Subrogation is a concept that's well-known among insurance and legal professionals but sometimes not by the policyholders who employ them. Even if it sounds complicated, it is in your benefit to comprehend the steps of how it works. The more knowledgeable you are about it, the more likely relevant proceedings will work out favorably.
An insurance policy you own is an assurance that, if something bad occurs, the company on the other end of the policy will make restitutions in one way or another in a timely fashion. If your home is robbed, for instance, your property insurance steps in to pay you or facilitate the repairs, subject to state property damage laws.
But since ascertaining who is financially accountable for services or repairs is sometimes a tedious, lengthy affair – and delay in some cases increases the damage to the victim – insurance companies usually decide to pay up front and figure out the blame after the fact. They then need a way to recover the costs if, when all is said and done, they weren't actually in charge of the expense.
Let's Look at an Example
Your living room catches fire and causes $10,000 in home damages. Fortunately, 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 to blame 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 Does Subrogation Work?
This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement 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. Usually, only you can sue for damages done to your self or property. But under subrogation law, your insurer is extended 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 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 – namely, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its costs by boosting your premiums and call it a day. On the other hand, if it has a competent legal team and pursues them enthusiastically, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half to blame), you'll typically get $500 back, depending on your state laws.
Furthermore, if the total cost of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as lawyers for car accidents Tacoma WA, pursue subrogation and wins, it will recover your expenses as well as its own.
All insurers are not the same. When shopping around, it's worth examining the records of competing agencies to determine if they pursue winnable subrogation claims; if they do so fast; if they keep their accountholders informed as the case proceeds; 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 company has a reputation 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.