Subrogation is an idea that's understood in insurance and legal circles but rarely by the people they represent. Even if it sounds complicated, it would be to your advantage to comprehend the nuances of how it works. The more you know about it, the more likely an insurance lawsuit will work out favorably.
Every insurance policy you have is an assurance that, if something bad occurs, the business on the other end of the policy will make restitutions without unreasonable delay. If your home is burglarized, your property insurance steps in to compensate you or pay for the repairs, subject to state property damage laws.
But since ascertaining who is financially responsible for services or repairs is sometimes a tedious, lengthy affair – and delay often compounds the damage to the policyholder – insurance companies often decide to pay up front and assign blame afterward. They then need a path to recoup the costs if, ultimately, they weren't actually in charge of the payout.
Let's Look at an Example
Your garage catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays for the repairs. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him to blame for the damages. You already have your money, but your insurance firm is out ten grand. What does the firm do next?
How Subrogation Works
This is where subrogation comes in. It is the process that an insurance company uses to claim payment 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. Normally, only you can sue for damages to your self or property. But under subrogation law, your insurer is considered to have some of your rights in exchange 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.
Why Do I Need to Know This?
For a start, 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 – to be precise, $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to recoup its losses by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases efficiently, it is doing you a favor as well as itself. If all is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found one-half to blame), you'll typically get half your deductible back, based on the laws in most states.
Additionally, 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 business law payson ut, pursue subrogation and wins, 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 legitimate subrogation claims; if they do so without delay; if they keep their policyholders posted as the case goes on; and if they then process successfully won reimbursements right away so that you can get your money back and move on with your life. If, on the other hand, an insurer has a record of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, you should keep looking.