Subrogation is an idea that's understood among legal and insurance firms but rarely by the customers who employ them. Rather than leave it to the professionals, it is in your benefit to understand an overview of the process. The more information you have about it, the more likely it is that relevant proceedings will work out in your favor.
An insurance policy you hold is a promise that, if something bad occurs, the firm that covers the policy will make restitutions in one way or another without unreasonable delay. If your vehicle is hit, insurance adjusters (and police, when necessary) decide who was at fault and that party's insurance pays out.
But since ascertaining who is financially responsible for services or repairs is typically a time-consuming affair – and time spent waiting in some cases compounds the damage to the victim – insurance firms usually decide to pay up front and assign blame afterward. They then need a means to get back the costs if, once the situation is fully assessed, they weren't actually responsible for the payout.
Let's Look at an Example
Your garage catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays out your claim in full. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him accountable for the damages. The home has already been repaired in the name of expediency, but your insurance company is out all that money. What does the company 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 companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Usually, only you can sue for damages done to your self or property. But under subrogation law, your insurance company is extended 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, 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 choose to recover its costs by upping your premiums. On the other hand, if it knows which cases it is owed and pursues those cases enthusiastically, it is acting both in its own interests and in yours. If all of the money is recovered, you will get your full 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.
Moreover, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as worker compensation terms Marietta GA, successfully press a subrogation case, it will recover your losses in addition to its own.
All insurers are not created equal. When shopping around, it's worth examining the records of competing firms to determine if they pursue valid subrogation claims; if they resolve those claims fast; if they keep their policyholders updated as the case goes on; and if they then process successfully won reimbursements right away so that you can get your money 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 profitability by raising your premiums, you'll feel the sting later.