Subrogation

What you need to know about premises liability The 21st century’s new “gig economy” has opened endless new opportunities for individuals to market and profit from their personal skills and assets. Firms like Uber, TaskRabbit, Airbnb*, to name a few, leverage emerging technology to connect customers to products and service providers on a microscale. This results in increased convenience for customers, lower prices and a share in what has become the future of commerce. But with these advances come questions about insurance coverage and liability. Here, we’ll look at Airbnb and discover what the company’s liabilities are when they broker short-term rentals between homeowners and guests. Consider this hypothetical: Your insured retails high-end pots and pans. Most of their business comes from large hotels and restaurant chains. Your insured has no brick-and-mortar store, per se, so most sales are done in the field. Employees of your ensured regularly travel to other cities to meet with buyers in person. Generally, these employees stay in national chain hotels. But recently, your insured has noticed that they can save considerable amounts on lodging expenses by housing multiple employees in Airbnbs at the same time. Your insured sends a group of employees to Palm Springs and books a three bedroom house they found on Airbnb. While in residence at the Airbnb, one of the employees (we’ll call her Belinda) slips on loose, improperly secured tile in the bathroom and suffers serious injuries. Assume for the purposes of this scenario that Belinda was in the course and scope of employment at the time of the injury and her workers’ compensation claim is accepted. Your options for subrogation here are murky at best. Do you try to collect from the homeowners insurance? Does Airbnb have any liability? Let’s untangle this subrogation journey. California Law of Negligence Our first stop is to see if there was negligence involved in the cause of the accident. To help determine this, let’s look at the California law of negligence. Most simply, the subrogating carrier is required to show: A duty of care (see below) was owed ✔ There was a breach of that duty ✔ The breach of that duty caused the claimant’s injuries ✔ The claimant suffered legally recognized damages ✔ Check! All of the negligence requirements are met, but by whom? Understanding Duty of Care Property owners owe guests a duty of care to maintain premises in a reasonably safe manner. Additionally, they must warn anyone who enters their property or is staying in their home of any known hazards. When a person lawfully on the premises is injured by an unsafe condition that they were not made aware of, or that the owner should have fixed, the owner could be liable for the injury. These unsafe conditions can include, but are not limited to: Slippery surfaces Defective locks Dog bites Here the property owner owed a duty of care to make sure the bathroom tiles were properly secured and not a hazard. Their breach of duty could be actual or constructive knowledge of the loose bathroom tile. If they knew about the loose tile, or should have known about it with exercise of due care, and failed to remedy it, then they breached their duty to Belinda. That loose tile caused her to fall and the fall resulted in her injuries and thus the carrier’s subrogation damages. Liability looks pretty solid on the homeowner. However, in each particular case you are going to want to make sure there aren’t any contracts that affect the liability of the parties, especially with the added complication of involvement of Airbnb. When looking at premises liability in California, consider: Who owned the property? Who possessed it? Who controlled it? Who had a duty to maintain it? The homeowner obviously answers “me!” to all those questions. Control is interesting, though, because you could make the reasonable leap in thinking that Airbnb was in control of the premises at the time of the accident. The home was part of their inventory and they do market the property and make a profit from its rental. But did Airbnb control the premises at the time of Belinda’s unfortunate accident? Airbnb’s premises liability policy Airbnb acts as an agent to secure bookings for rental properties, but is not the owner or operator of the premises and therefore does not “control” it. When guests are at the premises, they are covered under the homeowners’ insurance policy. However, to be a good partner to their hosts, Airbnb offers “Host Protection Insurance.” This is an insurance policy that is in effect whenever a host is renting their home to guests. It’s free to hosts and provides a million dollars per occurrence for injury to guests or damage to the host’s property. Airbnb has this great insurance plan, so you can just recover your subrogation claim from them? Not so fast. There are a number of scenarios for recovery: In California, homeowners don’t have to carry homeowners insurance unless the property has a mortgage. So, if there is no homeowner’s insurance policy in effect, the injury coverage would default to the Airbnb Host Protection Insurance. This is the tidiest scenario, but uncommon. If the Airbnb does have homeowners insurance, there could be varying levels of coverage from property to property. If the homeowner only has earthquake insurance, for example, the claim would again fall on Airbnb’s insurance. If the host has homeowner’s insurance that covers guests’ injuries, Airbnb’s Insurance plan stipulates that the homeowner’s insurance be tapped first and completely before it kicks in. It’s important to note, too, that Airbnb’s insurance does not cover intentional injuries or damage to the premises. How do you collect? Collecting on a case involving an Airbnb can be complicated since there are so many factors and overlapping coverage issues and scenarios involved. The first step to determining where to look for collection would be to determine the amount and type of homeowner’s insurance existed in effect during the rental period. If you’re lucky and the homeowner

Increasing the Odds: Strategies for Mediation as a Workers’ Compensation Subrogator Mediation as a subrogator is like playing a two-player game as a third player. The game is designed for two players, and those two players don’t understand how you fit into their game and they don’t really want you there. Your pieces to the game, however, hold a lot of power if you place yourself in the right position for mediation. BY CHALSIE KELLER AND KELSEY DANIEL As a subrogator, you will likely be ignored for a good portion of the mediation. This is because the mediator tends to focus on the Injured Worker and Defendants as the parties to the case, thinking they are the most important players to the mediation. The mediator usually has a plan to come to you at the end of the negotiation with the singular goal of reducing your recovery as much as possible to get a settlement within the bounds of the “deal” they have already worked on with the Injured Worker and Defendants. Even worse in some cases, the mediator may view you as another source of money to contribute to the overall settlement. The solution to controlling the outcome of the game, is to place yourself in the best position to negotiate with all parties. This usually translates to “leave your options open” and “get creative.” DIFFERENT TYPES OF SETTLEMENT Subrogation is a unique situation in the civil arena because the goal may not always be to get as much money from the settlement possible. Sound crazy? The other parties to the case may think so too. Approaching mediation from this perspective can give you great leverage to getting the best overall recovery for the claim. A settlement where the Subrogator takes less direct money in reimbursement does not translate to an overall lower recovery. Although it seems contradictory, the opposite is often true. A settlement where the Subrogator agrees to recover less direct money from the overall settlement in exchange for a stipulation to credit, or a third party compromise and release, can be a much better bargain than receiving a larger amount of direct money from the settlement. When the underlying claim is left open, the carrier faces high exposure that an even exceed the estimates at the time of settlement. Closing off a “bleeding” claim can be much more beneficial than cash in hand. To use this leverage to your best advantage, knowledge of the status of the workers’ compensation claim, and the different settlement options available to you based on that status, are key. Different states have different rules governing each of these options, but most allow a carrier to obtain some sort of credit that makes all of these strategies options for the Subrogator. There are three major types of settlement options: Direct Cash Only; Direct Cash with Claim Credit/Closure, and; Claim Credit/Closure Only Let’s use the following example to better understand each option and how they would play out in this scenario: The worker’s compensation claim total estimated cost is $90,000. $70,000 in benefits have been paid to date. $20,000 in benefits are in reserves for the permanent disability rating and future medical care Identified by the Panel Qualified Medical Evaluator. The civil subrogation team has discovered the third party civil defendants have a $100,000 policy available to recover from in the subrogation case. Both the injured worker and the Subrogator have filed suits and made a claim for the $100,000 policy. Direct Cash Only Direct Cash Only settlement simply means your subrogation recovery value only comes from whatever money you are able to recover from the third party subrogation case. This kind of settlement agreement generally arises when there is insufficient insurance available to recover from the Defendant. When this occurs, you have three people fighting for the same money (the Subrogator, the Injured Worker and the Injured Worker’s Plaintiff Attorney). In our scenario, the Defendant’s policy limits were $100,000. If the defendant’s offer their full policy for settlement, each party (the Subrogator, the Injured Worker and the Injured Worker’s Plaintiff Attorney) could equally splitch the $100,000 giving them cach $33.333.33. Your recovery from this scenario is the value of the direct cash you are settling for, $33,333,33. You can choose this option for settlement with both an open or closed Workers’ compensation claim. However, if your claim is closed, your recovery ends there. Insufficient funds from a Defendant, usually due to low policy limits, is a prime example of why it is so important to communicate with the Subro Team (claims representative, subrogation representative, subrogation attorney) to keep the underlying workers compensation claim open. If the claim is open, you can petition your State’s appeals board for credit for the net recovery of the injured worker (jurisdiction permitting) and recover an additional $33,333.33 in claim credit. This credit is required to be spent on the claim, with itemized proof by the injured worker, before the carrier is obligated to pay our benefits under the claim. This effectually closes the claim in many scenarios. If you have an agreeable injured worker and Plaintiff attorney, you can choose the next option for settlement, Direct Cash with Claim Credit Closure. Common Fund Doctrine and Interpleader As an additional element of concern with low policy limit cases, and in states where the Subrogator has a first right of recovery, the Subrogator’s damages alone will often exceed the policy limits, or will at least exceed what the plaintiff attorney thinks you are entitled to recover. An argument that will likely be made is that the Plaintiff attorney put forth more effort and therefore procured the settlement. This contention, when applicable in your jurisdiction, is commonly referred to as the Common Fund Doctrine. The doctrine stands for the premise that where one creates a fund to which others have a claim, that one is entitled to first recover their costs of litigation and attorney’s fees. It is an equitable principal designed to prevent unjust enrichment. Some states