Subrogation and How It Affects Your Insurance

Subrogation is a concept that's understood in insurance and legal circles but sometimes not by the customers they represent. Even if you've never heard the word before, it would be in your self-interest to comprehend the steps of the process. The more information you have about it, the more likely it is that an insurance lawsuit will work out favorably.

An insurance policy you own is a promise that, if something bad happens to you, the company on the other end of the policy will make good in a timely manner. If a storm damages your real estate, for example, your property insurance steps in to pay you or facilitate the repairs, subject to state property damage laws.

But since figuring out who is financially responsible for services or repairs is regularly a confusing affair – and time spent waiting sometimes increases the damage to the victim – insurance companies in many cases decide to pay up front and assign blame after the fact. They then need a path to recover the costs if, ultimately, they weren't in charge of the expense.

Let's Look at an Example

Your kitchen catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it takes care of the repair expenses. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him responsible for the damages. You already have your money, but your insurance company is out $10,000. What does the company do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the way 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. Usually, only you can sue for damages to your self or property. But under subrogation law, your insurance company is extended 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 Should I Care?

For one thing, if your insurance policy stipulated a deductible, it wasn't just your insurance company that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – namely, $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to recover its costs by increasing your premiums. On the other hand, if it knows which cases it is owed and pursues them enthusiastically, it is acting both in its own interests and in yours. If all of the money is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent accountable), you'll typically get half your deductible back, depending on the laws in your state.

In addition, if the total cost 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 personal injury lawyer Bonney Lake WA, successfully press a subrogation case, it will recover your expenses as well as its own.

All insurers are not the same. When shopping around, it's worth researching the records of competing firms to determine whether they pursue valid subrogation claims; if they resolve those claims fast; if they keep their clients informed as the case goes on; 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 insurance agency has a record of honoring claims that aren't its responsibility and then covering its profit margin by raising your premiums, you'll feel the sting later.