The Things You Need to Know About Subrogation

Subrogation is a concept that's well-known in insurance and legal circles but rarely by the policyholders they represent. Rather than leave it to the professionals, it would be in your self-interest to comprehend the nuances of how it works. The more information you have, the better decisions you can make about your insurance policy.

An insurance policy you own is a commitment that, if something bad occurs, the business that covers the policy will make good in a timely fashion. If you get an injury while working, for instance, your employer's workers compensation pays out for medical services. Employment lawyers handle the details; you just get fixed up.

But since determining who is financially responsible for services or repairs is typically a tedious, lengthy affair – and time spent waiting sometimes adds to the damage to the policyholder – insurance firms usually opt to pay up front and figure out the blame later. They then need a mechanism to recover the costs if, when all the facts are laid out, they weren't responsible for the expense.

Let's Look at an Example

Your kitchen catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays out your claim in full. 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 liable for the loss. You already have your money, but your insurance agency is out all that money. What does the agency do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the method that an insurance company uses to claim payment 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. Usually, only you can sue for damages done to your person or property. But under subrogation law, your insurer is given some of your rights for having taken care of the damages. It can go after the money 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 – to the tune of $1,000. If your insurance company is timid on any subrogation case it might not win, it might choose to recoup its expenses by increasing your premiums. On the other hand, if it knows which cases it is owed and goes after those cases efficiently, it is acting both in its own interests and in yours. If all ten grand 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 accountable), you'll typically get $500 back, depending on the laws in your state.

Additionally, 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 workmans compensation lawyers lake geneva wi, successfully press a subrogation case, it will recover your costs as well as its own.

All insurance agencies are not created equal. When comparing, it's worth examining the reputations of competing firms to determine if they pursue valid subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their clients informed as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your deductible back and move on with your life. If, on the other hand, an insurer has a record of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.