Subrogation is a concept that's well-known among insurance and legal firms but often not by the people they represent. Even if it sounds complicated, it would be in your self-interest to comprehend the steps of the process. The more you know about it, the better decisions you can make with regard to your insurance policy.
An insurance policy you hold is an assurance that, if something bad occurs, the business that insures the policy will make good in a timely fashion. If your home is burglarized, for instance, your property insurance steps in to repay you or enable the repairs, subject to state property damage laws.
But since determining who is financially responsible for services or repairs is sometimes a time-consuming affair – and time spent waiting often increases the damage to the policyholder – insurance firms in many cases decide to pay up front and figure out the blame later. They then need a path to regain the costs if, ultimately, they weren't responsible for the payout.
For Example
Your stove catches fire and causes $10,000 in house damages. Happily, you have property insurance and it takes care of the repair expenses. However, the assessor assigned to your case finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him accountable for the loss. The house has already been repaired in the name of expediency, but your insurance company is out ten grand. 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 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 insurance company is given 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 insurance company wasn't the only one 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 losses by upping your premiums and call it a day. On the other hand, if it has a competent legal team and pursues them enthusiastically, it is doing you a favor as well as itself. If all ten grand 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 at fault), you'll typically get $500 back, depending on your state laws.
In addition, if the total cost of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as car accident attorney Austell GA, pursue subrogation and succeeds, it will recover your expenses as well as its own.
All insurers are not the same. When shopping around, it's worth weighing the records of competing agencies to find out whether they pursue valid subrogation claims; if they do so without delay; if they keep their policyholders advised as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, instead, an insurer has a record of honoring claims that aren't its responsibility and then protecting its income by raising your premiums, you'll feel the sting later.