What You Need to Know About Subrogation

Subrogation is a term that's understood among legal and insurance professionals but often not by the policyholders they represent. Rather than leave it to the professionals, it is in your self-interest to know an overview of how it works. The more knowledgeable you are, the better decisions you can make about your insurance policy.

An insurance policy you hold is a promise that, if something bad happens to you, the firm on the other end of the policy will make good without unreasonable delay. If a windstorm damages your real estate, for example, your property insurance agrees 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 sometimes a tedious, lengthy affair – and delay in some cases adds to the damage to the victim – insurance firms usually opt to pay up front and assign blame after the fact. They then need a method to recoup the costs if, when all the facts are laid out, they weren't actually responsible for the payout.

Can You Give an Example?

Your living room catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it pays out your claim in full. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him responsible for the loss. The home has already been fixed up in the name of expediency, 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 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 done to your self or property. But under subrogation law, your insurance company is considered to have some of your rights in exchange for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.

How Does This Affect Me?

For one thing, if you have a deductible, it wasn't just your insurance company who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its expenses by raising your premiums. On the other hand, if it has a competent legal team and pursues them enthusiastically, it is acting both in its own interests and in yours. If all is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get $500 back, based on the laws in most states.

In addition, if the total cost 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 family law firm Las Vegas NV, successfully press a subrogation case, it will recover your losses in addition to its own.

All insurers are not created equal. When comparing, it's worth looking at the records of competing firms to evaluate if they pursue winnable subrogation claims; if they resolve those claims fast; if they keep their policyholders advised as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, instead, an insurer has a record of paying out claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.