Subrogation is a concept that's understood in insurance and legal circles but often not by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to know the nuances of the process. The more you know about it, the more likely it is that an insurance lawsuit will work out favorably.
Every insurance policy you own is a promise that, if something bad happens to you, the company on the other end of the policy will make good in a timely fashion. If a blizzard damages your house, your property insurance steps in to remunerate you or pay for the repairs, subject to state property damage laws.
But since ascertaining who is financially accountable for services or repairs is sometimes a time-consuming affair – and delay in some cases adds to the damage to the victim – insurance companies in many cases decide to pay up front and figure out the blame after the fact. They then need a path to regain the costs if, when all the facts are laid out, they weren't responsible for the payout.
Let's Look at an Example
Your electric outlet catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays out your claim in full. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him responsible for the loss. The home has already been fixed up in the name of expediency, but your insurance company is out $10,000. What does the company do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement after it has paid for something that should have been paid by some other entity. Some companies 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 done to your person or property. But under subrogation law, your insurer is extended some of your rights in exchange for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Should I Care?
For one thing, 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 – to the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recover its losses by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases enthusiastically, it is doing you a favor as well as itself. If all $10,000 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 responsible), you'll typically get $500 back, depending on the laws in your state.
Furthermore, if the total cost of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as family law 98501-1548, pursue subrogation and wins, it will recover your expenses in addition to its own.
All insurers are not created equal. When shopping around, it's worth comparing the reputations of competing companies to determine whether they pursue legitimate subrogation claims; if they do so fast; if they keep their accountholders posted as the case continues; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, on the other hand, an insurer has a reputation of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you'll feel the sting later.