Subrogation is a concept that's understood among legal and insurance professionals but often not by the customers they represent. Even if it sounds complicated, it is in your benefit to understand the steps of the process. The more knowledgeable you are, the better decisions you can make about your insurance policy.
Any insurance policy you hold is an assurance that, if something bad occurs, the insurer of the policy will make good without unreasonable delay. If a hailstorm damages your house, for instance, your property insurance steps in to compensate you or enable the repairs, subject to state property damage laws.
But since determining who is financially responsible for services or repairs is regularly a tedious, lengthy affair – and delay often adds to the damage to the victim – insurance companies usually decide to pay up front and assign blame after the fact. They then need a way to recover the costs if, once the situation is fully assessed, they weren't responsible for the expense.
Can You Give an Example?
Your stove 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 finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him accountable for the loss. You already have your money, but your insurance agency is out $10,000. What does the agency do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement 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. Usually, only you can sue for damages to your person or property. But under subrogation law, your insurance company is given some of your rights 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 Policyholders?
For starters, 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 choose to recover its losses by boosting your premiums. On the other hand, if it knows which cases it is owed and pursues them enthusiastically, it is acting both in its own interests and in yours. 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 at fault), you'll typically get $500 back, depending on the laws in your state.
In addition, if the total expense of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as foreclosure lawyers Batesville AR, successfully press a subrogation case, it will recover your losses in addition to its own.
All insurance companies are not created equal. When shopping around, it's worth looking up the records of competing agencies to find out whether they pursue valid subrogation claims; if they resolve those claims without delay; if they keep their accountholders apprised 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 company has a reputation of honoring claims that aren't its responsibility and then covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.