Subrogation is a term that's well-known in insurance and legal circles but often not by the customers they represent. Even if it sounds complicated, it would be in your self-interest to comprehend the steps of how it works. The more information you have about it, the more likely it is that an insurance lawsuit will work out favorably.

An insurance policy you have is an assurance that, if something bad occurs, the company on the other end of the policy will make restitutions without unreasonable delay. If your property is broken into, for example, your property insurance steps in to repay you or pay for the repairs, subject to state property damage laws.

But since figuring out who is financially responsible for services or repairs is typically a time-consuming affair – and delay in some cases increases the damage to the victim – insurance firms in many cases decide to pay up front and assign blame after the fact. They then need a path to regain the costs if, when all is said and done, they weren't actually in charge of the expense.

For Example

Your electric outlet catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays out your claim in full. 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 accountable for the damages. The home has already been fixed up in the name of expediency, but your insurance company is out all that money. 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 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 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 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, 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 the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recover its expenses by upping your premiums. On the other hand, if it has a capable legal team 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 50 percent culpable), you'll typically get $500 back, based on the laws in most states.

In addition, if the total price 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 personal injury lawyer Marietta, GA, pursue subrogation and wins, it will recover your costs in addition to its own.

All insurance agencies are not created equal. When comparing, it's worth contrasting the reputations of competing companies to evaluate if they pursue winnable subrogation claims; if they resolve those claims with some expediency; if they keep their clients informed as the case continues; 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 insurer has a reputation of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, you should keep looking.