Subrogation is a concept that's understood in legal and insurance circles but rarely by the customers who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to understand the nuances of how it works. The more you know about it, the better decisions you can make about your insurance company.
Any insurance policy you hold is a commitment that, if something bad occurs, the business that covers the policy will make restitutions in one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) decide who was to blame and that party's insurance covers the damages.
But since ascertaining who is financially responsible for services or repairs is typically a heavily involved affair – and time spent waiting sometimes compounds the damage to the policyholder – insurance companies in many cases opt to pay up front and figure out the blame afterward. They then need a path to get back the costs if, ultimately, they weren't in charge of the expense.
Your stove catches fire and causes $10,000 in home damages. Fortunately, 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 a reasonable possibility that a judge would find him liable for the damages. You already have your money, but your insurance firm is out ten grand. What does the firm do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the process 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. Ordinarily, only you can sue for damages done to your person or property. But under subrogation law, your insurer is given some of your rights in exchange for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Does This Matter to Me?
For one thing, if you have a deductible, your insurer wasn't the only one 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 lax about bringing subrogation cases to court, it might choose to recoup its expenses by increasing your premiums. On the other hand, if it knows which cases it is owed and pursues those cases aggressively, it is acting both in its own interests and in yours. 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 one-half at fault), 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 costly. If your insurance company or its property damage lawyers, such as Sumner Wa Car Accident Lawyer, pursue subrogation and wins, it will recover your costs in addition to its own.
All insurance companies are not the same. When shopping around, it's worth contrasting the reputations of competing companies to evaluate whether they pursue valid subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their clients informed as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, on the other hand, an insurer has a reputation of paying out claims that aren't its responsibility and then protecting its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.