Subrogation is an idea that's understood among insurance and legal companies but sometimes not by the policyholders who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your benefit to know an overview of how it works. The more you know about it, the better decisions you can make with regard to your insurance company.
Every insurance policy you have is an assurance that, if something bad occurs, the insurer of the policy will make good in a timely manner. If your vehicle is rear-ended, insurance adjusters (and the courts, when necessary) determine who was at fault and that party's insurance covers the damages.
But since figuring out who is financially responsible for services or repairs is sometimes a tedious, lengthy affair – and delay sometimes increases the damage to the policyholder – insurance companies often decide to pay up front and figure out the blame after the fact. They then need a way to recover the costs if, when all is said and done, they weren't actually responsible for the expense.
Your electric outlet catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays for the repairs. However, the assessor assigned to your case finds out 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 firm is out all that money. What does the firm do next?
How Subrogation Works
This is where subrogation comes in. It is the process 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. Usually, only you can sue for damages to your person or property. But under subrogation law, your insurer is considered to have some of your rights in exchange 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.
How Does This Affect Policyholders?
For one thing, if your insurance policy stipulated a deductible, your insurer 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 timid on any subrogation case it might not win, it might choose to recover its expenses by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after them enthusiastically, it is acting both in its own interests and in yours. If all $10,000 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 half your deductible back, based on the laws in most states.
In addition, if the total price 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 auto accident lawyer Tacoma WA, pursue subrogation and succeeds, it will recover your costs in addition to its own.
All insurance agencies are not created equal. When comparing, it's worth looking at the reputations of competing agencies to find out whether they pursue legitimate subrogation claims; if they do so with some expediency; if they keep their policyholders posted as the case continues; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, on the other hand, an insurer has a reputation of paying out claims that aren't its responsibility and then covering its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.