Subrogation is an idea that's understood among legal and insurance professionals but sometimes not by the policyholders they represent. Even if you've never heard the word before, it would be to your advantage to understand the nuances of how it works. The more knowledgeable you are, the better decisions you can make about your insurance policy.
Every insurance policy you have is a promise that, if something bad happens to you, the business that insures the policy will make good in a timely fashion. If a fire damages your property, for instance, your property insurance agrees to pay you or pay for the repairs, subject to state property damage laws.
But since ascertaining who is financially accountable for services or repairs is often a heavily involved affair – and time spent waiting in some cases increases the damage to the victim – insurance companies 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 payout.
Let's Look at 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, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him to blame for the loss. The house has already been fixed up in the name of expediency, but your insurance company is out all that money. 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 reimbursement 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. Under ordinary circumstances, only you can sue for damages to your self or property. But under subrogation law, your insurer is given some of your rights for making good on 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 a start, if you have a deductible, it wasn't just your insurer 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 recoup its costs by boosting your premiums. On the other hand, if it has a proficient legal team and goes after those cases enthusiastically, it is acting both in its own interests and in yours. If all $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half culpable), you'll typically get half your deductible back, based on the laws in most states.
Additionally, if the total loss of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely costly. If your insurance company or its property damage lawyers, such as workers comp attorney Columbus, ga, pursue subrogation and wins, it will recover your losses as well as its own.
All insurance agencies are not the same. When shopping around, it's worth contrasting the records of competing firms to evaluate if they pursue valid subrogation claims; if they do so in a reasonable amount of time; if they keep their accountholders informed as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, instead, an insurance company has a reputation of honoring claims that aren't its responsibility and then safeguarding its income by raising your premiums, you'll feel the sting later.