Subrogation is a concept that's well-known in insurance and legal circles but rarely by the policyholders they represent. Even if it sounds complicated, it is to your advantage to comprehend an overview of how it works. The more knowledgeable you are, the more likely it is that an insurance lawsuit will work out in your favor.
An insurance policy you own is a commitment that, if something bad happens to you, the business on the other end of the policy will make good without unreasonable delay. If your property suffers fire damage, for instance, your property insurance agrees to remunerate you or pay for the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is typically a tedious, lengthy affair – and delay in some cases compounds the damage to the victim – insurance firms often decide to pay up front and assign blame later. They then need a means to recoup the costs if, when all is said and done, they weren't 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 takes care of the repair expenses. However, the assessor assigned to your case 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. The house has already been repaired in the name of expediency, but your insurance company is out $10,000. What does the company 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. Ordinarily, only you can sue for damages to your self or property. But under subrogation law, your insurance company 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.
How Does This Affect Me?
For one thing, if you have a deductible, it wasn't just your insurance company 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 insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to recoup its costs by boosting your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and pursues them efficiently, it is doing you a favor as well as itself. If all is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent accountable), you'll typically get $500 back, based on the laws in most states.
Furthermore, if the total cost of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely costly. If your insurance company or its property damage lawyers, such as workers compensation Paddock Lake, WI, pursue subrogation and wins, it will recover your expenses in addition to its own.
All insurance agencies are not the same. When comparing, it's worth researching the records of competing firms to evaluate whether they pursue valid subrogation claims; if they resolve those claims quickly; if they keep their customers posted as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your losses 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 covering its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.