Subrogation is a concept that's well-known among insurance and legal companies but often not by the policyholders who hire them. Even if you've never heard the word before, it would be in your self-interest to comprehend the steps of the process. The more knowledgeable you are about it, the better decisions you can make with regard to your insurance company.
An insurance policy you hold is a commitment that, if something bad occurs, the business on the other end of the policy will make restitutions in one way or another without unreasonable delay. If a fire damages your house, your property insurance steps in to compensate you or facilitate the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is often a time-consuming affair a€" and delay in some cases increases the damage to the victim a€" insurance companies usually decide to pay up front and figure out the blame after the fact. They then need a path to recover the costs if, when there is time to look at all the facts, they weren't actually responsible for the payout.
Let's Look at an Example
Your stove catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays for the repairs. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him to blame for the damages. 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 way that an insurance company uses to claim payment 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 to your person or property. But under subrogation law, your insurer is extended some of your rights in exchange for having taken care of 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 one thing, if you have a deductible, your insurer wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too a€" to the tune of $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to recoup its costs by upping your premiums and call it a day. On the other hand, if it has a proficient legal team and goes after those cases aggressively, it is acting both in its own interests and in yours. If all 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 to blame), you'll typically get half your deductible back, based on the laws in most states.
Additionally, if the total price of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely costly. If your insurance company or its property damage lawyers, such as divorce lawyer utah county, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurance companies are not the same. When shopping around, it's worth looking at the reputations of competing agencies to evaluate whether they pursue winnable subrogation claims; if they resolve those claims fast; if they keep their accountholders advised as the case continues; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, on the other hand, an insurance company has a record of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you'll feel the sting later.