Subrogation and How It Affects Your Insurance Policy

Subrogation is an idea that's well-known in legal and insurance circles but rarely by the policyholders they represent. Rather than leave it to the professionals, it would be to your advantage to know an overview of how it works. The more knowledgeable you are, the more likely it is that relevant proceedings will work out favorably.

Every insurance policy you hold is a promise that, if something bad occurs, the insurer of the policy will make good in a timely manner. If your vehicle is in a fender-bender, insurance adjusters (and the courts, when necessary) decide who was at fault and that party's insurance pays out.

But since determining who is financially responsible for services or repairs is typically a confusing affair – and time spent waiting in some cases compounds the damage to the policyholder – insurance firms often opt to pay up front and figure out the blame afterward. They then need a path to recoup the costs if, in the end, they weren't in charge of the expense.

Let's Look at an Example

Your electric outlet catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays for the repairs. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him liable for the damages. The home has already been repaired in the name of expediency, 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 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. Ordinarily, 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 Do I Need to Know This?

For a start, if you have 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 have a stake in the outcome as well – to be precise, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its expenses by upping your premiums. On the other hand, if it knows which cases it is owed and goes after them enthusiastically, it is acting both in its own interests and in yours. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half accountable), you'll typically get half your deductible back, depending on the laws in your state.

Furthermore, if the total loss 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 wrongful death lawyer Bonney Lake, Wa, successfully press a subrogation case, it will recover your expenses in addition to its own.

All insurance companies are not the same. When shopping around, it's worth researching the reputations of competing companies to find out whether they pursue valid subrogation claims; if they do so without delay; if they keep their policyholders informed as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, on the other hand, an insurance agency has a reputation of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, you'll feel the sting later.