Subrogation is an idea that's understood in insurance and legal circles but sometimes not by the policyholders they represent. Even if you've never heard the word before, it would be to your advantage to comprehend the steps of how it works. The more information you have, the better decisions you can make about your insurance policy.
An insurance policy you have is a promise that, if something bad occurs, the firm on the other end of the policy will make good in one way or another in a timely fashion. If your vehicle is rear-ended, insurance adjusters (and the courts, when necessary) decide who was at fault and that party's insurance pays out.
But since ascertaining who is financially responsible for services or repairs is usually a heavily involved affair a€" and delay sometimes adds to the damage to the victim a€" insurance companies in many cases opt to pay up front and assign blame later. They then need a method to regain the costs if, when all is said and done, they weren't responsible for the expense.
Your bedroom catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays for the repairs. However, the assessor assigned to your case finds out that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him liable for the damages. You already have your money, 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 insurance firms 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 done to your person 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.
Why Do I Need to Know This?
For a start, if your insurance policy stipulated 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 a€" to the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recoup its costs by increasing your premiums and call it a day. On the other hand, if it has a competent legal team and goes after those cases efficiently, it is acting both in its own interests and in yours. If all 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 culpable), you'll typically get $500 back, based on the laws in most states.
Furthermore, if the total loss 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 Divorce law pleasant grove ut, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurers are not the same. When shopping around, it's worth weighing the records of competing agencies to find out if they pursue valid subrogation claims; if they do so with some expediency; if they keep their policyholders updated as the case continues; 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 insurance agency has a reputation of honoring claims that aren't its responsibility and then protecting its profitability by raising your premiums, you should keep looking.