The TPA Shortfall: Why TPAs Miss the Mark on LOU Recovery and How Specialists Maximize Returns 

By Sam Fensterstock, Cadex Insurance Recovery

In the high-stakes world of fleet management, every dollar counts, yet many organizations lose significant revenue by mishandling Loss of Use (LOU) claims in vehicle subrogation. If you oversee subrogation claims and outsource to a Third-Party Administrator (TPA), this white paper challenges you to face a tough truth: Most TPAs fail to effectively pursue LOU damages, if they pursue them at all. Industry data shows that adverse insurance carriers deny 70-80% of LOU claims as a standard tactic, banking on minimal pushback. Yet, 90% of these denials are winnable with proper effort. 

This paper clarifies what LOU is, distinct from loss of revenue or service interruption, and outlines your legal entitlement to these damages. We candidly expose TPA limitations, driven by their focus on efficiency over specialization, and contrast this with the superior results of firms like Cadex Insurance Recovery, which leverage expertise, proven processes, and a contingency-based model. Outsourcing to specialists can turn LOU recovery into a revenue engine, potentially recouping hundreds of thousands, or millions, annually. We urge you to rethink your TPA reliance and unlock the financial upside of specialized subrogation. 

Understanding Loss of Use and Your Legal Entitlement

As the person managing your company’s vehicle subrogation claims, you know recovering costs from not-at-fault accidents is complex. LOU damages, however, are often misunderstood, leading to missed opportunities. Unlike loss of revenue or service interruption, which require proving specific financial impacts like missed sales, LOU focuses on the value of a vehicle’s temporary unavailability due to an at-fault third party’s actions. 

LOU compensates for the “use” value of a sidelined commercial vehicle, typically calculated as the fair market rental rate for a comparable substitute. For example, if a delivery truck is down for 10 days and a similar truck rent is for $600 daily, you’re entitled to $6,000, whether you rented a replacement or not. This is not about lost profits but about the vehicle’s operational utility. 

Your legal right to LOU is rooted in tort law, which means that the at-fault party make you whole for both physical damage and loss of functionality. Courts nationwide uphold this, with state-specific nuances. In California, you’re entitled to reasonable rental value even if spares exist. In Texas, fair market rates apply, often requiring detailed operational logs. These are enforceable rights, not optional benefits. 

Yet, LOU recovery rates are low because adverse carriers deny 70-80% of initial claims, exploiting procedural complexities and expecting claimants, especially those using TPAs to give up. This systemic issue highlights why your TPA approach may be costing you, and why specialized subrogation is critical. 

The High Denial Rate: A Systemic Challenge

If your TPA handles LOU claims, the deck is stacked against you. Data shows 70-80% of LOU claims are denied outright, not because they’re invalid, but because carriers use deliberate tactics to avoid payouts. Unlike property damage claims with clear repair costs, LOU requires quantifying downtime, calculating precise loss values, and proving causation, complexities carriers exploit. 

Common denial strategies include: 

• Questioning Downtime: Carriers claim spares or alternatives mitigated the loss. 
• Demanding Documentation: Robust data may not meet carrier formats, prompting rejections. 
• Leveraging Loopholes: Policy nuances and jurisdictional variances justify denials, assuming you lack expertise to counter. 

Carriers bank on complacency, denying claims en masse because TPAs often lack the resources for prolonged fights. Yet, 90% of denied claims are valid if challenged properly. Are you leaving money on the table by not pushing back? 

Legal Complexities: State-Specific Hurdles 

LOU recovery is a legal battle, not just an administrative task. Compensability varies by state, demanding deep knowledge of case law to compel carriers to pay.

For example: Without this expertise, TPAs struggle, and claims are abandoned. The legal landscape requires precision that broad-spectrum administrators rarely deliver. 

The TPA Conundrum: Broad Competence vs. Specialized Mastery

TPAs are invaluable for managing diverse claims, liability, workers’ compensation, property damage, but their “jack-of-all-trades” model falters with LOU. We see that their primary focus is the recovery of physical damage, and they do this by prioritizing volume and efficiency.  However, TPAs lack the specialized focus needed for LOU’s legal and procedural demands. When a not-at-fault accident sidelines a vehicle, a TPA may submit a physical damage claims and basic low dollar LOU claim, only for it to be denied for “insufficient proof.” A cursory appeal often follows, but without state-specific legal knowledge, the claim stalls, and your company absorbs the loss. This isn’t incompetent, it’s a structural mismatch. Therefore, is TPA maximizing your returns or just checking boxes? 

Auditing Your TPA’s Recovery Results 

Auditing your TPA’s subrogation results can uncover missed LOU opportunities, potentially recovering thousands in entitled revenue. TPAs often overlook or inadequately pursue LOU due to their lack of specialization, leaving 70-80% of denied claims unchallenged despite 90% being winnable. A thorough audit, reviewing denials against case law, documentation, and carrier tactics, reveals gaps where insurers exploit complexities, like questioning downtime or demanding reformatted proof. This step exposes inefficiencies and enables engagement with contingency-based specialists, turning losses into gains without upfront costs. 

The Specialized Advantage: Why Cadex Delivers 

Specialized subrogation firms like Cadex Insurance Recovery focus solely on subrogation, with LOU as a core strength. We outperform TPAs through: 

• Expertise: Mastering LOU intricacies and state laws to overturn denials. 
• Proven Processes: Auditing claims and presenting irrefutable evidence. 
• Contingency Model: Fees only on recoveries, aligning our goals with yours. 
• Efficiency: Handling high volumes precisely. 
• Data-Driven Advocacy: Quantifying downtime to compel payouts. 

Real-World Impact: Case Studies

A regional fleet faced ten denied LOU claims from five not-at-fault accidents in a month. Cadex intervened, citing case law, negotiating persistently, and providing robust evidence, overturning nine claims for substantial recovery. Scaled across fleets, this yields hundreds of thousands annually. 

Strategic Considerations 

To optimize subrogation: 

• Recognize high denial rates and TPA inefficiencies. 
• Priority specialized negotiation expertise. 
• Address TPA resource constraints. 
• Use contingency models to align incentives. 

The Untapped Opportunity 

With 70-80% of LOU claims denied but 90% winnable, unclaimed damages can reach millions for large fleets. Specialists ensure this revenue is captured. 

Rethink Your Strategy 

TPAs excel in broad claims management but falter in LOU recovery’s niche demands. Cadex transforms reactive processes into proactive revenue engines. Continue absorbing losses, or partner with experts to claim what’s yours? Contact us to audit your claims and unlock your potential.