Subrogation and How It Affects Policyholders

Subrogation is an idea that's well-known in legal and insurance circles but rarely by the people they represent. Rather than leave it to the professionals, it would be to your advantage to understand an overview of the process. The more you know, the more likely an insurance lawsuit will work out in your favor.

Any insurance policy you have is a commitment that, if something bad occurs, the firm that insures the policy will make restitutions in one way or another in a timely manner. If your vehicle is hit, insurance adjusters (and police, when necessary) decide who was at fault and that person's insurance covers the damages.

But since figuring out who is financially accountable for services or repairs is often a tedious, lengthy affair – and delay sometimes compounds the damage to the victim – insurance companies often opt to pay up front and figure out the blame afterward. They then need a way to recoup the costs if, when all is said and done, they weren't responsible for the expense.

Let's Look at an Example

Your living room catches fire and causes $10,000 in home damages. Luckily, 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 reasonable possibility that a judge would find him to blame for the damages. The house has already been fixed up in the name of expediency, but your insurance agency is out all that money. What does the agency do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the process 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 insurer is extended some of your rights in exchange for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.

Why Do I Need to Know This?

For one thing, if your insurance policy stipulated a deductible, your insurer wasn't the only one 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 insurance company is timid on any subrogation case it might not win, it might opt to recover its losses by ballooning your premiums. On the other hand, if it knows which cases it is owed and goes after them aggressively, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get half your deductible back, depending on your state laws.

Moreover, 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 lawyers in immigration Magna Ut, pursue subrogation and wins, it will recover your expenses as well as its own.

All insurance companies are not the same. When shopping around, it's worth measuring the reputations of competing companies to determine if they pursue legitimate subrogation claims; if they resolve those claims without dragging their feet; if they keep their policyholders posted as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your losses back and move on with your life. If, on the other hand, an insurance agency has a record of paying out claims that aren't its responsibility and then covering its income by raising your premiums, you'll feel the sting later.