Subrogation is an idea that's well-known in legal and insurance circles but sometimes not by the policyholders who employ them. Even if it sounds complicated, it is in your benefit to understand the steps of how it works. The more knowledgeable you are about it, the better decisions you can make with regard to your insurance company.
An insurance policy you have is a promise that, if something bad happens to you, the business on the other end of the policy will make good in one way or another in a timely fashion. If you get injured on the job, your company's workers compensation insurance pays out for medical services. Employment lawyers handle the details; you just get fixed up.
But since determining who is financially responsible for services or repairs is usually a confusing affair – and delay in some cases adds to the damage to the victim – insurance companies in many cases opt to pay up front and assign blame later. They then need a way to get back the costs if, when all is said and done, 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 home damages. Luckily, you have property insurance and it takes care of the repair expenses. However, the assessor assigned to your case finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him accountable for the loss. The home has already been repaired in the name of expediency, but your insurance agency is out $10,000. What does the agency do next?
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. Normally, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is extended some of your rights 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 Individuals?
For starters, if your insurance policy stipulated a deductible, your insurance company wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to the tune of $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its expenses by upping your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and pursues them enthusiastically, it is acting both in its own interests and in yours. If all $10,000 is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found one-half 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 personal injury lawyer Sumner WA, successfully press a subrogation case, it will recover your costs as well as its own.
All insurance agencies are not the same. When shopping around, it's worth scrutinizing the records of competing companies to evaluate if they pursue legitimate subrogation claims; if they resolve those claims fast; if they keep their customers informed as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your deductible back and move on with your life. If, on the other hand, an insurance firm has a reputation of honoring claims that aren't its responsibility and then safeguarding its income by raising your premiums, you should keep looking.