Subrogation is a term that's well-known in insurance and legal circles but often not by the customers who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to understand the steps of how it works. The more information you have, the better decisions you can make with regard to your insurance company.
Every insurance policy you have is a promise that, if something bad happens to you, the firm that insures the policy will make good without unreasonable delay. If your property suffers fire damage, for example, your property insurance steps in to remunerate you or enable the repairs, subject to state property damage laws.
But since ascertaining who is financially accountable for services or repairs is typically a confusing affair – and time spent waiting in some cases compounds the damage to the policyholder – insurance firms usually decide to pay up front and figure out the blame later. They then need a method to recoup the costs if, once the situation is fully assessed, they weren't actually in charge of the expense.
Let's Look at an Example
Your electric outlet catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it takes care of the repair expenses. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him accountable for the damages. You already have your money, but your insurance agency is out $10,000. What does the agency do next?
How Does Subrogation Work?
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 insurance firms 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 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 Me?
For a start, if your insurance policy stipulated a deductible, your insurer wasn't the only one that 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 unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its losses by ballooning your premiums and call it a day. On the other hand, if it has a proficient legal team and goes after them efficiently, 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 to blame), you'll typically get $500 back, depending on the laws in your state.
Moreover, if the total expense of an accident is over 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 lawsuit lawyer spanish fork ut, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurance agencies are not created equal. When shopping around, it's worth scrutinizing the records of competing agencies to find out if they pursue valid subrogation claims; if they resolve those claims without dragging their feet; if they keep their policyholders advised as the case continues; and if they then process successfully won reimbursements quickly so that you can get your losses back and move on with your life. If, instead, an insurance firm has a reputation of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.