What You Need to Know About Subrogation

Subrogation is an idea that's understood in insurance and legal circles but sometimes not by the policyholders who employ them. Rather than leave it to the professionals, it is in your self-interest to understand the nuances of the process. The more you know, the better decisions you can make with regard to your insurance policy.

Every insurance policy you own is a promise that, if something bad happens to you, the firm that covers the policy will make restitutions in a timely fashion. If a windstorm damages your house, for example, your property insurance agrees to compensate you or enable the repairs, subject to state property damage laws.

But since ascertaining who is financially accountable for services or repairs is typically a time-consuming affair – and time spent waiting often adds to the damage to the policyholder – insurance firms in many cases decide to pay up front and figure out the blame afterward. They then need a mechanism to regain the costs if, when there is time to look at all the facts, they weren't 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 finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him responsible for the damages. You already have your money, but your insurance firm is out all that money. 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 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. Ordinarily, only you can sue for damages to your self or property. But under subrogation law, your insurance company is considered to have some of your rights in exchange 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.

How Does This Affect Me?

For a start, 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 have a stake in the outcome as well – to the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recoup its losses by upping your premiums. On the other hand, if it has a capable legal team and pursues them aggressively, it is acting both in its own interests and in yours. If all is recovered, you will get your full 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.

Moreover, if the total expense 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 attorneys that specialize in auto accidents Norcross GA, successfully press a subrogation case, it will recover your losses in addition to its own.

All insurers are not created equal. When comparing, it's worth examining the records of competing agencies to find out if they pursue legitimate subrogation claims; if they do so with some expediency; if they keep their policyholders apprised as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, instead, an insurer has a reputation of honoring claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, you should keep looking.