Subrogation and How It Affects Policyholders

Subrogation is a concept that's understood among legal and insurance companies but rarely by the customers who hire them. Rather than leave it to the professionals, it would be in your self-interest to comprehend the steps of how it works. The more you know, the better decisions you can make about your insurance company.

An insurance policy you hold is a promise that, if something bad occurs, the business that covers the policy will make good in one way or another in a timely manner. If a hailstorm damages your real estate, for instance, your property insurance steps in to repay you or facilitate the repairs, subject to state property damage laws.

But since ascertaining who is financially responsible for services or repairs is often a time-consuming affair – and delay sometimes compounds the damage to the victim – insurance firms in many cases opt to pay up front and figure out the blame later. They then need a way to recover the costs if, once the situation is fully assessed, 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 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 decent chance that a judge would find him accountable for the loss. The house has already been repaired in the name of expediency, but your insurance company is out ten grand. What does the company 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 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.

Why Do I Need to Know This?

For one thing, if your insurance policy stipulated 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 have a stake in the outcome as well – to be precise, $1,000. If your insurer is timid on any subrogation case it might not win, it might choose to get back its losses by ballooning your premiums. On the other hand, if it knows which cases it is owed and goes after them efficiently, it is acting both in its own interests and in yours. If all 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 at fault), you'll typically get half your deductible back, depending on the laws in your state.

Furthermore, if the total cost of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as auto accident attorneys Tacoma WA, pursue subrogation and wins, it will recover your expenses in addition to its own.

All insurance companies are not created equal. When comparing, it's worth examining the reputations of competing firms to determine if they pursue winnable subrogation claims; if they resolve those claims fast; if they keep their accountholders apprised as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, instead, an insurer has a reputation of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you should keep looking.