Subrogation is a term that's understood in insurance and legal circles but often not by the people they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to comprehend an overview of the process. The more knowledgeable you are about it, the better decisions you can make about your insurance company.
Every insurance policy you own is an assurance that, if something bad happens to you, the firm that insures the policy will make good without unreasonable delay. If you get injured at work, for instance, your employer's workers compensation insurance picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.
But since ascertaining who is financially responsible for services or repairs is typically a tedious, lengthy affair – and delay often increases the damage to the policyholder – insurance companies usually decide to pay up front and assign blame after the fact. They then need a method to recoup the costs if, when all the facts are laid out, they weren't actually responsible for the payout.
For Example
Your stove catches fire and causes $10,000 in home damages. Happily, you have property insurance and it pays out your claim in full. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is reason to believe 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 company is out ten grand. What does the company 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 companies 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 done to your person or property. But under subrogation law, your insurer is given some of your rights 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 the Insured?
For one thing, if you have a deductible, it wasn't just your insurer who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to be precise, $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to recoup its losses by increasing your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases enthusiastically, it is acting both in its own interests and in yours. If all $10,000 is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent at fault), you'll typically get half your deductible back, depending on the laws in your state.
Additionally, 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 Auto accident attorney Lithia Springs GA, pursue subrogation and succeeds, it will recover your losses in addition to its own.
All insurers are not created equal. When shopping around, it's worth looking at the reputations of competing companies to find out if they pursue legitimate subrogation claims; if they resolve those claims quickly; if they keep their clients advised as the case continues; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, on the other hand, an insurer has a reputation of honoring claims that aren't its responsibility and then protecting its bottom line by raising your premiums, you'll feel the sting later.