Subrogation is an idea that's understood in insurance and legal circles but rarely by the policyholders who hire 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 nuances of the process. The more knowledgeable you are about it, the better decisions you can make about your insurance policy.
Every insurance policy you have is a promise that, if something bad occurs, the insurer of the policy will make restitutions in a timely fashion. If your vehicle is hit, insurance adjusters (and the courts, when necessary) decide who was at fault and that person's insurance pays out.
But since figuring out who is financially accountable for services or repairs is usually a time-consuming affair – and delay sometimes adds to the damage to the victim – insurance firms often decide to pay up front and assign blame afterward. They then need a way to get back the costs if, in the end, they weren't in charge of the expense.
Can You Give an Example?
Your kitchen catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it takes care of the repair expenses. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him liable for the loss. You already have your money, but your insurance agency is out all that money. 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. Under ordinary circumstances, only you can sue for damages done 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 originally due to you, because it has covered the amount already.
Why Does This Matter to Me?
For starters, if your insurance policy stipulated a deductible, your insurer wasn't the only one who 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 insurer is timid on any subrogation case it might not win, it might choose to get back its costs by raising your premiums. On the other hand, if it has a capable legal team and goes after them efficiently, it is doing you a favor as well as itself. If all $10,000 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, depending on the laws in your state.
Furthermore, if the total price of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as how do i find a real estate lawyer Williams Bay, WI, pursue subrogation and succeeds, it will recover your costs as well as its own.
All insurance companies are not the same. When shopping around, it's worth looking at the reputations of competing firms to determine whether they pursue valid subrogation claims; if they do so quickly; if they keep their policyholders advised as the case continues; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, on the other hand, an insurance firm has a record of paying out claims that aren't its responsibility and then protecting its profitability by raising your premiums, you'll feel the sting later.