Subrogation is an idea that's well-known among insurance and legal professionals but often not by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your self-interest to comprehend the nuances of how it works. The more information you have, the better decisions you can make about your insurance company.
Every insurance policy you own is a promise that, if something bad occurs, the business on the other end of the policy will make restitutions in one way or another without unreasonable delay. If you get hurt while you're on the clock, for instance, your employer's workers compensation pays out for medical services. Employment lawyers handle the details; you just get fixed up.
But since figuring out who is financially accountable for services or repairs is often a time-consuming affair – and time spent waiting sometimes increases the damage to the victim – insurance companies often decide to pay up front and assign blame later. They then need a means to recover 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 living room catches fire and causes $10,000 in house damages. Happily, you have property insurance and it pays for the repairs. However, the assessor assigned to your case 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. The home has already been fixed up in the name of expediency, but your insurance company is out ten grand. What does the company do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the way that an insurance company uses to claim payment after it has paid for something that should have been paid by some other entity. Some companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Normally, only you can sue for damages done to your self or property. But under subrogation law, your insurance company is given some of your rights for making good on 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 starters, if your insurance policy stipulated 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 – to be precise, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to recover its costs by ballooning your premiums. On the other hand, if it has a capable legal team and goes after those cases efficiently, it is acting both in its own interests and in yours. If all $10,000 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 at fault), you'll typically get half your deductible back, based on the laws in most states.
In addition, if the total expense of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as divorce law olympia wa, pursue subrogation and succeeds, it will recover your costs as well as its own.
All insurance agencies are not the same. When shopping around, it's worth measuring the records of competing firms to evaluate whether they pursue legitimate subrogation claims; if they resolve those claims with some expediency; if they keep their clients updated 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, instead, an insurer has a reputation of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you should keep looking.