Subrogation is an idea that's well-known in insurance and legal circles but often not by the customers they represent. Rather than leave it to the professionals, it is in your benefit to understand the steps of how it works. The more information you have about it, the more likely it is that relevant proceedings will work out in your favor.
Every insurance policy you own is an assurance that, if something bad happens to you, the insurer of the policy will make good in a timely manner. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) determine who was to blame and that party's insurance covers the damages.
But since ascertaining who is financially accountable for services or repairs is typically a heavily involved affair – and time spent waiting sometimes increases the damage to the victim – insurance firms usually opt to pay up front and assign blame afterward. They then need a way to recoup the costs if, once the situation is fully assessed, they weren't actually in charge of the expense.
Let's Look at an Example
Your garage catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays for the repairs. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him liable for the loss. The house has already been fixed up in the name of expediency, but your insurance company is out ten grand. What does the company do next?
How Subrogation Works
This is where subrogation comes in. It is the method that an insurance company uses to claim payment after it has paid for something that should have been paid by some other entity. 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 done to your self or property. But under subrogation law, your insurance company is given some of your rights in exchange for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
How Does This Affect Policyholders?
For starters, 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 insurance company is lax about bringing subrogation cases to court, it might choose to recover its expenses by upping your premiums. On the other hand, if it knows which cases it is owed and goes after those cases enthusiastically, it is acting both in its own interests and in yours. If all of the money 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 expense of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as workmans comp lawyer Dunwoody, pursue subrogation and wins, it will recover your expenses in addition to its own.
All insurers are not created equal. When shopping around, it's worth looking at the reputations of competing companies to evaluate if they pursue valid subrogation claims; if they do so quickly; if they keep their policyholders informed as the case continues; and if they then process successfully won reimbursements immediately 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 bottom line by raising your premiums, you'll feel the sting later.