Subrogation and How It Affects You

Subrogation is an idea that's well-known among legal and insurance companies but often not by the customers they represent. Rather than leave it to the professionals, it would be in your benefit to know 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 an assurance that, if something bad happens to you, the firm that covers the policy will make restitutions in one way or another in a timely fashion. If your vehicle is hit, insurance adjusters (and police, when necessary) determine who was to blame and that party's insurance covers the damages.

But since figuring out who is financially responsible for services or repairs is often a tedious, lengthy affair – and time spent waiting in some cases compounds the damage to the policyholder – insurance companies often decide to pay up front and assign blame after the fact. They then need a mechanism to get back the costs if, in the end, they weren't in charge of the expense.

Let's Look at an Example

Your kitchen catches fire and causes $10,000 in house damages. Fortunately, 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 reason to believe that a judge would find him responsible for the loss. You already have your money, but your insurance firm is out ten grand. What does the firm do next?

How Subrogation Works

This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement 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. Normally, only you can sue for damages done to your person or property. But under subrogation law, your insurer is considered to have some of your rights 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 Should I Care?

For one thing, 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 – to the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its losses by raising your premiums. On the other hand, if it has a knowledgeable legal team and goes after them efficiently, 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 50 percent accountable), you'll typically get $500 back, based on the laws in most states.

Moreover, if the total cost 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 workers compensation law Whitewater, WI, pursue subrogation and succeeds, it will recover your costs in addition to its own.

All insurers are not created equal. When comparing, it's worth looking at the records of competing companies to determine if they pursue winnable subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their clients informed as the case continues; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, on the other hand, an insurance firm has a reputation of honoring claims that aren't its responsibility and then safeguarding its income by raising your premiums, even attractive rates won't outweigh the eventual headache.