Property insurance policies usually contain cooperation clauses regarding subrogation rights. Subrogation occurs when an insurer pays a policyholder a loss for which a third party may be responsible. The insurer becomes interested in getting its money back from the responsible third party. Accordingly, most property insurance policies have a clause which reads similar to this:
"The insured shall cooperate with the Company and, upon the Company’s request, assist in…the conduct of suits….; and the insured shall attend hearings and trials and assist in the securing and giving evidence and obtaining the attendance of witnesses."
At yesterday’s educational session at the NAPIA Annual Convention, attorney Jim LaRoe provided a presentation regarding insurance subrogation and how policyholders may benefit from it. In his presentation, "Making Lemonade-Your Client’s Insurer Says that Your Client is Uninsured/Underinsured and They are Correct-What Can You Do? A Texas Perspective," LaRoe made an important point:
The policyholder has rights against the third party as well. When amounts are lost but not covered under the policy, the policyholder needs to bargain with the insurer about many issues and the policyholder should have his or her own attorney.
LaRoe noted that often the policy is silent about how the money recovered is apportioned, who gets the money first, who gets to decide if settlement takes place, who pays for the attorneys and costs, who pays the policyholder for his or her time and inconvenience, and a host of other major financial issues.
For example, deductibles on many property policies can run in the millions. Policies limit recovery of some portion of losses. Some types of losses are simply not covered by the policy.
The bottom line is that, in many cases, the policyholder can only be made whole by getting substantial recoveries from a responsible third party.
As LaRoe noted, when the insurance company attorneys come with a litigation agreement for joint representation, there is often an inherent conflict of interest because the agreement is negotiable and those attorneys cannot serve two masters making that agreement. The policyholder needs somebody fighting for his or her rights and benefits rather than a lawyer who is working for the insurer’s best interests.