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The Key to Successful Recoveries…

July 2016

.... Be prepared, or prepare to fail. Points to consider when identifying and pursuing subrogated property damage claims.

Property damage claims can often be complex so it is important that all who examine potential subrogated claims understand what to look out for from the outset.

Firstly, a third party needs to be identified.  The First Notification of Loss (FNOL) is a vital time to capture the information necessary to decide whether there is a potential recovery claim and if so against whom. The incident will be fresh in the policyholder’s mind so it is beneficial to ask the right questions at an early stage to determine whether there is third party involvement such as:

    Did the policyholder have any relevant works carried out around the time of the incident?  If so, who carried out those works and does the policyholder have any documentation?
    If the damage was caused by a defective appliance, when was this appliance purchased? Is their proof of purchase? Who installed the appliance? Who is the manufacturer? Most importantly, the policyholder should be asked to retain the appliance for forensic examination.
    If the emergency services attended the scene, did they give any opinion as to the cause of the incident?  Does the policyholder have any reports / crime reference number / incident numbers?
    If the fault has already been fixed, is there a report from an independent contractor such as an independent plumber in an escape of water claim detailing the cause of the incident?

This shows the importance of the FNOL in determining the likely cause of the incident and whether there is an identifiable third party.  If a potential recovery is identified at an early stage, the evidence is likely to be far easier to obtain.

Secondly, a cause of action must be identified. The allegations against the third party should be considered to determine what the legal basis of the claim will be, for example: -

    Statutory (i.e. defective product – Consumer Protection Act); and/or
    Breach of Contract.

A person is not necessarily liable just because water or fire spread from their property to the risk address.  There has to be evidence of negligence on the part of the neighbour in order to establish liability against them. For example, were they put on notice of a maintenance issue but failed to take action resulting in a leak or did they carelessly discard a cigarette resulting in a fire? 

If a connection to the neighbour’s washing machine failed without warning resulting in an escape of water this is likely to have been caused by wear and tear so no recovery would be available.  If the washing machine was installed recently then the incident could have been caused by poor installation or a defective part and if this is the case, liability may attach to the installers or manufacturers depending on the evidence available.  This demonstrates the importance of asking the right questions at the outset.

Thirdly, once the cause of action has been established, evidence should be obtained to support the allegations against the third party. This may include any of the following (but this list is not exhaustive):

    Fire report;
    Forensic report;
    Independent plumber’s report;
    Police report;
    Loss adjuster’s report; and

Finally, a full analysis of the facts and evidence should be undertaken to determine prospects of success and the likely costs involved in pursuing a recovery. Sometimes a strongly worded letter of claim has the desired effect but consideration must be given to the costs involved in pursuing a recovery, especially if the value of the claim is less than £10,000.   


    Costs are not recoverable for small claims with a value of under £10,000.
    It is for the Claimant to prove its claim (on the balance of probabilities) so it is vital that evidence is obtained to support the allegations being made.

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