one step further and make sure you leave nothing to chance when it comes to your claims handling? Check out our services and find out how we help you stay afloat in the ocean of claims.