Subrogation is a term that's well-known among insurance and legal firms but often not by the policyholders who hire them. Rather than leave it to the professionals, it is in your self-interest to know an overview of the process. The more you know about it, the better decisions you can make with regard to your insurance company.
An insurance policy you own is an assurance that, if something bad occurs, the insurer of the policy will make restitutions in one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) decide who was at fault and that party's insurance covers the damages.
But since figuring out who is financially accountable for services or repairs is sometimes a confusing affair – and time spent waiting in some cases increases the damage to the victim – insurance firms often decide to pay up front and assign blame after the fact. They then need a mechanism to regain the costs if, ultimately, they weren't in charge of the expense.
Your living room catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays out your claim in full. However, in its investigation it finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him responsible for the damages. The home has already been fixed up in the name of expediency, but your insurance firm is out $10,000. What does the firm do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement 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. Ordinarily, only you can sue for damages done to your person 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 that was originally due to you, because it has covered the amount already.
How Does This Affect the Insured?
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 lost some money too – to the tune of $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to recoup its expenses by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them efficiently, it is acting both in its own interests and in yours. 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 one-half responsible), you'll typically get $500 back, based on the laws in most states.
In addition, if the total expense 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 insurance claims attorney Tacoma, WA, pursue subrogation and wins, it will recover your costs as well as its own.
All insurers are not created equal. When comparing, it's worth looking at the records of competing firms to find out if they pursue valid subrogation claims; if they do so with some expediency; if they keep their accountholders updated as the case continues; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, instead, an insurer has a reputation of paying out claims that aren't its responsibility and then protecting its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.