Subrogation and How It Affects Policyholders

Subrogation is a concept that's understood in insurance and legal circles but rarely by the customers who employ them. Rather than leave it to the professionals, it is in your self-interest to comprehend the nuances 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 own is an assurance that, if something bad occurs, the firm on the other end of the policy will make good in a timely manner. If you get an injury on the job, your company's workers compensation insurance pays out for medical services. Employment lawyers handle the details; you just get fixed up.

But since ascertaining who is financially responsible for services or repairs is sometimes a confusing affair – and time spent waiting in some cases compounds the damage to the victim – insurance firms often opt to pay up front and figure out the blame later. They then need a way to recover the costs if, when there is time to look at all the facts, they weren't in charge of the payout.

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 finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him to blame for the loss. You already have your money, but your insurance firm is out $10,000. 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 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. Normally, only you can sue for damages done to your self or property. But under subrogation law, your insurance company is given 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 one thing, if you have a deductible, your insurance company wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to be precise, $1,000. If your insurance company is timid on any subrogation case it might not win, it might opt to recover its losses by boosting your premiums. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, it is doing you a favor as well as itself. 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 to blame), you'll typically get half your deductible back, based on the laws in most states.

Moreover, if the total expense of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as injury lawyers Smyrna GA, successfully press a subrogation case, it will recover your costs in addition to its own.

All insurers are not created equal. When comparing, it's worth weighing the records of competing agencies to evaluate whether they pursue legitimate subrogation claims; if they do so 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 money back and move on with your life. If, instead, an insurance agency has a reputation of paying out claims that aren't its responsibility and then protecting its profitability by raising your premiums, you'll feel the sting later.