Subrogation is a term that's well-known in insurance and legal circles but rarely by the people they represent. Even if it sounds complicated, it would be to your advantage to comprehend an overview of how it works. The more information you have, the better decisions you can make with regard to your insurance company.
Every insurance policy you have is a promise that, if something bad happens to you, the insurer of the policy will make good in a timely fashion. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) determine who was at fault and that person's insurance pays out.
But since figuring out who is financially accountable for services or repairs is often a heavily involved affair – and time spent waiting in some cases compounds the damage to the victim – insurance companies usually decide to pay up front and figure out the blame later. They then need a mechanism to get back the costs if, when there is time to look at all the facts, they weren't in charge of the expense.
Can You Give an Example?
Your electric outlet catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it pays out your claim in full. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him liable for the loss. The home has already been repaired in the name of expediency, 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 payment 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. 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 for making good on 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 Me?
For a start, if you have a deductible, your insurer wasn't the only one 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 insurer is lax about bringing subrogation cases to court, it might choose to get back its losses by ballooning your premiums and call it a day. On the other hand, if it has a proficient legal team and pursues those cases efficiently, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent culpable), you'll typically get $500 back, based on the laws in most states.
Moreover, if the total cost 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 Criminal Defense Provo UT, successfully press a subrogation case, it will recover your losses as well as its own.
All insurers are not created equal. When shopping around, it's worth scrutinizing the records of competing firms to determine if they pursue winnable subrogation claims; if they do so fast; if they keep their clients informed as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your deductible back and move on with your life. If, instead, an insurer has a record of honoring claims that aren't its responsibility and then covering its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.