Subrogation is an idea that's understood among insurance and legal professionals but rarely by the policyholders they represent. Even if it sounds complicated, it would be in your benefit to understand an overview of how it works. The more information you have, the better decisions you can make about your insurance company.
An insurance policy you hold is a commitment that, if something bad happens to you, the business on the other end of the policy will make restitutions without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) determine who was to blame and that party's insurance pays out.
But since ascertaining who is financially responsible for services or repairs is typically a time-consuming affair – and time spent waiting sometimes compounds the damage to the policyholder – insurance firms in many cases decide to pay up front and assign blame afterward. They then need a method to regain the costs if, once the situation is fully assessed, they weren't responsible for the expense.
Can You Give an Example?
Your bedroom catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it pays for the repairs. 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 accountable for the damages. You already have your money, but your insurance firm is out ten grand. What does the firm do next?
How Subrogation Works
This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement 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 to your self or property. But under subrogation law, your insurance company is considered to have 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.
Why Do I Need to Know This?
For one thing, if you have 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 insurer is timid on any subrogation case it might not win, it might opt to recover its costs by boosting your premiums. On the other hand, if it knows which cases it is owed and goes after them enthusiastically, it is doing you a favor as well as itself. 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 responsible), you'll typically get $500 back, depending on your state laws.
Furthermore, if the total loss 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 Criminal defense cottonwood heights ut, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurance companies are not created equal. When comparing, it's worth comparing the reputations of competing companies to evaluate if they pursue winnable subrogation claims; if they resolve those claims without dragging their feet; if they keep their customers posted as the case goes on; 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 insurance firm has a reputation of honoring claims that aren't its responsibility and then covering its income by raising your premiums, you'll feel the sting later.