Subrogation is an idea that's understood among insurance and legal companies but rarely by the customers they represent. Even if you've never heard the word before, it would be in your benefit to understand the steps of the process. The more knowledgeable you are about it, the more likely it is that an insurance lawsuit will work out favorably.
An insurance policy you have is a promise that, if something bad happens to you, the business that covers the policy will make good in a timely fashion. If your property burns down, your property insurance agrees to remunerate 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 tedious, lengthy affair – and delay in some cases compounds 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 path to get back the costs if, when all is said and done, they weren't actually in charge of the payout.
Let's Look at 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 finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him responsible for the loss. The house has already been fixed up in the name of expediency, but your insurance agency is out $10,000. What does the agency do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the way 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 insurance company is considered to have some of your rights in exchange for making good on the damages. It can go after the money that was originally due to you, because it has covered the amount already.
Why Do I Need to Know This?
For one thing, 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 insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to get back its costs by raising your premiums. On the other hand, if it has a proficient legal team and pursues those cases aggressively, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full thousand-dollar 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, depending on the laws in your state.
Additionally, if the total cost 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 claims Norcross, GA, successfully press a subrogation case, it will recover your costs as well as its own.
All insurance agencies are not created equal. When shopping around, it's worth measuring the reputations of competing companies to find out whether they pursue valid subrogation claims; if they resolve those claims fast; if they keep their accountholders advised as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, on the other hand, an insurer has a reputation of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you'll feel the sting later.
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