Subrogation is an idea that's understood among insurance and legal professionals but often not by the customers who hire them. Even if you've never heard the word before, it is in your benefit to understand the nuances of how it works. The more you know about it, the better decisions you can make about your insurance company.
Every insurance policy you hold is a commitment that, if something bad happens to you, the firm on the other end of the policy will make restitutions in one way or another in a timely fashion. If your vehicle is hit, insurance adjusters (and the judicial system, when necessary) determine who was to blame and that party's insurance pays out.
But since determining who is financially responsible for services or repairs is often a time-consuming affair – and delay often compounds the damage to the victim – insurance companies often opt to pay up front and assign blame later. They then need a way to get back the costs if, when there is time to look at all the facts, they weren't in charge of the expense.
For Example
Your stove catches fire and causes $10,000 in home 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 liable for the loss. The house has already been fixed up in the name of expediency, but your insurance firm is out $10,000. What does the firm do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement 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. Ordinarily, 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.
How Does This Affect Policyholders?
For a start, if you have 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 opt to recoup its costs by increasing your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them efficiently, it is acting both in its own interests and in yours. If all of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half culpable), you'll typically get $500 back, depending on your state laws.
Moreover, if the total loss of an accident is over 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 auto accident lawyer Tacoma WA, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurance agencies are not the same. When comparing, it's worth researching the records of competing agencies to determine whether they pursue winnable subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their clients updated as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, instead, an insurance agency has a record of honoring claims that aren't its responsibility and then protecting its bottom line by raising your premiums, you'll feel the sting later.