Subrogation is a concept that's well-known among insurance and legal professionals but rarely by the customers they represent. Even if you've never heard the word before, it is in your self-interest to understand an overview of how it works. The more information you have about it, the better decisions you can make about your insurance company.
An insurance policy you hold is a commitment that, if something bad happens to you, the company on the other end of the policy will make good in one way or another in a timely manner. If your vehicle is hit, insurance adjusters (and the judicial system, when necessary) determine who was at fault and that person's insurance pays out.
But since determining who is financially accountable for services or repairs is usually a time-consuming affair – and time spent waiting often increases the damage to the policyholder – insurance firms in many cases opt to pay up front and figure out the blame after the fact. They then need a way to get back the costs if, ultimately, they weren't actually in charge of the payout.
Let's Look at an Example
Your stove catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it pays out your claim in full. 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 accountable for the damages. The home has already been fixed up in the name of expediency, but your insurance agency is out ten grand. What does the agency do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement 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 person or property. But under subrogation law, your insurer is given some of your rights 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 starters, if you have a deductible, your insurer wasn't the only one 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 insurer 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 knows which cases it is owed and pursues them aggressively, it is acting both in its own interests and in yours. If all 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 $500 back, depending on the laws in your state.
Moreover, if the total price of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as lawyer for child custody Lindon ut, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurers are not the same. When shopping around, it's worth comparing the records of competing agencies to determine if they pursue legitimate subrogation claims; if they do so without delay; if they keep their account holders apprised as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, instead, an insurance agency has a record of honoring claims that aren't its responsibility and then protecting its income by raising your premiums, you'll feel the sting later.