Subrogation is a concept that's well-known among legal and insurance professionals but rarely by the policyholders they represent. Even if you've never heard the word before, it would be in your self-interest to understand the steps of how it works. The more you know about it, the better decisions you can make with regard to your insurance policy.
An insurance policy you have is an assurance that, if something bad happens to you, the company that covers the policy will make good without unreasonable delay. If you get injured at work, for instance, your employer's workers compensation picks up the tab 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 confusing affair – and time spent waiting often increases the damage to the policyholder – insurance companies often opt to pay up front and figure out the blame later. They then need a means to regain the costs if, in the end, they weren't actually in charge of the payout.
Your living room catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it pays for the repairs. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him to blame for the damages. The house has already been repaired in the name of expediency, but your insurance company is out all that money. What does the company do next?
How Subrogation Works
This is where subrogation comes in. It is the way 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. Normally, only you can sue for damages to your person or property. But under subrogation law, your insurer is given some of your rights for having taken care of 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 the Insured?
For a start, if you have a deductible, it wasn't just your insurer that 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 insurer is timid on any subrogation case it might not win, it might choose to recoup its expenses by increasing your premiums. On the other hand, if it has a competent legal team and pursues those cases efficiently, 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 one-half accountable), you'll typically get half your deductible back, depending on your state laws.
Moreover, if the total loss of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as Sumner WA attorneys, pursue subrogation and succeeds, it will recover your losses in addition to its own.
All insurers are not created equal. When shopping around, it's worth researching the records of competing firms to evaluate if they pursue winnable subrogation claims; if they do so quickly; if they keep their accountholders posted as the case goes on; 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 insurer has a reputation of honoring claims that aren't its responsibility and then protecting its profit margin by raising your premiums, you'll feel the sting later.