Subrogation is an idea that's understood in insurance and legal circles but often not by the policyholders 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 comprehend the steps of how it works. The more knowledgeable you are about it, the better decisions you can make about your insurance company.
Any insurance policy you have is an assurance that, if something bad occurs, the business that insures the policy will make good without unreasonable delay. If your vehicle is hit, insurance adjusters (and police, when necessary) decide who was to blame and that person's insurance pays out.
But since figuring out who is financially accountable for services or repairs is regularly a time-consuming affair – and delay often increases the damage to the victim – insurance firms usually opt to pay up front and figure out the blame later. They then need a way to recover the costs if, when all is said and done, they weren't actually responsible for the expense.
Your stove catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays for the repairs. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him liable for the damages. You already have your money, but your insurance agency is out $10,000. What does the agency do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the method 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. Normally, only you can sue for damages done to your self or property. But under subrogation law, your insurance company is given some of your rights for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Should I Care?
For a start, if your insurance policy stipulated a deductible, it wasn't just your insurance company who 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 insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to get back its expenses by ballooning your premiums. On the other hand, if it has a competent legal team and pursues those cases aggressively, it is acting both in its own interests and in yours. If all 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 to blame), you'll typically get half your deductible back, depending on the laws in your state.
Moreover, if the total loss 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 divorce attorney 98501, pursue subrogation and wins, it will recover your losses as well as its own.
All insurers are not the same. When shopping around, it's worth looking at the reputations of competing companies to evaluate whether they pursue valid subrogation claims; if they resolve those claims fast; if they keep their accountholders posted as the case goes on; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, instead, an insurance agency has a reputation of paying out claims that aren't its responsibility and then safeguarding its profit margin by raising your premiums, you'll feel the sting later.