Subrogation is an idea that's understood among legal and insurance firms but rarely by the people they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to know the nuances of how it works. The more information you have, the better decisions you can make about your insurance company.
An insurance policy you have is an assurance that, if something bad occurs, the insurer of the policy will make restitutions without unreasonable delay. If your home is robbed, your property insurance steps in to pay you or pay for the repairs, subject to state property damage laws.
But since ascertaining who is financially responsible for services or repairs is sometimes a tedious, lengthy affair – and time spent waiting often increases the damage to the victim – insurance companies usually opt to pay up front and assign blame after the fact. They then need a method to get back the costs if, when all the facts are laid out, they weren't actually responsible for the expense.
Can You Give an Example?
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 reason to believe that a judge would find him to blame for the loss. You already have your money, but your insurance company is out ten grand. What does the company do next?
How Subrogation Works
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. Under ordinary circumstances, only you can sue for damages done to your person or property. But under subrogation law, your insurance company 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.
How Does This Affect Individuals?
For starters, if you have a deductible, your insurance company wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to recoup its expenses by raising your premiums. On the other hand, if it has a capable legal team and goes after those cases enthusiastically, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found one-half responsible), you'll typically get $500 back, based on the laws in most states.
In addition, 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 lawyer for child custody Lindon ut, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurers are not the same. When shopping around, it's worth comparing the records of competing companies to determine whether they pursue legitimate subrogation claims; if they do so with some expediency; if they keep their account holders informed as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your losses back and move on with your life. If, on the other hand, an insurer has a record of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, you should keep looking.