Subrogation is a term that's well-known among legal and insurance professionals but sometimes not by the customers they represent. Even if it sounds complicated, it would be to your advantage to know the steps of the process. The more knowledgeable you are about it, the better decisions you can make about your insurance policy.
Every insurance policy you hold is an assurance that, if something bad happens to you, the firm that covers the policy will make good in a timely fashion. If your vehicle is hit, insurance adjusters (and police, when necessary) decide who was to blame and that person's insurance pays out.
But since determining who is financially accountable for services or repairs is typically a time-consuming affair – and delay often increases the damage to the policyholder – insurance firms in many cases decide to pay up front and assign blame later. They then need a way to recoup the costs if, when there is time to look at all the facts, they weren't actually in charge of the expense.
Let's Look at an Example
Your living room catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it pays for the repairs. However, in its investigation it finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him responsible for the damages. You already have your money, but your insurance agency is out ten grand. What does the agency do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the way that an insurance company uses to claim payment after it has paid for something that should have been paid by some other entity. Some companies 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 person or property. But under subrogation law, your insurance company 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 the Insured?
For starters, if you have 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 insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its costs by boosting your premiums. On the other hand, if it has a proficient legal team and pursues them efficiently, 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 one-half responsible), you'll typically get half your deductible back, depending on your state laws.
Moreover, 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 expensive. If your insurance company or its property damage lawyers, such as worker compensation terms Marietta GA, successfully press a subrogation case, it will recover your expenses as well as its own.
All insurers are not created equal. When comparing, it's worth comparing the records of competing companies to find out whether they pursue winnable subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their accountholders informed as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, instead, an insurer has a reputation of paying out claims that aren't its responsibility and then safeguarding its income by raising your premiums, you should keep looking.