Subrogation is a term that's understood in legal and insurance circles but sometimes not by the people who employ them. Even if it sounds complicated, it is in your benefit to know the steps of the process. The more knowledgeable you are about it, the better decisions you can make about your insurance company.
Every insurance policy you hold is an assurance that, if something bad happens to you, the firm that insures the policy will make restitutions in one way or another without unreasonable delay. If your vehicle is in a fender-bender, insurance adjusters (and the courts, when necessary) decide who was to blame and that person's insurance pays out.
But since figuring out who is financially responsible for services or repairs is sometimes a tedious, lengthy affair – and time spent waiting in some cases adds to the damage to the victim – insurance companies usually opt to pay up front and assign blame afterward. They then need a method to regain the costs if, in the end, they weren't responsible for the payout.
Your kitchen catches fire and causes $10,000 in home damages. Happily, you have property insurance and it takes care of the repair expenses. 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 liable for the damages. You already have your money, but your insurance agency is out ten grand. What does the agency do next?
How Subrogation Works
This is where subrogation comes in. It is the method 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. Normally, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is given some of your rights for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Should I Care?
For one thing, if your insurance policy stipulated a deductible, your insurance company wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to recover its losses by ballooning your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and pursues those cases enthusiastically, it is acting both in its own interests and in yours. If all ten grand 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 to blame), you'll typically get $500 back, depending on your state laws.
Additionally, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as worker compensation terms Lithia Springs GA, pursue subrogation and succeeds, it will recover your losses as well as its own.
All insurance companies are not created equal. When shopping around, it's worth measuring the reputations of competing agencies to determine whether they pursue legitimate subrogation claims; if they do so without delay; if they keep their accountholders updated 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 agency has a reputation of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you'll feel the sting later.