Subrogation is an idea that's well-known among legal and insurance professionals but rarely by the customers who hire them. Even if you've never heard the word before, it is to your advantage to understand the steps of the process. The more information you have about it, the more likely relevant proceedings will work out in your favor.
An insurance policy you own is an assurance that, if something bad happens to you, the firm on the other end of the policy will make good in a timely manner. If your vehicle is hit, insurance adjusters (and the judicial system, when necessary) decide who was to blame and that party's insurance pays out.
But since determining who is financially responsible for services or repairs is often a tedious, lengthy affair – and time spent waiting sometimes adds to the damage to the victim – insurance companies in many cases opt to pay up front and assign blame after the fact. They then need a path to get back the costs if, once the situation is fully assessed, they weren't actually in charge of the payout.
For Example
Your garage catches fire and causes $10,000 in home damages. Happily, you have property insurance and it pays for the repairs. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him to blame for the loss. The home 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 way that an insurance company uses to claim payment after it has paid for something that should have been paid by some other entity. Some companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Normally, only you can sue for damages to your person or property. But under subrogation law, your insurance company is considered to have 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.
How Does This Affect the Insured?
For a start, if your insurance policy stipulated a deductible, it wasn't just your insurance company who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to recover its expenses by raising your premiums. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, it is acting both in its own interests and in yours. If all of the money 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 culpable), you'll typically get $500 back, depending on the laws in your state.
Moreover, if the total expense 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 personal injury attorney Bonney Lake WA, successfully press a subrogation case, it will recover your expenses as well as its own.
All insurance companies are not created equal. When comparing, it's worth looking at the records of competing companies to determine if they pursue valid subrogation claims; if they do so quickly; if they keep their clients informed as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, on the other hand, an insurer has a record of paying out claims that aren't its responsibility and then covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.