Subrogation is an idea that's understood among legal and insurance firms but often not by the people who employ them. Even if it sounds complicated, it is in your benefit to comprehend the nuances of how it works. The more knowledgeable you are, the more likely it is that an insurance lawsuit will work out in your favor.
An insurance policy you have is an assurance that, if something bad occurs, the insurer of the policy will make restitutions in a timely manner. If you get injured on the job, for instance, your employer's workers compensation picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.
But since ascertaining who is financially responsible for services or repairs is typically a time-consuming affair – and time spent waiting in some cases compounds the damage to the victim – insurance companies in many cases opt to pay up front and figure out the blame after the fact. They then need a method to recover the costs if, in the end, they weren't actually responsible for the payout.
Let's Look at an Example
Your bedroom catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it takes care of the repair expenses. However, the assessor assigned to your case discovers 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 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. Usually, only you can sue for damages to your person or property. But under subrogation law, your insurer is extended some of your rights for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Do I Need to Know This?
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 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 increasing your premiums. On the other hand, if it has a knowledgeable legal team and goes after those cases aggressively, it is doing you a favor as well as itself. 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 50 percent accountable), you'll typically get $500 back, depending on the laws in your state.
Additionally, 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 expensive. If your insurance company or its property damage lawyers, such as living trust 66061, successfully press a subrogation case, it will recover your costs as well as its own.
All insurers are not the same. When shopping around, it's worth contrasting the records of competing agencies to find out whether they pursue valid subrogation claims; if they do so quickly; if they keep their policyholders apprised as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, instead, an insurance agency has a reputation of honoring claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, you'll feel the sting later.