Subrogation is an idea that's well-known in legal and insurance circles but often not by the policyholders who hire them. Rather than leave it to the professionals, it is to your advantage to understand the nuances of the process. The more knowledgeable you are, the more likely it is that relevant proceedings will work out favorably.
An insurance policy you have is a promise that, if something bad happens to you, the insurer of the policy will make good in one way or another in a timely fashion. If a storm damages your real estate, your property insurance steps in to compensate you or enable the repairs, subject to state property damage laws.
But since figuring out who is financially accountable for services or repairs is regularly a tedious, lengthy affair – and time spent waiting often adds to the damage to the policyholder – insurance companies usually decide to pay up front and assign blame after the fact. They then need a mechanism to recoup the costs if, when there is time to look at all the facts, they weren't actually responsible for the expense.
Can You Give an Example?
Your stove catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it takes care of the repair expenses. 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 to blame for the loss. The house has already been repaired in the name of expediency, but your insurance agency is out all that money. What does the agency 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. Normally, only you can sue for damages done to your self or property. But under subrogation law, your insurer is considered to have 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 Policyholders?
For a start, if your insurance policy stipulated 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 insurer is timid on any subrogation case it might not win, it might choose to recoup its expenses by upping your premiums. On the other hand, if it knows which cases it is owed and pursues those cases efficiently, 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 one-half accountable), you'll typically get half your deductible back, depending on your state laws.
Moreover, if the total cost of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as serious injury attorney pasadena md, 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 measuring the records of competing agencies to determine if they pursue winnable subrogation claims; if they do so without dragging their feet; if they keep their clients 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, instead, an insurer has a record of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.