Subrogation is a concept that's understood among legal and insurance professionals but sometimes not by the people they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to comprehend the steps of the process. The more knowledgeable you are about it, the better decisions you can make about your insurance policy.
Every insurance policy you own is a commitment that, if something bad happens to you, the business that insures the policy will make restitutions in one way or another without unreasonable delay. If your house is burglarized, for example, your property insurance steps in to pay you or pay for the repairs, subject to state property damage laws.
But since ascertaining who is financially responsible for services or repairs is often a confusing affair – and delay often adds to the damage to the victim – insurance firms in many cases decide to pay up front and assign blame after the fact. They then need a path to recoup the costs if, when all the facts are laid out, they weren't actually in charge of the expense.
Let's Look at an Example
Your stove 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 to blame for the damages. The house has already been repaired in the name of expediency, but your insurance company is out all that money. What does the company do next?
How Does Subrogation Work?
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. Under ordinary circumstances, only you can sue for damages done to your person or property. But under subrogation law, your insurance company 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 starters, if you have 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 have a stake in the outcome as well – namely, $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to get back its expenses by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after them aggressively, it is doing you a favor as well as itself. If all is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found one-half accountable), you'll typically get half your deductible back, depending on the laws in your state.
In addition, if the total loss 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 accident attorney roswell, ga, pursue subrogation and wins, it will recover your expenses as well as its own.
All insurance agencies are not the same. When comparing, it's worth examining the records of competing companies to determine if they pursue legitimate subrogation claims; if they resolve those claims without delay; if they keep their clients advised as the case continues; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, instead, an insurer has a reputation of paying out claims that aren't its responsibility and then safeguarding its income by raising your premiums, you should keep looking.