Subrogation is an idea that's understood in legal and insurance circles but rarely by the policyholders who employ them. Even if you've never heard the word before, it would be in your benefit to comprehend an overview of how it works. The more you know about it, the better decisions you can make about your insurance policy.
Any insurance policy you have is a commitment that, if something bad occurs, the insurer of the policy will make restitutions in one way or another in a timely manner. If you get an injury while working, for example, your employer's workers compensation pays out for medical services. Employment lawyers handle the details; you just get fixed up.
But since determining who is financially responsible for services or repairs is typically a confusing affair – and delay often compounds the damage to the victim – insurance companies usually decide to pay up front and assign blame later. They then need a method to recover the costs if, when all is said and done, they weren't actually in charge of the payout.
Let's Look at an Example
Your stove catches fire and causes $10,000 in house damages. Happily, you have property insurance and it takes care of the repair expenses. However, in its investigation it finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him accountable for the loss. The home 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 Subrogation Works
This is where subrogation comes in. It is the process that an insurance company uses to claim payment when it pays out a claim that turned out not to be its responsibility. 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. Normally, only you can sue for damages done to your self or property. But under subrogation law, your insurer is extended some of your rights in exchange for making good on the damages. It can go after the money that was originally due to you, because it has covered the amount already.
Why Do I Need to Know This?
For starters, 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 be precise, $1,000. If your insurer is timid on any subrogation case it might not win, it might choose to get back its expenses by boosting your premiums and call it a day. On the other hand, if it has a competent legal team and pursues those cases aggressively, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full $1,000 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, depending on your state laws.
Additionally, if the total expense 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 discrimination lawyer bellevue wa, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurers are not the same. When shopping around, it's worth looking at the reputations of competing companies to determine if they pursue legitimate subrogation claims; if they resolve those claims with some expediency; if they keep their clients updated as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, instead, an insurer has a record of paying out claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.