Subrogation is a term that's understood among legal and insurance firms but often not by the people who hire them. Even if it sounds complicated, it is in your self-interest to comprehend the nuances of how it works. The more knowledgeable you are, the better decisions you can make about your insurance policy.
Any insurance policy you own is an assurance that, if something bad happens to you, the firm on the other end of the policy will make good without unreasonable delay. If your vehicle is hit, insurance adjusters (and the courts, when necessary) determine who was at fault and that party's insurance pays out.
But since ascertaining who is financially accountable for services or repairs is often a tedious, lengthy affair – and time spent waiting sometimes compounds the damage to the policyholder – insurance firms often opt to pay up front and assign blame after the fact. They then need a way to recoup the costs if, when all the facts are laid out, they weren't responsible for the payout.
Can You Give an Example?
Your stove catches fire and causes $10,000 in home damages. Luckily, 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 reasonable possibility that a judge would find him liable for the damages. The home has already been fixed up in the name of expediency, but your insurance agency is out $10,000. What does the agency do next?
How Subrogation Works
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 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 the Insured?
For one thing, if your insurance policy stipulated a deductible, your insurance company wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to recover its expenses by upping your premiums. On the other hand, if it knows which cases it is owed and pursues those cases enthusiastically, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent culpable), you'll typically get half your deductible back, depending on your state laws.
Furthermore, if the total loss of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as personal injury attorney near me Tacoma Wa, successfully press a subrogation case, it will recover your losses as well as its own.
All insurance agencies are not created equal. When shopping around, it's worth measuring the records of competing firms to determine whether they pursue winnable subrogation claims; if they resolve those claims quickly; if they keep their clients apprised as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, instead, an insurer has a record of honoring claims that aren't its responsibility and then safeguarding its income by raising your premiums, even attractive rates won't outweigh the eventual headache.