Subrogation is a concept that's understood in legal and insurance circles but rarely by the people they represent. Even if you've never heard the word before, it would be to your advantage to know the nuances of the process. The more you know about it, the more likely it is that relevant proceedings will work out favorably.
Every insurance policy you hold is an assurance that, if something bad occurs, the insurer of the policy will make restitutions in a timely fashion. If your vehicle is rear-ended, insurance adjusters (and the courts, when necessary) determine who was to blame and that person's insurance pays out.
But since determining who is financially accountable for services or repairs is usually a time-consuming affair – and time spent waiting sometimes increases the damage to the victim – insurance companies in many cases decide to pay up front and figure out the blame after the fact. They then need a means to recoup the costs if, when there is time to look at all the facts, they weren't responsible for the expense.
Can You Give an Example?
Your electric outlet catches fire and causes $10,000 in home damages. Luckily, 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 reason to believe that a judge would find him to blame for the loss. The home has already been fixed up in the name of expediency, but your insurance firm is out $10,000. What does the firm 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 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.
Why Does This Matter to Me?
For a start, if you have a deductible, it wasn't just your insurance company 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 insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to recover its losses by raising your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and pursues those cases enthusiastically, it is acting both in its own interests and in yours. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent culpable), you'll typically get $500 back, based on the laws in most states.
Additionally, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as attorneys lake geneva wi, successfully press a subrogation case, 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 reputations of competing agencies to evaluate whether they pursue valid subrogation claims; if they resolve those claims without dragging their feet; if they keep their clients informed as the case continues; 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 insurance company has a reputation of honoring claims that aren't its responsibility and then safeguarding its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.