Subrogation is a term that's well-known in insurance and legal circles but sometimes not by the policyholders 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 understand the nuances of how it works. The more information you have about it, the better decisions you can make with regard to your insurance company.
Every insurance policy you own is a commitment that, if something bad happens to you, the company on the other end of the policy will make good in one way or another in a timely fashion. If your vehicle is hit, insurance adjusters (and police, when necessary) determine who was at fault and that party's insurance covers the damages.
But since determining who is financially responsible for services or repairs is regularly a confusing affair – and time spent waiting sometimes adds to the damage to the policyholder – insurance companies usually opt to pay up front and assign blame afterward. They then need a way to recoup the costs if, in the end, they weren't actually in charge of the expense.
Your living room catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it pays out your claim in full. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him accountable for the damages. The home has already been repaired in the name of expediency, but your insurance company is out all that money. 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 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 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 Policyholders?
For starters, if your insurance policy stipulated a deductible, your insurer wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to the tune of $1,000. If your insurance company is timid on any subrogation case it might not win, it might opt to recoup its losses by boosting your premiums and call it a day. On the other hand, if it has a competent legal team and goes after them enthusiastically, it is doing you a favor as well as itself. 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 50 percent accountable), you'll typically get $500 back, depending on your state laws.
Furthermore, if the total expense 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 lawsuit lawyer springville ut, pursue subrogation and wins, it will recover your expenses as well as its own.
All insurers are not the same. When comparing, it's worth comparing the records of competing companies to determine if they pursue winnable subrogation claims; if they do so fast; if they keep their policyholders apprised as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, on the other hand, an insurance agency has a record of paying out claims that aren't its responsibility and then covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.