Subrogation is a term that's well-known in insurance and legal circles but often not by the customers they represent. Even if you've never heard the word before, it is in your self-interest to know the nuances of how it works. The more knowledgeable you are, 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 insurer of the policy will make good in one way or another without unreasonable delay. If your house is robbed, your property insurance steps in to pay you or enable the repairs, subject to state property damage laws.
But since ascertaining who is financially accountable for services or repairs is regularly a confusing affair – and time spent waiting sometimes increases the damage to the victim – insurance firms in many cases opt to pay up front and figure out the blame later. They then need a method to recoup the costs if, once the situation is fully assessed, they weren't responsible for the payout.
Let's Look at an Example
Your kitchen catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it takes care of the repair expenses. However, in its investigation it finds out that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him liable for the loss. The house has already been fixed up 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 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 self or property. But under subrogation law, your insurer is considered to have 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.
How Does This Affect the Insured?
For one thing, 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 insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its costs by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, it is doing you a favor as well as itself. If all 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 at fault), you'll typically get $500 back, based on the laws in most states.
Moreover, if the total cost 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 workers comp lawyer Mableton GA, successfully press a subrogation case, it will recover your expenses as well as its own.
All insurers are not created equal. When comparing, it's worth contrasting the reputations of competing firms to determine whether they pursue legitimate subrogation claims; if they resolve those claims with some expediency; if they keep their customers updated as the case goes on; and if they then process successfully won reimbursements right away so that you can get your losses back and move on with your life. If, on the other hand, an insurer has a reputation of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you'll feel the sting later.