Subrogation is a term that's well-known among insurance and legal professionals 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 would be in your self-interest to comprehend the steps of how it works. The more knowledgeable you are about it, the better decisions you can make with regard to your insurance company.
An insurance policy you have is a commitment that, if something bad occurs, the company on the other end of the policy will make restitutions in one way or another in a timely fashion. If you get an injury while working, your company's workers compensation pays out for medical services. Employment lawyers handle the details; you just get fixed up.
But since ascertaining who is financially responsible for services or repairs is often a time-consuming affair – and time spent waiting sometimes increases the damage to the victim – insurance companies usually decide to pay up front and assign blame after the fact. They then need a means to recoup the costs if, ultimately, they weren't in charge of the expense.
Let's Look at an Example
Your living room catches fire and causes $10,000 in house damages. Happily, you have property insurance and it pays for the repairs. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him accountable for the damages. You already have your money, but your insurance firm is out all that money. 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 reimbursement when it pays out a claim that turned out not to be its responsibility. 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 person or property. But under subrogation law, your insurer is given 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 Does This Matter to Me?
For one thing, if your insurance policy stipulated a deductible, it wasn't just your insurer who 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 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 proficient legal team and pursues those cases aggressively, it is acting both in its own interests and in yours. If all ten grand 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 at fault), you'll typically get $500 back, depending on your state laws.
Moreover, 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 Personal Injury Attorney Bonney Lake WA, pursue subrogation and wins, it will recover your losses in addition to its own.
All insurers are not created equal. When shopping around, it's worth comparing the records of competing companies to evaluate if they pursue legitimate subrogation claims; if they do so without dragging their feet; if they keep their accountholders advised as the case continues; and if they then process successfully won reimbursements right away so that you can get your funding back and move on with your life. If, instead, an insurer has a reputation of honoring claims that aren't its responsibility and then covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.