Subrogation is a concept that's understood among insurance and legal firms but often not by the policyholders who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to know the steps of the process. The more knowledgeable you are, the more likely it is that an insurance lawsuit will work out in your favor.
Every insurance policy you own is a promise that, if something bad happens to you, the insurer of the policy will make good in one way or another without unreasonable delay. If your vehicle is in a fender-bender, insurance adjusters (and police, when necessary) decide who was at fault and that party's insurance pays out.
But since determining who is financially accountable for services or repairs is usually a heavily involved affair – and time spent waiting often increases the damage to the victim – insurance companies often decide to pay up front and figure out the blame afterward. They then need a means to get back the costs if, when there is time to look at all the facts, they weren't responsible for the expense.
Can You Give an Example?
Your electric outlet catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays out your claim in full. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him to blame for the loss. 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 way that an insurance company uses to claim payment 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. Ordinarily, only you can sue for damages to your self or property. But under subrogation law, your insurer is extended some of your rights for having taken care of the damages. It can go after the money that was originally due to you, because it has covered the amount already.
Why Should I Care?
For a start, if you have a deductible, your insurer wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to the tune of $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to recoup its losses by boosting your premiums. On the other hand, if it has a capable legal team and goes after those cases efficiently, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half to blame), you'll typically get half your deductible back, based on the laws in most states.
Additionally, if the total expense of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as work injury Alpharetta, pursue subrogation and wins, it will recover your expenses in addition to its own.
All insurance companies are not created equal. When shopping around, it's worth measuring the reputations of competing firms to find out if they pursue legitimate subrogation claims; if they do so quickly; if they keep their clients updated as the case continues; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, instead, an insurance firm has a reputation of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you'll feel the sting later.