Subrogation is a concept that's well-known in legal and insurance circles but rarely by the policyholders they represent. Even if it sounds complicated, it is in your self-interest to know the steps of how it works. The more you know, the more likely it is that relevant proceedings will work out in your favor.
An insurance policy you own is an assurance that, if something bad happens to you, the firm on the other end of the policy will make good without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the courts, when necessary) decide who was to blame and that party's insurance covers the damages.
But since determining who is financially responsible for services or repairs is usually a tedious, lengthy affair – and delay in some cases increases the damage to the policyholder – insurance companies usually opt to pay up front and assign blame after the fact. They then need a mechanism to get back the costs if, ultimately, they weren't in charge of the payout.
Can You Give an Example?
Your stove catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it takes care of the repair expenses. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him to blame for the damages. The house has already been fixed up in the name of expediency, but your insurance agency is out ten grand. 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 after it has paid for something that should have been paid by some other entity. 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. Normally, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is given some of your rights for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Should I Care?
For a start, if your insurance policy stipulated a deductible, it wasn't just your insurance company 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 insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to recover its losses by increasing your premiums and call it a day. On the other hand, if it has a competent legal team and goes after them enthusiastically, 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 responsible), 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 may have had to pay the difference. If your insurance company or its property damage lawyers, such as auto accident norcross ga, 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 looking at the records of competing agencies to find out if they pursue valid subrogation claims; if they resolve those claims fast; if they keep their policyholders informed as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, instead, an insurer has a reputation of paying out claims that aren't its responsibility and then protecting its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.