Subrogation is a concept that's well-known in insurance and legal circles but often not by the people they represent. Even if it sounds complicated, it would be in your self-interest to understand an overview of how it works. The more information you have, the better decisions you can make about your insurance policy.
Every insurance policy you hold is a commitment that, if something bad occurs, the insurer of the policy will make good in one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) decide who was at fault and that person's insurance covers the damages.
But since figuring out who is financially responsible for services or repairs is usually a time-consuming affair – and delay sometimes increases the damage to the policyholder – insurance companies often opt to pay up front and figure out the blame after the fact. They then need a means to regain the costs if, when all the facts are laid out, they weren't in charge of the payout.
For Example
Your garage catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it takes care of the repair expenses. However, in its investigation it finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him liable for the loss. You already have your money, but your insurance agency is out ten grand. What does the agency do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the way 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 to your self or property. But under subrogation law, your insurer is given 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 starters, if your insurance policy stipulated a deductible, it wasn't just your insurer who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to be precise, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to get back its expenses by increasing your premiums. On the other hand, if it knows which cases it is owed and goes after those cases efficiently, it is doing you a favor as well as itself. If all is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half culpable), you'll typically get $500 back, based on the laws in most states.
Additionally, 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 car injury lawyer decatur, ga, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurance companies are not created equal. When shopping around, it's worth weighing the reputations of competing companies to evaluate if they pursue valid subrogation claims; if they do so quickly; if they keep their clients 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 agency has a reputation of paying out claims that aren't its responsibility and then protecting its income by raising your premiums, you'll feel the sting later.