Subrogation is a concept that's understood in insurance and legal circles but often not by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your self-interest to understand the nuances of the process. The more knowledgeable you are, the more likely an insurance lawsuit will work out favorably.
Any insurance policy you hold is a promise that, if something bad happens to you, the company on the other end of the policy will make good in one way or another without unreasonable delay. If your home is broken into, your property insurance agrees to repay you or pay for the repairs, subject to state property damage laws.
But since determining who is financially responsible for services or repairs is usually a time-consuming affair – and time spent waiting often increases the damage to the victim – insurance firms in many cases opt to pay up front and assign blame after the fact. They then need a means to recover the costs if, ultimately, they weren't responsible for the payout.
Your garage catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays for the repairs. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him responsible for the damages. The house has already been fixed up in the name of expediency, but your insurance firm is out ten grand. What does the firm do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the way 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. Under ordinary circumstances, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is extended 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.
Why Should I Care?
For starters, if your insurance policy stipulated a deductible, your insurance company wasn't the only one who 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 unconcerned with pursuing subrogation even when it is entitled, it might opt to recover its costs by ballooning your premiums and call it a day. On the other hand, if it has a proficient legal team and pursues them enthusiastically, it is doing you a favor as well as itself. 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.
Additionally, if the total loss 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 civil rights university place wa, pursue subrogation and wins, it will recover your costs in addition to its own.
All insurance agencies are not the same. When shopping around, it's worth examining the records of competing agencies to evaluate if they pursue legitimate subrogation claims; if they resolve those claims with some expediency; if they keep their policyholders advised 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 safeguarding its profit margin by raising your premiums, you should keep looking.