Subrogation is a term that's well-known in legal and insurance circles but sometimes not by the policyholders who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your self-interest to know the steps of how it works. The more knowledgeable you are about it, the better decisions you can make about your insurance policy.
An 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 fashion. If a blizzard damages your home, your property insurance agrees to compensate you or pay for the repairs, subject to state property damage laws.
But since determining who is financially responsible for services or repairs is regularly a time-consuming affair – and time spent waiting in some cases compounds the damage to the victim – insurance companies in many cases opt to pay up front and figure out the blame later. They then need a mechanism to regain the costs if, when all the facts are laid out, they weren't in charge of the expense.
Can You Give an Example?
Your stove catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it takes care of the repair expenses. 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 liable for the loss. The house has already been fixed up in the name of expediency, but your insurance company is out ten grand. What does the company do next?
How Subrogation Works
This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement after it has paid for something that should have been paid by some other entity. 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 insurance company is considered to have some of your rights in exchange 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.
Why Does This Matter to Me?
For a start, if your insurance policy stipulated a deductible, your insurance company 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 the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to recover its costs by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after them aggressively, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent 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 trusts and estates law Racine WI, pursue subrogation and succeeds, it will recover your expenses as well as its own.
All insurance agencies are not the same. When comparing, it's worth measuring the records of competing firms to evaluate if they pursue winnable subrogation claims; if they do so with some expediency; if they keep their accountholders apprised as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your losses back and move on with your life. If, on the other hand, an insurance agency has a reputation of honoring claims that aren't its responsibility and then covering its profitability by raising your premiums, you should keep looking.