Subrogation is an idea that's well-known in insurance and legal circles but rarely by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your benefit to understand an overview of how it works. The more you know about it, the better decisions you can make with regard to your insurance company.
Every insurance policy you hold is a promise that, if something bad occurs, the insurer of the policy will make good without unreasonable delay. If you get an injury on the job, your employer's workers compensation picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.
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 policyholder – insurance companies in many cases opt to pay up front and assign blame afterward. They then need a means to get back the costs if, when there is time to look at all the facts, they weren't actually in charge of the expense.
Let's Look at an Example
Your kitchen catches fire and causes $10,000 in home damages. Happily, you have property insurance and it pays out your claim in full. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him responsible for the loss. You already have your money, but your insurance firm is out $10,000. What does the firm do next?
How Subrogation Works
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. Under ordinary circumstances, 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 that was originally due to you, because it has covered the amount already.
How Does This Affect the Insured?
For a start, if your insurance policy stipulated a deductible, it wasn't just your insurer that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to recover its costs by boosting your premiums. On the other hand, if it has a proficient legal team and pursues them aggressively, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found one-half accountable), you'll typically get half your deductible back, depending on your state laws.
Additionally, if the total expense of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as Divorce law Orem UT, pursue subrogation and wins, it will recover your expenses in addition to its own.
All insurance companies are not created equal. When comparing, it's worth weighing the reputations of competing agencies to determine if they pursue winnable subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their customers informed as the case proceeds; 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, on the other hand, an insurer has a reputation of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, you should keep looking.