Subrogation is an idea that's well-known in legal and insurance circles but often not by the policyholders they represent. Even if you've never heard the word before, it is to your advantage to know the steps of the process. The more knowledgeable you are about it, the better decisions you can make about your insurance company.
Every insurance policy you own is an assurance that, if something bad happens to you, the business that insures the policy will make good in a timely manner. If your vehicle is hit, insurance adjusters (and police, when necessary) determine who was at fault and that party's insurance pays out.
But since ascertaining who is financially responsible for services or repairs is sometimes a time-consuming affair – and time spent waiting in some cases compounds the damage to the policyholder – insurance companies usually opt to pay up front and assign blame afterward. 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 responsible for the payout.
Can You Give an Example?
Your kitchen catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it pays out your claim in full. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him to blame for the damages. The house has already been repaired in the name of expediency, but your insurance agency is out all that money. What does the agency do next?
How Subrogation Works
This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement 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 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 Policyholders?
For a start, if your insurance policy stipulated 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 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 ballooning your premiums. On the other hand, if it has a capable legal team and pursues them 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 at fault), you'll typically get $500 back, depending on the laws in your state.
Additionally, if the total loss 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 workers compensation Dunwoody, pursue subrogation and succeeds, it will recover your costs in addition to its own.
All insurers are not the same. When comparing, it's worth comparing the reputations of competing agencies to evaluate whether they pursue winnable subrogation claims; if they do so without dragging their feet; if they keep their clients informed as the case continues; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, instead, an insurer has a reputation of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, you should keep looking.