Subrogation is an idea that's understood among insurance and legal professionals but rarely by the customers they represent. Even if it sounds complicated, it is in your self-interest to know an overview of the process. The more knowledgeable you are about it, the better decisions you can make with regard to your insurance policy.
Every insurance policy you own is a promise that, if something bad happens to you, the insurer of the policy will make good in a timely manner. If you get an injury while working, your company's workers compensation picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.
But since determining who is financially responsible for services or repairs is usually a time-consuming affair – and delay often compounds the damage to the victim – insurance firms usually opt to pay up front and assign blame later. They then need a mechanism to regain the costs if, once the situation is fully assessed, they weren't in charge of the payout.
Can You Give an Example?
Your kitchen catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays for the repairs. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him accountable for the loss. You already have your money, but your insurance firm is out $10,000. 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 reimbursement 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. 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 originally due to you, because it has covered the amount already.
How Does This Affect Individuals?
For a start, if your insurance policy stipulated a deductible, your insurer wasn't the only one who 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 insurer is timid on any subrogation case it might not win, it might choose to recoup its losses by ballooning your premiums. On the other hand, if it has a competent legal team and goes after them efficiently, it is acting both in its own interests and in yours. 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 responsible), 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 medical malpractice Mclean Va, successfully press a subrogation case, it will recover your expenses as well as its own.
All insurers are not created equal. When shopping around, it's worth comparing the reputations of competing companies to find out if they pursue legitimate subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their accountholders 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 insurer has a reputation of honoring claims that aren't its responsibility and then protecting its bottom line by raising your premiums, you'll feel the sting later.