Subrogation is a concept that's well-known in insurance and legal circles but rarely by the people they represent. Even if you've never heard the word before, it would be to your advantage to comprehend an overview of how it works. The more information you have, the more likely it is that relevant proceedings will work out favorably.
Any insurance policy you hold is a commitment that, if something bad happens to you, the business that covers the policy will make restitutions in a timely manner. If your vehicle is hit, insurance adjusters (and the judicial system, when necessary) decide who was to blame and that person's insurance pays out.
But since ascertaining who is financially accountable for services or repairs is often a confusing affair – and delay often compounds the damage to the policyholder – insurance companies often decide to pay up front and figure out the blame later. They then need a way to recoup the costs if, when all the facts are laid out, they weren't actually responsible for the payout.
Can You Give an Example?
Your kitchen catches fire and causes $10,000 in house damages. Luckily, 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 a decent chance that a judge would find him liable for the damages. The home has already been fixed up in the name of expediency, 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 way that an insurance company uses to claim payment when it pays out a claim that turned out not to be its responsibility. Some companies 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 to your person or property. But under subrogation law, your insurance company is given some of your rights in exchange 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 Do I Need to Know This?
For one thing, if you have a deductible, your insurance company wasn't the only one that 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 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 knows which cases it is owed and pursues those cases aggressively, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get half your deductible back, depending on the laws in your state.
Additionally, if the total loss 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 estate planning attorney Racine WI, successfully press a subrogation case, it will recover your costs as well as its own.
All insurers are not the same. When shopping around, it's worth looking at the reputations of competing companies to find out if they pursue winnable subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their accountholders posted as the case continues; and if they then process successfully won reimbursements right away so that you can get your losses back and move on with your life. If, instead, an insurer has a record of paying out claims that aren't its responsibility and then protecting its profitability by raising your premiums, you should keep looking.