Subrogation is a concept that's well-known among legal and insurance professionals but rarely by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is to your advantage to comprehend an overview of the process. The more you know, the more likely an insurance lawsuit will work out in your favor.
Every insurance policy you own is a commitment that, if something bad happens to you, the company on the other end of the policy will make restitutions in one way or another without unreasonable delay. If your vehicle is in a fender-bender, insurance adjusters (and police, when necessary) determine who was at fault and that party's insurance pays out.
But since determining who is financially responsible for services or repairs is sometimes a tedious, lengthy affair – and delay in some cases adds to the damage to the policyholder – insurance firms often decide to pay up front and figure out the blame later. 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 electric outlet catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays for the repairs. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him responsible for the damages. You already have your money, but your insurance company is out ten grand. 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 payment 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. Normally, 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 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, it wasn't just your insurer 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 timid on any subrogation case it might not win, it might choose to recoup its expenses by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them aggressively, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent accountable), you'll typically get half your deductible back, depending on the laws in your state.
Moreover, if the total price 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 Legal representation for Bonney lake Residents, pursue subrogation and wins, it will recover your expenses as well as its own.
All insurance agencies are not the same. When shopping around, it's worth comparing the reputations of competing companies to determine if they pursue valid subrogation claims; if they resolve those claims without delay; if they keep their accountholders informed as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, on the other hand, an insurance firm has a record of honoring claims that aren't its responsibility and then protecting its income by raising your premiums, you'll feel the sting later.