Subrogation is a term that's understood in insurance and legal circles but often not by the people who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your benefit to understand the nuances of the process. The more you know about it, the better decisions you can make with regard to your insurance company.
An insurance policy you own is a commitment that, if something bad occurs, the business that covers the policy will make good in one way or another in a timely manner. If a fire damages your house, for example, your property insurance agrees to remunerate you or enable the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is usually a heavily involved affair – and time spent waiting often adds to the damage to the victim – insurance companies often opt to pay up front and figure out the blame afterward. They then need a mechanism to get back the costs if, once the situation is fully assessed, they weren't in charge of the payout.
Your garage catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays for the repairs. However, the assessor assigned to your case 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 $10,000. What does the company do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the process that an insurance company uses to claim payment 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. Ordinarily, only you can sue for damages to your self or property. But under subrogation law, your insurance company 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 the Insured?
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 timid on any subrogation case it might not win, it might opt to recover its expenses by upping your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and goes after those cases aggressively, it is acting both in its own interests and in yours. If all is recovered, you will get your full thousand-dollar 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.
Furthermore, 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 immigration attorney Herriman UT, pursue subrogation and wins, it will recover your losses in addition to its own.
All insurers are not the same. When shopping around, it's worth researching the records of competing companies to find out whether they pursue valid subrogation claims; if they resolve those claims quickly; if they keep their clients informed as the case goes on; and if they then process successfully won reimbursements right away so that you can get your funding 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 bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.