Subrogation is a term that's understood among legal and insurance firms but sometimes not by the policyholders who employ them. Rather than leave it to the professionals, it is in your benefit to comprehend the steps of how it works. The more knowledgeable you are about it, the more likely it is that an insurance lawsuit will work out in your favor.
Any insurance policy you own is a commitment that, if something bad occurs, the business on the other end of the policy will make good in one way or another without unreasonable delay. If your property is broken into, for example, your property insurance agrees to pay you or enable the repairs, subject to state property damage laws.
But since determining who is financially responsible for services or repairs is sometimes a heavily involved affair – and delay in some cases increases the damage to the victim – insurance firms usually decide to pay up front and assign blame after the fact. They then need a means to regain the costs if, when there is time to look at all the facts, they weren't responsible for the expense.
For Example
Your bedroom catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it takes care of the repair expenses. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him to blame for the loss. The home has already been repaired in the name of expediency, 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 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 to your person 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 that was originally due to you, because it has covered the amount already.
How Does This Affect Individuals?
For a start, if you have 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 insurance company is lax about bringing subrogation cases to court, it might opt to recoup its costs by ballooning your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after them efficiently, 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 one-half accountable), you'll typically get half your deductible back, based on the laws in most states.
Furthermore, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as wrongful death lawyer Puyallup, Wa, pursue subrogation and wins, it will recover your expenses as well as its own.
All insurers are not created equal. When shopping around, it's worth scrutinizing the reputations of competing firms to find out if they pursue winnable subrogation claims; if they do so without dragging their feet; if they keep their accountholders advised as the case goes on; and if they then process successfully won reimbursements right away so that you can get your money 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 safeguarding its profitability by raising your premiums, you'll feel the sting later.