Subrogation is a concept that's well-known among legal and insurance companies but often not by the people they represent. Even if you've never heard the word before, it would be to your advantage to know the steps 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 have is a commitment that, if something bad occurs, the firm on the other end of the policy will make good in a timely manner. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) determine who was to blame and that party's insurance pays out.
But since determining who is financially responsible for services or repairs is regularly a heavily involved affair – and time spent waiting in some cases 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 way to recover the costs if, in the end, they weren't actually responsible for the payout.
Let's Look at an Example
Your kitchen catches fire and causes $10,000 in home damages. Happily, you have property insurance and it pays out your claim in full. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him liable for the damages. You already have your money, but your insurance company is out all that money. What does the company do next?
How Subrogation Works
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. Normally, only you can sue for damages to your self or property. But under subrogation law, your insurer is given 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 a start, if you have a deductible, it wasn't just your insurer that 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 expenses by ballooning your premiums and call it a day. On the other hand, if it knows which cases it is owed 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 thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get $500 back, depending on the laws in your state.
Moreover, if the total loss of an accident is over your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as personal injury claims Powder Springs, GA, successfully press a subrogation case, it will recover your losses in addition to its own.
All insurance agencies are not the same. When comparing, it's worth looking up the records of competing firms to determine whether they pursue winnable subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their accountholders informed 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, on the other hand, an insurer has a reputation of honoring claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, you should keep looking.