Subrogation and How It Affects Your Insurance Policy

Subrogation is a concept that's well-known in insurance and legal circles but often not by the customers who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to understand the nuances of the process. The more information you have, the more likely an insurance lawsuit will work out in your favor.

An insurance policy you hold is a promise that, if something bad happens to you, the firm that covers the policy will make good in a timely manner. If you get an injury on the job, your company's workers compensation insurance picks up the tab 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 often a time-consuming affair – and delay often compounds the damage to the policyholder – insurance companies usually opt to pay up front and assign blame later. They then need a way to recover the costs if, once the situation is fully assessed, they weren't actually in charge of the payout.

Can You Give an Example?

Your electric outlet 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 reasonable possibility that a judge would find him accountable for the loss. The home has already been repaired in the name of expediency, but your insurance firm is out all that money. What does the firm do next?

How Subrogation Works

This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement after it has paid for something that should have been paid by some other entity. 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 insurance company is considered to have some of your rights in exchange for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.

Why Should I Care?

For one thing, if your insurance policy stipulated a deductible, your insurance company wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to get back its expenses by boosting your premiums. On the other hand, if it has a knowledgeable legal team and goes after them aggressively, it is acting both in its own interests and in yours. If all $10,000 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 culpable), you'll typically get half your deductible back, depending on your state laws.

Furthermore, if the total cost 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 Criminal defense cottonwood heights ut, pursue subrogation and wins, it will recover your costs as well as its own.

All insurers are not created equal. When comparing, it's worth contrasting the reputations of competing agencies to find out whether they pursue winnable subrogation claims; if they resolve those claims quickly; if they keep their policyholders updated as the case goes on; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, instead, an insurance company has a record of honoring claims that aren't its responsibility and then protecting its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.