Subrogation is an idea that's understood in legal and insurance circles but sometimes not by the customers they represent. Rather than leave it to the professionals, it would be in your self-interest to understand the nuances of how it works. The more you know about it, the better decisions you can make about your insurance company.
An insurance policy you have is an assurance that, if something bad occurs, the business on the other end of the policy will make good in one way or another in a timely manner. If you get injured at work, for instance, your employer's workers compensation insurance picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.
But since determining who is financially responsible for services or repairs is regularly a confusing affair – and time spent waiting sometimes increases the damage to the policyholder – insurance firms in many cases opt to pay up front and assign blame afterward. They then need a mechanism to regain the costs if, when there is time to look at all the facts, they weren't actually responsible for the expense.
Can You Give an Example?
Your bedroom catches fire and causes $10,000 in home damages. Happily, you have property insurance and it pays for the repairs. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him responsible for the loss. You already have your money, but your insurance firm is out ten grand. What does the firm do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the process 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 to your person or property. But under subrogation law, your insurer is extended some of your rights 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 Do I Need to Know This?
For one thing, if you have a deductible, your insurer 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 – to the tune of $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to recover its losses by increasing your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases enthusiastically, 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 50 percent responsible), you'll typically get $500 back, based on the laws in most states.
In addition, 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 local criminal defense attorney Spanish Fork UT, pursue subrogation and succeeds, it will recover your expenses in addition to its own.
All insurers are not the same. When shopping around, it's worth measuring the records of competing companies to find out if they pursue winnable subrogation claims; if they do so in a reasonable amount of time; if they keep their customers apprised as the case goes on; and if they then process successfully won reimbursements right away so that you can get your losses back and move on with your life. If, on the other hand, an insurance company has a reputation of paying out claims that aren't its responsibility and then protecting its profit margin by raising your premiums, you should keep looking.