Subrogation is an idea that's understood among insurance and legal firms but sometimes not by the policyholders who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your self-interest to understand the steps of the process. The more you know, the better decisions you can make with regard to your insurance company.
Any insurance policy you have is a commitment that, if something bad happens to you, the firm that covers the policy will make restitutions without unreasonable delay. If your vehicle is in a fender-bender, insurance adjusters (and the courts, when necessary) determine who was to blame and that party's insurance pays out.
But since figuring out who is financially responsible for services or repairs is typically a heavily involved affair a€" and delay sometimes adds to the damage to the victim a€" insurance firms often opt to pay up front and figure out the blame after the fact. They then need a method to regain the costs if, once the situation is fully assessed, they weren't responsible for the expense.
Can You Give an Example?
Your electric outlet catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it pays for the repairs. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him liable for the loss. You already have your money, 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 process 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. Ordinarily, only you can sue for damages done to your person or property. But under subrogation law, your insurer is given 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 Should I Care?
For starters, if your insurance policy stipulated a deductible, it wasn't just your insurer who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too a€" namely, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to get back its losses by raising your premiums. On the other hand, if it has a knowledgeable legal team and pursues those cases efficiently, it is acting both in its own interests and in yours. 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 one-half accountable), you'll typically get $500 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 worker compensation terms Atlanta GA, pursue subrogation and wins, it will recover your expenses as well as its own.
All insurers are not the same. When comparing, it's worth measuring the records of competing firms to find out whether they pursue valid subrogation claims; if they do so without dragging their feet; if they keep their policyholders apprised as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your deductible 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 covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.