Subrogation is a concept that's well-known in insurance and legal circles but rarely by the customers they represent. Even if you've never heard the word before, it is to your advantage to know the nuances of how it works. The more you know about it, the more likely relevant proceedings will work out in your favor.
Every insurance policy you hold is an assurance that, if something bad occurs, the insurer of the policy will make restitutions in one way or another in a timely manner. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) decide who was at fault and that party's insurance pays out.
But since figuring out who is financially responsible for services or repairs is sometimes a confusing affair – and time spent waiting often compounds the damage to the victim – insurance firms in many cases decide to pay up front and assign blame afterward. They then need a means to get back the costs if, when all is said and done, they weren't in charge of the payout.
Can You Give an Example?
Your electric outlet catches fire and causes $10,000 in home damages. Happily, you have property insurance and it pays out your claim in full. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him accountable for the damages. The home 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 method that an insurance company uses to claim reimbursement 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. Usually, only you can sue for damages done to your self or property. But under subrogation law, your insurance company is considered to have some of your rights in exchange for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Should I Care?
For one thing, 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 – namely, $1,000. If your insurance company is timid on any subrogation case it might not win, it might opt to get back its losses by ballooning your premiums. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, it is acting both in its own interests and in yours. 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 to blame), 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 living trust 66061, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurers are not created equal. When shopping around, it's worth scrutinizing the reputations of competing companies to determine if they pursue valid subrogation claims; if they do so with some expediency; if they keep their customers apprised as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your money back and move on with your life. If, on the other hand, an insurer has a record of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you'll feel the sting later.