Subrogation and How It Affects Policyholders

Subrogation is an idea that's well-known among insurance and legal firms but rarely by the people they represent. Even if you've never heard the word before, it is in your benefit 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 in your favor.

Every insurance policy you hold is a promise that, if something bad happens to you, the firm that insures the policy will make good in a timely manner. If a windstorm damages your property, for example, your property insurance steps in to compensate you or facilitate the repairs, subject to state property damage laws.

But since determining who is financially responsible for services or repairs is regularly a confusing affair – and delay often adds to the damage to the victim – insurance firms in many cases opt to pay up front and figure out the blame after the fact. They then need a method to recover the costs if, when all the facts are laid out, they weren't actually responsible for the expense.

Can You Give an Example?

Your stove catches fire and causes $10,000 in home damages. Happily, you have property insurance and it pays for the repairs. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him to blame 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 companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Normally, only you can sue for damages done to your self or property. But under subrogation law, your insurer is given some of your rights for making good on 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 starters, if your insurance policy stipulated a deductible, your insurer wasn't the only one 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 insurance company is lax about bringing subrogation cases to court, it might opt to get back its costs by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after them aggressively, it is doing you a favor as well as itself. If all ten grand 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 your state laws.

Furthermore, if the total loss 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 car accident attorney lithia springs ga, pursue subrogation and succeeds, it will recover your losses as well as its own.

All insurance agencies are not the same. When shopping around, it's worth looking up the reputations of competing companies to determine whether they pursue winnable subrogation claims; if they do so with some expediency; if they keep their customers updated 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, on the other hand, an insurer has a record of honoring claims that aren't its responsibility and then covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.