Subrogation is a concept that's understood among legal and insurance firms but often not by the policyholders 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 understand the steps of how it works. The more knowledgeable you are about it, the better decisions you can make about your insurance policy.
Every insurance policy you have is a promise that, if something bad happens to you, the firm on the other end of the policy will make restitutions without unreasonable delay. If a fire damages your home, your property insurance steps in to pay you or pay for the repairs, subject to state property damage laws.
But since ascertaining who is financially accountable for services or repairs is sometimes a heavily involved affair – and time spent waiting sometimes adds to the damage to the victim – insurance firms often opt to pay up front and assign blame later. They then need a means to recover the costs if, once the situation is fully assessed, they weren't actually in charge of the payout.
For Example
Your living room catches fire and causes $10,000 in home 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 reason to believe that a judge would find him liable 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. Normally, only you can sue for damages to your person or property. But under subrogation law, your insurer is considered to have some of your rights 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.
How Does This Affect Policyholders?
For one thing, if you have a deductible, it wasn't just your insurer 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 choose to recoup its losses by ballooning 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 $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half culpable), you'll typically get half your deductible back, depending on your state laws.
In addition, if the total loss 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 fathers rights attorney Boulder City nv, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurance companies are not the same. When shopping around, it's worth examining the reputations of competing firms to determine whether they pursue valid subrogation claims; if they resolve those claims with some expediency; if they keep their clients advised as the case goes on; and if they then process successfully won reimbursements immediately 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 profitability by raising your premiums, you should keep looking.