Subrogation is a concept that's well-known in insurance and legal circles but rarely by the people who employ them. Even if you've never heard the word before, it is in your self-interest to comprehend the nuances of the process. The more information you have about it, the better decisions you can make about your insurance company.
Every insurance policy you have is a commitment that, if something bad happens to you, the company that covers the policy will make restitutions in one way or another in a timely manner. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) decide who was at fault and that person's insurance covers the damages.
But since figuring out who is financially accountable for services or repairs is usually a time-consuming affair – and time spent waiting sometimes compounds the damage to the victim – insurance firms usually opt to pay up front and figure out the blame afterward. They then need a method to recover the costs if, ultimately, they weren't actually responsible for the payout.
Let's Look at an Example
You are in a car accident. Another car collided with yours. The police show up to assess the situation, you exchange insurance information, and you go on your way. You have comprehensive insurance and file a repair claim. Later police tell the insurance companies that the other driver was at fault and his insurance should have paid for the repair of your car. How does your company get its funds back?
How Does Subrogation Work?
This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement when it pays out a claim that turned out not to be its responsibility. Some companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Normally, 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 in exchange 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.
Why Do I Need to Know This?
For one thing, if your insurance policy stipulated a deductible, it wasn't just your insurance company 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 timid on any subrogation case it might not win, it might opt to recover its expenses by increasing your premiums. On the other hand, if it has a knowledgeable legal team and pursues them aggressively, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get half your deductible back, depending on your state laws.
In addition, if the total cost 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 personal injury attorney Sumner WA, pursue subrogation and wins, it will recover your costs in addition to its own.
All insurers are not created equal. When shopping around, it's worth comparing the records 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 policyholders updated as the case proceeds; 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 record of honoring claims that aren't its responsibility and then covering its profitability by raising your premiums, you should keep looking.
Subrogation is a term that's well-known among legal and insurance companies but sometimes not by the policyholders who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your benefit to understand the steps of the process. The more you know about it, the better decisions you can make about your insurance policy.
Any insurance policy you have is an assurance that, if something bad occurs, the business that insures the policy will make restitutions in one way or another in a timely fashion. If your vehicle is in a fender-bender, insurance adjusters (and the courts, when necessary) determine who was to blame and that party's insurance pays out.
But since determining who is financially responsible for services or repairs is usually a time-consuming affair – and time spent waiting sometimes increases the damage to the victim – insurance firms often decide to pay up front and assign blame later. They then need a means to get back the costs if, ultimately, they weren't actually in charge of the payout.
For Example
Your electric outlet catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays for the repairs. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him accountable for the loss. The home has already been repaired in the name of expediency, but your insurance firm is out $10,000. What does the firm do next?
How Subrogation Works
This is where subrogation comes in. It is the method that an insurance company uses to claim payment when it pays out a claim that turned out not to be its responsibility. 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 originally due to you, because it has covered the amount already.
Why Should I Care?
For a start, 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 timid on any subrogation case it might not win, it might choose to recoup its expenses by increasing your premiums. On the other hand, if it knows which cases it is owed and goes after those cases efficiently, it is doing you a favor as well as itself. If all ten grand 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 half your deductible back, based on the laws in most states.
Moreover, if the total loss of an accident is over your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as personal injury lawyer Sumner WA, successfully press a subrogation case, it will recover your losses as well as its own.
All insurers are not created equal. When shopping around, it's worth measuring the reputations of competing agencies to determine whether they pursue valid subrogation claims; if they resolve those claims without delay; if they keep their customers updated as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, on the other hand, an insurance agency has a record of honoring claims that aren't its responsibility and then covering its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.
