Subrogation is an idea that's well-known in legal and insurance circles but sometimes not by the people they represent. Even if you've never heard the word before, it would be to your advantage to understand the nuances of the process. The more knowledgeable you are about it, the more likely it is that relevant proceedings will work out favorably.
An insurance policy you hold is a commitment that, if something bad happens to you, the business on the other end of the policy will make good in one way or another without unreasonable delay. If your property burns down, for instance, your property insurance agrees to remunerate you or pay for the repairs, subject to state property damage laws.
But since determining who is financially accountable for services or repairs is usually a tedious, lengthy affair – and time spent waiting sometimes increases the damage to the policyholder – insurance firms usually decide to pay up front and figure out the blame afterward. They then need a mechanism to get back the costs if, once the situation is fully assessed, they weren't actually responsible for the payout.
Let's Look at an Example
Your stove catches fire and causes $10,000 in home damages. Happily, 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 responsible for the damages. You already have your money, 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 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 done 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 Individuals?
For one thing, if you have a deductible, your insurer wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to be precise, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to recoup its costs by ballooning your premiums. On the other hand, if it has a knowledgeable legal team and goes after them efficiently, it is doing you a favor as well as itself. If all is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half culpable), you'll typically get half your deductible back, based on the laws in most states.
In addition, if the total cost of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as business law springville ut, successfully press a subrogation case, it will recover your costs as well as its own.
All insurance agencies are not the same. When comparing, it's worth measuring the reputations of competing companies to evaluate if they pursue valid subrogation claims; if they do so fast; if they keep their policyholders posted as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your deductible 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, you should keep looking.