Subrogation is a concept that's understood among insurance and legal companies but often not by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your benefit to comprehend the nuances of how it works. The more information you have about it, the more likely it is that an insurance lawsuit will work out favorably.
Every insurance policy you own is a commitment that, if something bad happens to you, the insurer of the policy will make restitutions without unreasonable delay. If a hailstorm damages your house, your property insurance steps in to pay you or enable the repairs, subject to state property damage laws.
But since figuring out who is financially accountable for services or repairs is typically a time-consuming affair – and time spent waiting sometimes adds to the damage to the policyholder – insurance firms usually decide to pay up front and figure out the blame after the fact. They then need a method to get back the costs if, once the situation is fully assessed, they weren't actually responsible for the expense.
For Example
Your kitchen catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it takes care of the repair expenses. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him responsible for the damages. 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 Subrogation Works
This is where subrogation comes in. It is the method that an insurance company uses to claim payment after it has paid for something that should have been paid by some other entity. 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. Under ordinary circumstances, only you can sue for damages 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 the Insured?
For a start, 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 have a stake in the outcome as well – to be precise, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recoup its costs by raising your premiums and call it a day. On the other hand, if it has a proficient legal team and goes after those cases efficiently, it is acting both in its own interests and in yours. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half accountable), you'll typically get $500 back, based on the laws in most states.
Furthermore, if the total expense 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 insurance claims attorney Tacoma, WA, pursue subrogation and succeeds, it will recover your costs as well as its own.
All insurers are not created equal. When shopping around, it's worth weighing the reputations of competing agencies to find out whether they pursue valid subrogation claims; if they do so quickly; if they keep their accountholders apprised as the case continues; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, instead, an insurance firm has a reputation of honoring claims that aren't its responsibility and then protecting its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.