Subrogation is a concept that's well-known in legal and insurance circles but rarely by the policyholders who employ them. Even if it sounds complicated, it would be to your advantage to understand an overview of how it works. The more you know, the better decisions you can make about your insurance company.
Every insurance policy you hold is a commitment that, if something bad occurs, the company that covers the policy will make good in a timely fashion. If your house suffers fire damage, your property insurance steps in to pay you or enable the repairs, subject to state property damage laws.
But since determining who is financially accountable for services or repairs is usually a heavily involved affair – and time spent waiting in some cases compounds the damage to the policyholder – insurance companies usually opt to pay up front and figure out the blame after the fact. They then need a way to recoup the costs if, when there is time to look at all the facts, they weren't actually responsible for the payout.
Let's Look at an Example
Your bedroom catches fire and causes $10,000 in house 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 decent chance that a judge would find him to blame for the damages. The home 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 Subrogation Works
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 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 self or property. But under subrogation law, your insurance company is given some of your rights for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Does This Matter to Me?
For one thing, if you have a deductible, your insurance company wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to be precise, $1,000. If your insurance company is timid on any subrogation case it might not win, it might choose to get back its expenses by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them aggressively, 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 responsible), you'll typically get half your deductible back, depending on the laws in your state.
Moreover, if the total cost 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 car accident attorney Alpharetta GA, pursue subrogation and succeeds, it will recover your expenses as well as its own.
All insurance agencies are not the same. When shopping around, it's worth looking up the reputations of competing agencies to find out if they pursue legitimate subrogation claims; if they do so without dragging their feet; if they keep their policyholders apprised as the case continues; and if they then process successfully won reimbursements right away so that you can get your funding back and move on with your life. If, instead, an insurer 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.