Subrogation is a concept that's understood among legal and insurance professionals but often not by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to comprehend an overview of the process. The more you know about it, the more likely it is that relevant proceedings will work out in your favor.
An insurance policy you have is a commitment that, if something bad happens to you, the insurer of the policy will make restitutions without unreasonable delay. If your house suffers fire damage, your property insurance agrees to pay you or facilitate the repairs, subject to state property damage laws.
But since ascertaining who is financially responsible for services or repairs is typically a confusing affair – and time spent waiting sometimes adds to the damage to the policyholder – insurance firms usually decide to pay up front and figure out the blame afterward. They then need a way to recover the costs if, in the end, they weren't responsible for the expense.
Can You Give an Example?
Your electric outlet catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays for the repairs. However, the assessor assigned to your case 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. You already have your money, but your insurance company is out all that money. What does the company do next?
How Subrogation Works
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 insurance firms 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 to your person or property. But under subrogation law, your insurer is extended some of your rights in exchange for making good on 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 starters, if you have a deductible, your insurer 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 be precise, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to recover its losses by upping your premiums. On the other hand, if it knows which cases it is owed 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 $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent accountable), you'll typically get $500 back, based on the laws in most states.
Additionally, 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 auto accident atlanta ga, pursue subrogation and wins, it will recover your costs in addition to its own.
All insurers are not the same. When comparing, it's worth examining the reputations of competing companies to find out whether they pursue valid subrogation claims; if they resolve those claims without delay; if they keep their policyholders apprised as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, on the other hand, an insurance company has a record of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, you'll feel the sting later.