Subrogation is a term that's understood among insurance and legal companies but often not by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to comprehend the nuances of the process. The more knowledgeable you are about it, the better decisions you can make about your insurance company.
An insurance policy you own is a commitment that, if something bad happens to you, the insurer of the policy will make restitutions in a timely fashion. If you get injured on the job, for example, your employer's workers compensation pays out for medical services. Employment lawyers handle the details; you just get fixed up.
But since determining who is financially responsible for services or repairs is typically a time-consuming affair – and time spent waiting sometimes increases the damage to the policyholder – insurance companies in many cases decide to pay up front and assign blame after the fact. They then need a means to get back the costs if, once the situation is fully assessed, they weren't in charge of the payout.
Let's Look at an Example
Your bedroom catches fire and causes $10,000 in home damages. Fortunately, 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 reason to believe that a judge would find him accountable for the damages. You already have your money, but your insurance agency is out $10,000. What does the agency do next?
How Subrogation Works
This is where subrogation comes in. It is the way 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. Ordinarily, only you can sue for damages done to your person or property. But under subrogation law, your insurer is considered to have some of your rights for having taken care of 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 you have 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 – namely, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to recover its expenses by upping your premiums. 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 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 responsible), you'll typically get half your deductible back, depending on your state laws.
Moreover, if the total expense 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 legal assistance springville ut, successfully press a subrogation case, it will recover your expenses as well as its own.
All insurance agencies are not the same. When comparing, it's worth looking at the reputations of competing companies to evaluate whether they pursue valid subrogation claims; if they resolve those claims fast; if they keep their clients posted as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your deductible back and move on with your life. If, on the other hand, an insurance company has a reputation of honoring claims that aren't its responsibility and then safeguarding its income by raising your premiums, even attractive rates won't outweigh the eventual headache.