Subrogation is a term that's understood among insurance and legal professionals but rarely by the policyholders they represent. Even if you've never heard the word before, it would be to your advantage to comprehend the steps of how it works. The more you know about it, the better decisions you can make with regard to your insurance policy.
Every insurance policy you hold is a promise that, if something bad occurs, the company on the other end of the policy will make good in one way or another in a timely fashion. If your vehicle is in a fender-bender, insurance adjusters (and the courts, when necessary) decide who was to blame and that person's insurance pays out.
But since ascertaining who is financially responsible for services or repairs is often a confusing affair – and time spent waiting sometimes increases the damage to the victim – insurance companies in many cases opt to pay up front and figure out the blame afterward. They then need a means to recoup the costs if, when there is time to look at all the facts, they weren't actually responsible for the payout.
Can You Give an Example?
Your stove catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays out your claim in full. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him to blame for the loss. You already have your money, 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 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. Ordinarily, only you can sue for damages done 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.
How Does This Affect Me?
For a start, if your insurance policy stipulated 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 insurance company is timid on any subrogation case it might not win, it might opt to get back its costs by raising your premiums. On the other hand, if it has a proficient legal team and goes after those cases efficiently, it is doing you a favor as well as itself. If all 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 to blame), you'll typically get half your deductible back, based on the laws in most states.
Additionally, if the total cost of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as car accident attorney Lithia springs GA, 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 measuring the records of competing firms to find out if they pursue winnable subrogation claims; if they do so without delay; if they keep their clients posted as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, on the other hand, an insurance company has a record of honoring claims that aren't its responsibility and then safeguarding its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.