Subrogation and How It Affects You

Subrogation is a term that's well-known among insurance and legal companies but rarely by the customers who hire them. Rather than leave it to the professionals, it is in your self-interest to understand the steps of the process. The more you know, the more likely an insurance lawsuit will work out favorably.

An insurance policy you hold is a promise that, if something bad happens to you, the company that covers the policy will make restitutions in a timely fashion. If you get injured on the job, for example, your company's workers compensation insurance agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.

But since determining who is financially accountable for services or repairs is typically a tedious, lengthy affair – and time spent waiting in some cases adds to the damage to the victim – insurance firms often opt to pay up front and figure out the blame after the fact. They then need a means to get back the costs if, ultimately, they weren't in charge of the payout.

For Example

Your stove 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 discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him responsible for the damages. You already have your money, but your insurance agency is out ten grand. What does the agency do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the method that an insurance company uses to claim payment when it pays out a claim that turned out not to be its responsibility. 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 done to your self or property. But under subrogation law, your insurance company is given some of your rights for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.

How Does This Affect the Insured?

For a start, if your insurance policy stipulated a deductible, it wasn't just your insurance company who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – namely, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to get back its expenses by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after 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 at fault), you'll typically get $500 back, based on the laws in most states.

Furthermore, if the total loss 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 Auto Accident Lawyer in Marietta, Ga, pursue subrogation and succeeds, it will recover your costs as well as its own.

All insurers are not the same. When comparing, it's worth contrasting the reputations of competing companies to evaluate if they pursue valid subrogation claims; if they resolve those claims with some expediency; if they keep their accountholders posted as the case goes on; and if they then process successfully won reimbursements right away so that you can get your losses 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 covering its profit margin by raising your premiums, you'll feel the sting later.