Subrogation is an idea that's well-known in insurance and legal circles but sometimes not by the people who employ them. Rather than leave it to the professionals, it is in your self-interest to understand the nuances of how it works. The more knowledgeable you are about it, the better decisions you can make with regard to your insurance policy.
An insurance policy you own is a commitment that, if something bad happens to you, the business that insures the policy will make good in one way or another in a timely fashion. If your house is burglarized, for example, your property insurance steps in to remunerate you or pay for the repairs, subject to state property damage laws.
But since ascertaining who is financially responsible for services or repairs is typically a time-consuming affair – and time spent waiting often increases the damage to the victim – insurance companies in many cases opt to pay up front and figure out the blame afterward. They then need a mechanism to get back the costs if, when all is said and done, they weren't in charge of the expense.
For Example
Your bedroom catches fire and causes $10,000 in house 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 a decent chance that a judge would find him accountable for the damages. You already have your money, but your insurance agency is out ten grand. What does the agency do next?
How Does Subrogation Work?
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 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 self or property. But under subrogation law, your insurer is extended 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.
How Does This Affect Individuals?
For a start, 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 insurance company is timid on any subrogation case it might not win, it might opt to get back its costs by ballooning your premiums and call it a day. On the other hand, if it has a proficient legal team and goes after those cases enthusiastically, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent accountable), you'll typically get half your deductible back, based on the laws in most states.
Moreover, if the total cost of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as medical malpractice Mclean Va, successfully press a subrogation case, it will recover your losses as well as its own.
All insurers are not the same. When comparing, it's worth looking at the reputations of competing firms to evaluate if they pursue winnable subrogation claims; if they resolve those claims fast; if they keep their clients informed as the case continues; 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 insurance company has a reputation of honoring claims that aren't its responsibility and then protecting its income by raising your premiums, you'll feel the sting later.