Subrogation is a concept that's well-known among legal and insurance companies but sometimes not by the customers they represent. Even if it sounds complicated, it is in your benefit to know the nuances of how it works. The more knowledgeable you are about it, the better decisions you can make about your insurance policy.
An insurance policy you own is a commitment that, if something bad occurs, the insurer of the policy will make restitutions in one way or another in a timely manner. If your vehicle is rear-ended, insurance adjusters (and the courts, when necessary) determine who was at fault and that person's insurance covers the damages.
But since determining who is financially accountable for services or repairs is regularly a confusing affair – and time spent waiting often increases the damage to the victim – insurance companies in many cases opt to pay up front and figure out the blame after the fact. They then need a mechanism to recoup the costs if, ultimately, they weren't responsible for the payout.
Can You Give an Example?
Your electric outlet catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it pays for the repairs. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him responsible for the damages. You already have your money, but your insurance agency is out $10,000. What does the agency do next?
How Subrogation Works
This is where subrogation comes in. It is the way that an insurance company uses to claim payment 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. Ordinarily, only you can sue for damages done to your self or property. But under subrogation law, your insurer is considered to have some of your rights in exchange 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 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 insurance company is timid on any subrogation case it might not win, it might choose to get back its losses by raising your premiums and call it a day. On the other hand, if it has a proficient legal team and goes after them aggressively, 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 at fault), you'll typically get $500 back, depending on the laws in your state.
In addition, if the total loss of an accident is over 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 lawyer Puyallup WA, successfully press a subrogation case, it will recover your losses as well as its own.
All insurers are not the same. When shopping around, it's worth contrasting the reputations of competing firms to evaluate if they pursue valid subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their customers apprised as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your money back and move on with your life. If, on the other hand, an insurance company has a record of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.