Subrogation and How It Affects You

Subrogation is a concept that's understood among legal and insurance companies but often not by the people who employ them. Rather than leave it to the professionals, it is to your advantage to know an overview of the process. The more you know about it, the better decisions you can make about your insurance policy.

An insurance policy you hold is an assurance that, if something bad occurs, the business on the other end of the policy will make restitutions without unreasonable delay. If a storm damages your real estate, for instance, your property insurance steps in to repay you or pay for the repairs, subject to state property damage laws.

But since figuring out who is financially responsible for services or repairs is usually a heavily involved affair – and time spent waiting in some cases compounds the damage to the policyholder – insurance companies in many cases opt to pay up front and figure out the blame later. They then need a method to get back the costs if, once the situation is fully assessed, they weren't actually responsible for the payout.

Can You Give an Example?

Your garage catches fire and causes $10,000 in home damages. Happily, you have property insurance and it pays out your claim in full. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him to blame for the loss. You already have your money, but your insurance company is out all that money. What does the company do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the way that an insurance company uses to claim payment after it has paid for something that should have been paid by some other entity. Some companies 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 considered to have some of your rights 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 Does This Matter to Me?

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 – namely, $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its costs by increasing your premiums and call it a day. 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 thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found one-half responsible), you'll typically get half your deductible back, based on the laws in most states.

Moreover, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as criminal defense law firm Pleasant Grove UT, pursue subrogation and succeeds, it will recover your expenses in addition to its own.

All insurance agencies are not the same. When shopping around, it's worth scrutinizing the records of competing agencies to evaluate if they pursue winnable subrogation claims; if they do so fast; if they keep their policyholders apprised as the case continues; 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, instead, an insurance agency has a record of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you should keep looking.