What You Need to Know About Subrogation

Subrogation is a term that's well-known in legal and insurance circles but often not by the people who employ them. Even if it sounds complicated, it is in your self-interest to know the steps of the process. The more knowledgeable you are, the more likely it is that relevant proceedings will work out favorably.

An insurance policy you hold is a promise that, if something bad happens to you, the company that covers the policy will make good in one way or another in a timely manner. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) determine who was to blame and that party's insurance covers the damages.

But since figuring out who is financially responsible for services or repairs is typically a confusing affair – and delay in some cases increases the damage to the policyholder – insurance companies in many cases opt to pay up front and figure out the blame afterward. They then need a path to regain the costs if, when all the facts are laid out, they weren't responsible for the expense.

Can You Give an Example?

Your garage catches fire and causes $10,000 in home damages. Happily, you have property insurance and it takes care of the repair expenses. However, in its investigation it finds out that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him responsible for the loss. The house has already been fixed up in the name of expediency, 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 method that an insurance company uses to claim payment 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. Usually, only you can sue for damages to your self or property. But under subrogation law, your insurer is extended 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.

Why Should I Care?

For one thing, 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 have a stake in the outcome as well – to the tune of $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to get back its expenses by ballooning your premiums. On the other hand, if it has a capable legal team and goes after them efficiently, it is acting both in its own interests and in yours. If all ten grand 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 to blame), you'll typically get $500 back, based on the laws in most states.

Additionally, if the total expense 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 workers compensation law Whitewater, WI, pursue subrogation and succeeds, it will recover your losses in addition to its own.

All insurers are not the same. When shopping around, it's worth weighing the records of competing agencies to evaluate whether they pursue valid subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their policyholders advised as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your deductible back and move on with your life. If, on the other hand, an insurance company has a record of honoring claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, you'll feel the sting later.