Subrogation is a term that's well-known among legal and insurance firms but often not by the customers who employ them. Even if you've never heard the word before, it would be to your advantage to understand an overview of how it works. The more information you have, the more likely an insurance lawsuit will work out in your favor.
Every insurance policy you have is a promise that, if something bad happens to you, the firm that insures the policy will make good in one way or another in a timely manner. If your real estate suffers fire damage, your property insurance steps in to repay you or pay for the repairs, subject to state property damage laws.
But since determining who is financially responsible for services or repairs is sometimes a time-consuming affair – and time spent waiting sometimes adds to the damage to the policyholder – insurance companies often decide to pay up front and figure out the blame after the fact. They then need a path to recover the costs if, in the end, they weren't actually responsible for the expense.
Can You Give an Example?
Your stove catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it pays for the repairs. 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 responsible for the damages. You already have your money, but your insurance agency is out all that money. What does the agency do next?
How Does Subrogation Work?
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. Usually, only you can sue for damages to your person or property. But under subrogation law, your insurer is extended 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 Individuals?
For one thing, if you have a deductible, it wasn't just your insurer that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to get back its expenses by boosting your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and pursues them enthusiastically, it is doing you a favor as well as itself. If all 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 at fault), you'll typically get half your deductible back, based on the laws in most states.
Furthermore, if the total loss of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as legal counsel springville ut, successfully press a subrogation case, it will recover your costs as well as its own.
All insurers are not created equal. When shopping around, it's worth scrutinizing the records of competing companies to determine if they pursue legitimate subrogation claims; if they do so without dragging their feet; if they keep their clients apprised 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 record of paying out claims that aren't its responsibility and then safeguarding its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.