Subrogation is a term that's understood in legal and insurance circles but rarely by the policyholders who hire them. Even if you've never heard the word before, it is in your self-interest to know an overview of how it works. The more you know, the more likely an insurance lawsuit will work out in your favor.
Every insurance policy you have is a promise that, if something bad happens to you, the company that covers the policy will make good without unreasonable delay. If your house is robbed, for example, your property insurance steps in to repay you or pay for the repairs, subject to state property damage laws.
But since determining who is financially accountable for services or repairs is often a heavily involved affair – and delay sometimes increases the damage to the victim – insurance firms usually decide to pay up front and figure out the 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 actually in charge of the expense.
Can You Give an Example?
Your kitchen catches fire and causes $10,000 in home 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 reason to believe that a judge would find him liable for the damages. You already have your money, but your insurance company is out $10,000. What does the company do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement after it has paid for something that should have been paid by some other entity. 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. Usually, only you can sue for damages to your person or property. But under subrogation law, your insurer is considered to have 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.
How Does This Affect Policyholders?
For one thing, if you have a deductible, it wasn't just your insurer that 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 timid on any subrogation case it might not win, it might choose to recoup its losses by upping your premiums and call it a day. On the other hand, if it has a competent legal team and pursues those cases aggressively, it is acting both in its own interests and in yours. If all of the money 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 to blame), you'll typically get $500 back, based on the laws in most states.
Additionally, if the total expense of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as immigration law firm South Jordon UT, successfully press a subrogation case, it will recover your expenses as well as its own.
All insurance agencies are not created equal. When shopping around, it's worth contrasting the reputations of competing companies to find out whether they pursue legitimate subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their policyholders advised as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your funding back and move on with your life. If, on the other hand, an insurance firm 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.