Subrogation is a concept that's understood in legal and insurance circles but sometimes not by the policyholders who employ them. Rather than leave it to the professionals, it is to your advantage to know the nuances of how it works. The more knowledgeable you are, the more likely an insurance lawsuit will work out favorably.
Every insurance policy you own is a promise that, if something bad happens to you, the firm that covers the policy will make restitutions without unreasonable delay. If you get an injury at work, for example, your company's workers compensation pays out for medical services. Employment lawyers handle the details; you just get fixed up.
But since figuring out who is financially responsible for services or repairs is often a tedious, lengthy affair – and delay sometimes adds to the damage to the victim – insurance firms in many cases opt to pay up front and assign blame after the fact. They then need a method to regain the costs if, ultimately, they weren't actually responsible for the payout.
Can You Give an Example?
Your living room catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it takes care of the repair expenses. However, in its investigation it discovers 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 repaired in the name of expediency, 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 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. Under ordinary circumstances, only you can sue for damages done to your self or property. But under subrogation law, your insurance company is extended some of your rights for having taken care of the damages. It can go after the money that was originally due to you, because it has covered the amount already.
How Does This Affect Individuals?
For one thing, if you have a deductible, your insurance company 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 recover its costs by boosting your premiums. On the other hand, if it knows which cases it is owed and pursues those cases efficiently, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get $500 back, based on the laws in most states.
Furthermore, 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 workmans comp Alpharetta, pursue subrogation and wins, it will recover your losses in addition to its own.
All insurers are not created equal. When shopping around, it's worth looking at the reputations of competing firms to evaluate whether they pursue legitimate subrogation claims; if they resolve those claims with some expediency; if they keep their policyholders updated 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 insurance company has a record of honoring claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, you should keep looking.