Subrogation is an idea that's understood among legal and insurance firms but rarely by the policyholders who hire them. Even if you've never heard the word before, it would be to your advantage to understand the nuances of how it works. The more knowledgeable you are, the better decisions you can make about your insurance company.
Every insurance policy you own is a commitment that, if something bad happens to you, the company on the other end of the policy will make good without unreasonable delay. If a blizzard damages your house, your property insurance steps in 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 usually a heavily involved affair – and delay in some cases increases the damage to the victim – insurance companies often decide to pay up front and figure out the blame afterward. They then need a method to regain the costs if, when there is time to look at all the facts, they weren't in charge of the payout.
Let's Look at an Example
Your bedroom catches fire and causes $10,000 in house damages. Happily, you have property insurance and it pays out your claim in full. However, in its investigation it finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him liable for the loss. You already have your money, but your insurance agency is out all that money. 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 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 self or property. But under subrogation law, your insurer is considered to have some of your rights for having taken care of the damages. It can go after the money that was originally due to you, because it has covered the amount already.
Why Should I Care?
For starters, if your insurance policy stipulated a deductible, it wasn't just your insurer who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to recoup its costs by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, it is doing you a favor as well as itself. If all $10,000 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 culpable), you'll typically get $500 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 employment law 98501-1548, successfully press a subrogation case, it will recover your expenses in addition to 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 resolve those claims without delay; if they keep their customers advised as the case proceeds; 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 insurance firm has a reputation of paying out claims that aren't its responsibility and then safeguarding its income by raising your premiums, even attractive rates won't outweigh the eventual headache.