Subrogation is a term that's well-known among legal and insurance firms but often not by the customers who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to know an overview of the process. The more information you have about it, the more likely relevant proceedings will work out in your favor.
Every insurance policy you have is a promise that, if something bad happens to you, the insurer of the policy will make good without unreasonable delay. If you get injured while working, your company's workers compensation agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.
But since figuring out who is financially accountable for services or repairs is regularly a heavily involved affair – and time spent waiting sometimes compounds the damage to the policyholder – insurance firms usually opt to pay up front and figure out the blame afterward. They then need a method to recoup the costs if, when all the facts are laid out, they weren't actually responsible for the expense.
Let's Look at an Example
Your bedroom catches fire and causes $10,000 in house damages. Happily, you have property insurance and it pays for the repairs. However, in its investigation it finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him liable for the loss. You already have your money, 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 reimbursement when it pays out a claim that turned out not to be its responsibility. 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. Under ordinary circumstances, only you can sue for damages done to your self or property. But under subrogation law, your insurer is given 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 the Insured?
For starters, if you have a deductible, it wasn't just your insurer that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurance company is timid on any subrogation case it might not win, it might opt to recover its costs by raising your premiums and call it a day. On the other hand, if it has a capable legal team and goes after those cases aggressively, it is acting both in its own interests and in yours. If all of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent at fault), you'll typically get half your deductible back, depending on your state laws.
In addition, if the total cost 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 criminal defense lawyer near me, successfully press a subrogation case, it will recover your losses in addition to its own.
All insurers are not created equal. When shopping around, it's worth contrasting the records of competing agencies to determine whether they pursue winnable subrogation claims; if they resolve those claims fast; if they keep their clients advised as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your deductible 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 protecting its bottom line by raising your premiums, you should keep looking.