This article is a companion piece to this video
Supply chain disruptions are an ever-present risk that cause complications and financial catastrophes at every turn. Even short disruptions in key raw materials or products can have lasting ripple effects. So, what happens when the delay of delivery on a product causes an insurance claim to cost way more than it should have? Is there a way to recover those losses from the manufacturer?
Insurance Conflict vs Commiseration: The Reality of Supply Chain Disruptions
Jason poses a hypothetical:
Your insured is in a car accident and you as the insurer need to replace their bumper. The auto repair shop says it will take 12 weeks to get it in because of delays. As an insurer, you are now faced with the dilemma of deciding if it is even safe to have your insured drive their car without a bumper for 12+ weeks. Then subsequently, that you will have to cover the cost of a car rental for several months.
How will you recover those extra expenses paid out to your insured? If there is a clear tortfeasor that caused the accident, you may be able to pursue them for subrogation recovery. But what about the manufacturer that did not supply the bumper in a timely manner?
There is no contract issue or product liability involved, which leaves you only with a question of general breach of duty. Does the manufacturer have a duty to keep up with demand?
The answer is no. The US economy is a free market; unless there was a contract of agreement that specified future expectations, a company cannot be sued for the inability to keep up with demand. In the end, supply chain disruptions affect every corner of the economy. Those delivery delays that hurt your bottom line are just the last falling domino in a series of damages those delays have caused each party involved in previous stages of the supply chain. Everyone feels its effects.
The Importance of Thorough Analysis of Subrogation Claims
While all losses a creditor encounters are not recoverable under a subrogation theory, ensuring every claim is investigated and double-checked for viability is key to minimizing the effects of realities like supply chain disruptions. A subrogation-focused law firm can help you maximize subrogation recovery wherever possible while minimizing cost of pursuit, ensuring you remain a competitive player in the marketplace.If you would like to learn more about subrogation strategy, visit Rathbone Group’s YouTube channel and podcast library for more On Subrogation, a free educational resource for insurance professionals. Have a question on a subject we haven’t yet covered? Email us at [email protected] or [email protected] to see our subrogation lawyers unpack it in a future episode.