Subrogation is an idea that's understood in legal and insurance circles but sometimes not by the customers who hire them. Even if you've never heard the word before, it would be in your benefit to comprehend an overview of the process. The more knowledgeable you are, the better decisions you can make about your insurance policy.
Every insurance policy you own is an assurance that, if something bad occurs, the insurer of the policy will make good without unreasonable delay. If your property burns down, for instance, your property insurance agrees to compensate you or pay for the repairs, subject to state property damage laws.
But since figuring out who is financially accountable for services or repairs is often a confusing affair – and time spent waiting often adds to the damage to the victim – insurance firms often opt to pay up front and figure out the blame later. They then need a method to recover the costs if, when there is time to look at all the facts, they weren't in charge of the expense.
Let's Look at an Example
You are in a car accident. Another car ran into yours. The police show up to assess the situation, you exchange insurance details, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later police tell the insurance companies that the other driver was to blame and her insurance policy should have paid for the repair of your vehicle. How does your company get its money back?
How Subrogation Works
This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement after it has paid for something that should have been paid by some other entity. 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 to your person or property. But under subrogation law, your insurer is given 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 your insurance policy stipulated 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 – namely, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recoup its costs by upping your premiums and call it a day. On the other hand, if it has a competent legal team and goes after them aggressively, it is doing you a favor as well as itself. 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 accountable), you'll typically get half your deductible back, based on the laws in most states.
In addition, if the total price of an accident is over 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 wrongful death lawyer Puyallup, Wa, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurers are not created equal. When comparing, it's worth scrutinizing the reputations of competing agencies to determine if they pursue valid subrogation claims; if they do so quickly; if they keep their customers advised as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your losses back and move on with your life. If, instead, an insurer has a record of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, you should keep looking.