Subrogation is a concept that's understood among legal and insurance companies but rarely by the people they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your benefit to understand an overview of the process. The more knowledgeable you are about it, the better decisions you can make about your insurance policy.
An insurance policy you have is an assurance that, if something bad happens to you, the insurer of the policy will make restitutions in a timely fashion. If a hailstorm damages your house, your property insurance agrees to repay you or pay for the repairs, subject to state property damage laws.
But since ascertaining who is financially accountable for services or repairs is typically a tedious, lengthy affair – and delay in some cases compounds the damage to the victim – insurance companies often opt to pay up front and figure out the blame after the fact. They then need a mechanism to get back the costs if, ultimately, they weren't actually in charge of the expense.
Let's Look at an Example
You are in a highway accident. Another car crashed into yours. The police show up to assess the situation, you exchange insurance information, and you go on your way. You have comprehensive insurance and file a repair claim. Later it's determined that the other driver was entirely to blame and her insurance policy should have paid for the repair of your vehicle. How does your company get its funds back?
How Subrogation Works
This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement 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. Under ordinary circumstances, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is extended some of your rights in exchange 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 Does This Matter to Me?
For a start, if you have a deductible, your insurance company 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 – namely, $1,000. If your insurance company is timid on any subrogation case it might not win, it might opt to get back its expenses by increasing 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 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent accountable), you'll typically get half your deductible back, depending on the laws in your state.
Furthermore, if the total expense 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 business law springville ut, successfully press a subrogation case, it will recover your costs as well as its own.
All insurance agencies are not the same. When shopping around, it's worth weighing the reputations of competing firms to determine if they pursue winnable subrogation claims; if they resolve those claims without delay; if they keep their policyholders advised as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, on the other hand, an insurer has a record of paying out claims that aren't its responsibility and then covering its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.