Subrogation is an idea that's well-known among legal and insurance professionals but rarely by the policyholders they represent. Even if it sounds complicated, it would be to your advantage to understand an overview of the process. The more you know, the better decisions you can make about your insurance policy.
An insurance policy you have is an assurance that, if something bad happens to you, the business that covers the policy will make good in one way or another without unreasonable delay. If your real estate suffers fire damage, your property insurance steps in to compensate you or pay for the repairs, subject to state property damage laws.
But since figuring out who is financially accountable for services or repairs is often a confusing affair – and delay often increases the damage to the victim – insurance firms often opt to pay up front and figure out the blame after the fact. They then need a mechanism to regain the costs if, when all the facts are laid out, they weren't actually responsible for the expense.
Can You Give an Example?
Your stove catches fire and causes $10,000 in house damages. Fortunately, 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 reasonable possibility that a judge would find him liable for the loss. The home has already been fixed up in the name of expediency, but your insurance company is out $10,000. 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 to your self or property. But under subrogation law, your insurance company is extended some of your rights in exchange for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Does This Matter to Me?
For one thing, if your insurance policy stipulated a deductible, it wasn't just your insurance company who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its expenses by raising your premiums. On the other hand, if it knows which cases it is owed and pursues them efficiently, it is acting both in its own interests and in yours. If all ten grand 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 $500 back, based on the laws in most states.
In addition, if the total loss 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 foreclosure lawyers Batesville AR, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurance agencies are not created equal. When comparing, it's worth researching the records of competing firms to determine if they pursue valid subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their customers posted as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, instead, an insurer has a reputation of honoring claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.