Subrogation is a term that's well-known among legal and insurance firms but rarely by the customers they represent. Even if it sounds complicated, it would be to your advantage to understand the nuances of the process. The more knowledgeable you are, the more likely it is that relevant proceedings will work out favorably.
Every insurance policy you own is a promise that, if something bad happens to you, the business that covers the policy will make restitutions in one way or another in a timely manner. If a fire damages your home, your property insurance agrees to remunerate you or pay for the repairs, subject to state property damage laws.
But since figuring out who is financially accountable for services or repairs is usually a tedious, lengthy affair – and time spent waiting often increases the damage to the policyholder – insurance firms usually opt to pay up front and assign blame after the fact. They then need a means to get back the costs if, once the situation is fully assessed, they weren't responsible for the expense.
Let's Look at an Example
You are in a highway accident. Another car crashed into yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance and file a repair claim. Later it's determined that the other driver was entirely to blame and her insurance should have paid for the repair of your auto. How does your company get its money back?
How Subrogation Works
This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement 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. Ordinarily, 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 in exchange 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 Do I Need to Know This?
For a start, if you have 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 timid on any subrogation case it might not win, it might opt to recoup its losses by ballooning your premiums. On the other hand, if it has a competent legal team and goes after those cases efficiently, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full 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, depending on the laws in your state.
Additionally, if the total cost of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as Law office near Tacoma washington, pursue subrogation and wins, it will recover your costs as well as its own.
All insurers are not created equal. When shopping around, it's worth researching the reputations of competing firms to evaluate whether they pursue legitimate subrogation claims; if they resolve those claims fast; if they keep their policyholders informed as the case proceeds; 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 record of honoring claims that aren't its responsibility and then covering its bottom line by raising your premiums, you'll feel the sting later.