Subrogation is a concept that's well-known among legal and insurance firms but sometimes not by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to know the nuances of the process. The more knowledgeable you are, the more likely it is that an insurance lawsuit will work out in your favor.
Every insurance policy you hold is a promise that, if something bad occurs, the firm that insures the policy will make restitutions in one way or another without unreasonable delay. If a storm damages your home, your property insurance agrees to compensate you or facilitate the repairs, subject to state property damage laws.
But since determining who is financially accountable for services or repairs is sometimes a tedious, lengthy affair – and delay in some cases adds to the damage to the policyholder – insurance firms often decide to pay up front and figure out the blame later. They then need a path to recover the costs if, ultimately, they weren't in charge of the payout.
Let's Look at an Example
You are in a vehicle accident. Another car collided with yours. The police show up to assess the situation, you exchange insurance information, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later it's determined that the other driver was at fault and her insurance policy should have paid for the repair of your car. How does your insurance company get its funds back?
How Subrogation Works
This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement 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. Ordinarily, 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 that was originally due to you, because it has covered the amount already.
How Does This Affect Policyholders?
For starters, if your insurance policy stipulated a deductible, your insurer wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to be precise, $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its costs by boosting your premiums. On the other hand, if it has a competent legal team and goes after those cases aggressively, 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 50 percent culpable), you'll typically get $500 back, based on the laws in most states.
In addition, if the total price of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as Divorce law spanish fork UT, pursue subrogation and succeeds, it will recover your costs in addition to its own.
All insurers are not created equal. When comparing, it's worth comparing the reputations of competing firms to find out if they pursue legitimate subrogation claims; if they do so in a reasonable amount of time; if they keep their clients informed as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, instead, an insurer has a reputation of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, you should keep looking.