Subrogation is an idea that's understood in insurance and legal circles but rarely by the policyholders they represent. Even if it sounds complicated, it is in your benefit to understand an overview of how it works. The more you know, the more likely relevant proceedings will work out favorably.
Every insurance policy you hold is a promise that, if something bad happens to you, the business on the other end of the policy will make good in a timely manner. If you get injured while working, for example, your employer's workers compensation insurance pays out for medical services. Employment lawyers handle the details; you just get fixed up.
But since ascertaining who is financially responsible for services or repairs is typically a time-consuming affair – and delay sometimes compounds the damage to the victim – insurance companies in many cases decide to pay up front and assign blame after the fact. They then need a way to recover the costs if, when all is said and done, they weren't in charge of the expense.
Can You Give an Example?
Your living room catches fire and causes $10,000 in home damages. Happily, you have property insurance and it takes care of the repair expenses. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him to blame for the damages. You already have your money, but your insurance agency is out all that money. What does the agency do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the way that an insurance company uses to claim payment when it pays out a claim that turned out not to be its responsibility. Some insurance firms have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Under ordinary circumstances, only you can sue for damages to your person or property. But under subrogation law, your insurer is considered to have some of your rights in exchange for making good on the damages. It can go after the money that was originally due to you, because it has covered the amount already.
How Does This Affect the Insured?
For starters, if you have a deductible, it wasn't just your insurer that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – namely, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its costs by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases efficiently, it is acting both in its own interests and in yours. If all of the money is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found one-half culpable), you'll typically get $500 back, depending on your state laws.
In addition, if the total loss of an accident is over your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as legal assistance payson ut, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurance agencies are not the same. When comparing, it's worth contrasting the records of competing companies to determine if they pursue winnable subrogation claims; if they do so with some expediency; if they keep their customers informed as the case continues; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, on the other hand, an insurer has a reputation of honoring claims that aren't its responsibility and then protecting its income by raising your premiums, even attractive rates won't outweigh the eventual headache.