Subrogation is a term that's understood in legal and insurance circles but often not by the policyholders who hire them. Even if you've never heard the word before, it would be in your self-interest to understand an overview of how it works. The more information you have about it, the better decisions you can make with regard to your insurance company.
An insurance policy you own is a promise that, if something bad occurs, the company that insures the policy will make restitutions without unreasonable delay. If your home suffers fire damage, your property insurance agrees to remunerate you or pay for the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is sometimes a confusing affair – and time spent waiting in some cases adds to the damage to the victim – insurance firms usually decide to pay up front and figure out the blame later. They then need a way to recoup the costs if, when all is said and done, they weren't responsible for the payout.
Let's Look at an Example
You are in a highway accident. Another car crashed into yours. Police are called, you exchange insurance information, and you go on your way. You have comprehensive insurance and file a repair claim. Later police tell the insurance companies that the other driver was to blame and his insurance should have paid for the repair of your car. How does your insurance company get its money back?
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 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 person or property. But under subrogation law, your insurance company is extended some of your rights 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.
How Does This Affect Individuals?
For a start, 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 – to the tune of $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its costs by boosting your premiums and call it a day. On the other hand, if it has a capable legal team and goes after those cases enthusiastically, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full thousand-dollar 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, depending on the laws in your state.
In addition, if the total loss of an accident is more than 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 Attorney Bonney Lake WA, successfully press a subrogation case, it will recover your losses in addition to its own.
All insurance agencies are not created equal. When shopping around, it's worth looking up the records of competing agencies to find out if they pursue valid subrogation claims; if they do so with some expediency; if they keep their customers updated as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, on the other hand, an insurance firm has a record of honoring claims that aren't its responsibility and then protecting its income by raising your premiums, you should keep looking.