Subrogation is a concept that's understood among insurance and legal companies but rarely by the people they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your benefit to understand an overview of the process. The more information you have, the better decisions you can make about your insurance policy.
Any insurance policy you have is a promise that, if something bad occurs, the company that insures the policy will make good without unreasonable delay. If you get an injury while working, your employer's workers compensation picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.
But since determining who is financially accountable for services or repairs is regularly a confusing affair – and time spent waiting sometimes compounds the damage to the policyholder – insurance firms often opt to pay up front and figure out the blame afterward. They then need a means to get back the costs if, in the end, they weren't responsible for the expense.
For Example
Your electric outlet catches fire and causes $10,000 in home 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 to blame for the loss. You already have your money, but your insurance agency is out $10,000. What does the agency do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the way 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. Under ordinary circumstances, only you can sue for damages done to your self or property. But under subrogation law, your insurer is given 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 Does This Matter to Me?
For starters, 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 have a stake in the outcome as well – to be precise, $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to get back its expenses by ballooning your premiums. On the other hand, if it knows which cases it is owed and goes after them efficiently, it is acting both in its own interests and in yours. If all of the money 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 to blame), you'll typically get half your deductible back, depending on the laws in your state.
Furthermore, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as attorneys that specialize in auto accidents Lithia springs GA, pursue subrogation and wins, it will recover your expenses in addition to its own.
All insurance agencies are not created equal. When shopping around, it's worth examining the records of competing companies to find out if they pursue valid subrogation claims; if they do so without dragging their feet; if they keep their accountholders updated as the case continues; and if they then process successfully won reimbursements immediately so that you can get your deductible back and move on with your life. If, instead, an insurance agency has a record of honoring claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, you'll feel the sting later.