Subrogation is an idea that's understood in insurance and legal circles but rarely by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your self-interest to know the steps of the process. The more you know about it, the better decisions you can make about your insurance policy.
Any insurance policy you have is a commitment that, if something bad occurs, the business on the other end of the policy will make good in a timely fashion. If a blizzard damages your real estate, your property insurance steps in to compensate you or enable the repairs, subject to state property damage laws.
But since determining who is financially responsible for services or repairs is regularly a tedious, lengthy affair – and delay often compounds the damage to the victim – insurance firms often decide to pay up front and figure out the blame later. They then need a method to regain the costs if, ultimately, they weren't in charge of the payout.
Let's Look at an Example
Your living room catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays out your claim in full. 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 responsible for the damages. You already have your money, but your insurance agency is out all that money. What does the agency do next?
How Subrogation Works
This is where subrogation comes in. It is the process that an insurance company uses to claim payment when it pays out a claim that turned out not to be its responsibility. Some companies 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 to your person or property. But under subrogation law, your insurance company is extended some of your rights for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
How Does This Affect Individuals?
For starters, 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 lost some money too – 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 losses by ballooning your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and pursues 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 $1,000 deductible back. If it recovers half (for instance, in a case where you are found one-half responsible), you'll typically get $500 back, based on the laws in most states.
Additionally, if the total price 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 Sumner Wa Car Accident Lawyer, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurance companies are not created equal. When shopping around, it's worth examining the reputations of competing companies to determine whether they pursue winnable subrogation claims; if they resolve those claims with some expediency; if they keep their policyholders apprised as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your money 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 protecting its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.