Monday, January 3, 2011

It Pays To Be An Insurance Expert: Bicycle Replacement and 'Subrogation'

Six years ago I started a career in Insurance working on large accounts--oil refineries, national governments and their departments of defense.  Though I am an expert on Property and Liability Insurance, I really didn't know anything or had any experience with what we call Personal Lines: car, home, health, life, worker's comp., et cetera.

Until I went to the orthopedist over a week later, after hobbling around work on crutches, the driver's insurance didn't know who I was, but immediately contacted me after that.

As I wrote earlier, I didn't think I was seriously injured.  I just wanted them to pay for my medical care, replace my bicycle, and maybe give me a few thousand dollars for 'pain and suffering.'

Given what I do for a living, I confidently called up the claims adjuster and did a recorded interview.  I was brilliant at this, but I wouldn't recommend anyone do it--in fact, I wouldn't do it again.  The claims adjuster asked me very specific questions meant to throw me off.  She asked how many lanes the crosswalk spanned, how many I crossed before I was hit, what color the car that hit me was, what I was wearing--even asking leading questions like "Were you wearing long pants?" so she could claim I lost control of the bike on my own and simply fell in front of the car.  I didn't give her an inch to stand on.  Still, it was a stupid thing to do.

You have to understand, an insurance company is not your friend--even if you're the insured, even if they seem not too bright, or if they come across as genuinely concerned about your welfare.  Their entire goal is to never have to pay a claim, and if they're going to pay anything at all it's going to be to their paying customer who has been sending them premium for years.  Don't agree with anything, don't sign anything, don't accept any quick offers of compensation.  In other words, I did a very stupid thing by speaking with that claims adjuster, which could have turned out very badly for me.  And this was just the Liability adjuster.  They had one claims representative for each: Liability, Property, Medical, and Auto Physical Damage.  The ones that really pissed me off though were the Property and Auto PD adjusters, and here's why.

The Property claims specialist was insisting that the Auto PD adjuster visit my home and look at the bike to see what the level of damage was.  Again, I do insurance for a living, so I said 'absolutely not.'  My argument was that an over one ton vehicle struck an 18 pound bicycle, which has no protective body around it (except the rider of course).  It's a given that the bike is unsafe to ride and should be replaced.  They weren't going to x-ray it for fractures or check to make sure the frame was still straight--literally just a visual inspection by someone who is not any kind of bicycle expert.  I did invite the adjuster to ride the bike down a mountainside at 50 miles per hour if he felt confident that his visual inspection deemed the bike safe to ride, that it wouldn't simply fall apart beneath him when he hit a bump at high speed, while I followed right behind him in an SUV, but he didn't take me up on it.

So I called State Farm, which is my insurance carrier for Renter's Insurance to ask if the loss of the bicycle was covered, and sure enough it was.  I told State Farm the make, model, year; when I bought it; what the equivilant current model would be that could serve as a replacement and its Manufacturer Suggested Retail Price.  I did not inflate the numbers.  I even provided the specifications of the bicycle that was destroyed and the one I deemed its replacement.

Most importantly, I didn't tell either the driver's insurance company (which asked) or State Farm (which didn't ask) how much I paid for the bike.  How much I paid doesn't matter.  I got a good deal, but let's say for example that it was a gift--would that mean that my loss was $0 ?  Of course not.  I was not going to pay to get hit by a car and have my property destroyed.

State Farm adjusted for depreciation and altogether calculated the loss of my two year old bicycle at just short of $2,000--which is a bit more than I paid for the bike and upgrades I mentioned to them, but only just a bit.  Less the $500 deductible, I received a check for about $1,500.

The way insurance works is my $2,000 loss was then State Farm's $1,500 loss, and they wanted their money back.  Also, I was given the amount of my loss less $500, so I wanted my money back too.  This is where Subrogation comes in.

What Subrogation means is my insurance company has just bought me a new bike and therefore the right to collect from the driver's insurance for that loss is now theirs instead of mine--I can't collect twice for the same loss--not like in the movies where someone's $100,000 house blows up and they get a million because they overinsured (that's just a myth).  The duty of the Insured is to provide any requested evidence for them to recover their loss.

So I went out to the crosswalk where I was hit one week later, at the same time of day, to take pictures and video.  Sure enough, not only did I clearly show the scene, but I easily found several drivers who stopped in or after the crosswalk in the exact same spot I was hit.  Some of the pictures are actually hillarious, but for privacy reasons I will not share them here.

I sent the pictures as well as a satellite image of the location and a detailed description of what happened to State Farm, and in a very short time I received a check for my $500 deductible as well.  Had I not done the work, we wouldn't have seen that money for months, if ever.

If you're thinking why didn't I get my insurer to pay me for the liability portion as well and have them subrogate against the driver's insurance for that, the fact is they simply can't do that.  In Property insurance, it's easy to adjust a claim because there are definite dollar amounts attached to property and repairs, but liability awards to injured parties are indefinite; they could be simply the amount of lost wages, or double the amount of the medical costs for pain and suffering; or they could be enough for you to retire comfortably, buy a house and a car, pay off your student loans, and take a trip to Europe. 

If you want more than the monetary equivilant of a light apology, and particularly if you are really injured, you need a lawyer.  Don't worry about paying for it, as most (perhaps all) lawyers will take your case on a contingency fee basis.  In New York the lawyer gets one third of any money awarded you by law, no more / no less.  And if you think that's a lot, consider the fact that without a lawyer you may only receive a few thousand dollars--if anything--whereas with a lawyer you will likely get at least whatever the Liability limit is on the driver's insurance.  In New York state, the statutory liability limit is $25,000 but many drivers purchase excess limits of $100,000 or $300,000 because it protects them against your lawyer going after their personal assets to make up the difference between their coverage and what a judge has awarded you in court--which, again, could be any amount whatsoever.

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