Subrogation is a term that's well-known in insurance and legal circles but sometimes not by the people who hire them. Even if it sounds complicated, it is to your advantage to understand an overview of the process. The more information you have, the better decisions you can make about your insurance policy.
Any insurance policy you own is a promise that, if something bad happens to you, the business that covers the policy will make good in a timely manner. If your vehicle is rear-ended, insurance adjusters (and the courts, when necessary) decide who was to blame and that party's insurance pays out.
But since determining who is financially responsible for services or repairs is regularly a tedious, lengthy affair – and time spent waiting often compounds the damage to the victim – insurance companies often opt to pay up front and assign blame afterward. They then need a means to regain the costs if, ultimately, they weren't actually responsible for the payout.
Your electric outlet catches fire and causes $10,000 in house 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 a reasonable possibility that a judge would find him liable for the loss. 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 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 to your self 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 originally due to you, because it has covered the amount already.
How Does This Affect Policyholders?
For one thing, 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 have a stake in the outcome as well – namely, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to recover its expenses by upping your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and pursues those cases aggressively, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent at fault), 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. If your insurance company or its property damage lawyers, such as family law morgan hill ca, pursue subrogation and wins, it will recover your costs as well as its own.
All insurance agencies are not the same. When shopping around, it's worth examining the records of competing companies to evaluate whether they pursue valid subrogation claims; if they do so in a reasonable amount of time; if they keep their accountholders advised as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, instead, an insurance agency has a record of paying out claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, you'll feel the sting later.