Subrogation and How It Affects Policyholders

Subrogation is a term that's well-known among legal and insurance firms but often not by the policyholders they represent. Even if you've never heard the word before, it would be in your benefit to know the steps of the process. The more knowledgeable you are, the more likely it is that an insurance lawsuit will work out in your favor.

Every insurance policy you have is an assurance that, if something bad happens to you, the business on the other end of the policy will make good without unreasonable delay. If a storm damages your home, your property insurance agrees to pay you or enable the repairs, subject to state property damage laws.

But since figuring out who is financially responsible for services or repairs is often a tedious, lengthy affair – and time spent waiting in some cases adds to the damage to the victim – insurance firms in many cases decide to pay up front and assign blame later. They then need a path to recoup the costs if, once the situation is fully assessed, they weren't actually responsible for the expense.

For Example

Your bedroom catches fire and causes $10,000 in house damages. Happily, you have property insurance and it takes care of the repair expenses. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is reason to believe 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 firm is out ten grand. What does the firm do next?

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 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 done to your self 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 that was originally due to you, because it has covered the amount already.

How Does This Affect Me?

For one thing, if you have a deductible, it wasn't just your insurer who 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 insurance company is timid on any subrogation case it might not win, it might opt to get back its expenses by ballooning your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them enthusiastically, it is acting both in its own interests and in yours. 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 one-half culpable), you'll typically get half your deductible back, depending on the laws in your state.

Additionally, if the total cost of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely costly. If your insurance company or its property damage lawyers, such as chapter 7 bankruptcy kemmerer wy, successfully press a subrogation case, it will recover your losses as well as its own.

All insurers are not created equal. When comparing, it's worth comparing the reputations of competing companies to find out if they pursue winnable subrogation claims; if they do so fast; if they keep their accountholders posted as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your money back and move on with your life. If, on the other hand, an insurance company has a record of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.