Subrogation is a term that's well-known 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 would be to your advantage to understand an overview of the process. The more you know, the better decisions you can make about your insurance policy.
Any insurance policy you own is a promise that, if something bad occurs, the company that insures the policy will make good in a timely fashion. If your property suffers fire damage, your property insurance steps in to compensate you or enable the repairs, subject to state property damage laws.
But since determining who is financially responsible for services or repairs is often a confusing affair – and time spent waiting in some cases compounds the damage to the policyholder – insurance firms in many cases decide to pay up front and figure out the blame after the fact. They then need a mechanism to get back the costs if, when there is time to look at all the facts, they weren't actually in charge of the expense.
For Example
Your electric outlet catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it takes care of the repair expenses. However, the insurance investigator 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 loss. 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 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 to your self 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 your insurance policy stipulated a deductible, it wasn't just your insurer that 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 insurance company is lax about bringing subrogation cases to court, it might choose to recoup its losses by upping your premiums. On the other hand, if it knows which cases it is owed and pursues them efficiently, it is doing you a favor as well as itself. If all ten grand 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 culpable), you'll typically get $500 back, based on the laws in most states.
Moreover, if the total expense 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 legal assistance Puyallup WA, 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 scrutinizing the reputations of competing agencies to find out whether they pursue winnable subrogation claims; if they resolve those claims quickly; if they keep their clients updated as the case continues; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, instead, an insurance firm has a reputation of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.