Subrogation is an idea that's understood in insurance and legal circles but often not by the customers they represent. Even if you've never heard the word before, it would be in your benefit to understand the nuances of the process. The more knowledgeable you are about it, the more likely it is that an insurance lawsuit will work out favorably.
An insurance policy you have is a commitment that, if something bad happens to you, the firm that covers the policy will make good in one way or another in a timely fashion. If your vehicle is in a fender-bender, insurance adjusters (and police, when necessary) determine who was to blame and that person's insurance pays out.
But since ascertaining who is financially responsible for services or repairs is often a time-consuming affair – and time spent waiting in some cases compounds the damage to the policyholder – insurance firms usually opt to pay up front and assign blame later. They then need a path to recover the costs if, when there is time to look at all the facts, they weren't actually responsible for the expense.
Your electric outlet catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays out your claim in full. However, the assessor assigned to your case finds out that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him accountable for the damages. The house has already been fixed up in the name of expediency, but your insurance company is out $10,000. 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 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 done to your person 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 Policyholders?
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 unconcerned with pursuing subrogation even when it is entitled, it might choose to recoup its losses by raising your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and goes after those cases aggressively, it is acting both in its own interests and in yours. If all of the money is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found one-half to blame), you'll typically get half your deductible back, based on the laws in most states.
Additionally, if the total cost 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 attorney Washington DC, pursue subrogation and wins, it will recover your expenses in addition to its own.
All insurers are not created equal. When shopping around, it's worth looking at the records of competing agencies to determine whether they pursue legitimate subrogation claims; if they do so in a reasonable amount of time; if they keep their clients posted as the case goes on; and if they then process successfully won reimbursements right away so that you can get your funding back and move on with your life. If, on the other hand, an insurance agency has a reputation of honoring claims that aren't its responsibility and then protecting its income by raising your premiums, you should keep looking.