Subrogation is an idea that's understood in insurance and legal circles but rarely by the policyholders who employ 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 you know, the more likely it is that relevant proceedings will work out favorably.
An insurance policy you have is a commitment that, if something bad occurs, the business on the other end of the policy will make good in one way or another in a timely fashion. If your house is broken into, your property insurance agrees to pay 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 typically a tedious, lengthy affair – and delay often compounds the damage to the victim – insurance companies often decide to pay up front and figure out the blame after the fact. They then need a method to regain the costs if, once the situation is fully assessed, they weren't responsible for the expense.
Can You Give an Example?
You are in a car accident. Another car crashed into yours. The police show up to assess the situation, you exchange insurance information, and you go on your way. You have comprehensive insurance and file a repair claim. Later police tell the insurance companies that the other driver was entirely at fault and her insurance policy should have paid for the repair of your auto. How does your insurance company get its money back?
How Subrogation Works
This is where subrogation comes in. It is the process 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. Ordinarily, only you can sue for damages to your self or property. But under subrogation law, your insurer is considered to have 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.
How Does This Affect Individuals?
For a start, if you have a deductible, your insurer 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 choose to recoup its losses by ballooning your premiums. On the other hand, if it has a capable legal team and goes after them enthusiastically, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent culpable), you'll typically get $500 back, based on the laws in most states.
In addition, if the total expense of an accident is over your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as wills & trust 66061, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurers are not created equal. When shopping around, it's worth measuring the records of competing firms to determine if they pursue valid subrogation claims; if they do so in a reasonable amount of time; if they keep their clients apprised as the case goes on; and if they then process successfully won reimbursements right away so that you can get your funding back and move on with your life. If, on the other hand, an insurance company has a reputation of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you'll feel the sting later.