Subrogation is a term that's understood in legal and insurance circles but sometimes not by the customers who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to know an overview of the process. The more information you have about it, the better decisions you can make about your insurance company.
Any insurance policy you own is a promise that, if something bad happens to you, the insurer of the policy will make good in a timely manner. If your home is burglarized, for instance, your property insurance agrees to compensate you or pay for the repairs, subject to state property damage laws.
But since ascertaining who is financially accountable for services or repairs is typically a heavily involved affair – and time spent waiting sometimes increases the damage to the policyholder – insurance companies often opt to pay up front and assign blame after the fact. They then need a means to recover the costs if, when all is said and done, they weren't in charge of the expense.
Can You Give an Example?
Your stove catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it takes care of the repair expenses. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him liable for the loss. The house 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 way 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. Under ordinary circumstances, only you can sue for damages done to your self or property. But under subrogation law, your insurance company 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.
How Does This Affect Policyholders?
For starters, if your insurance policy stipulated a deductible, it wasn't just your insurance company that 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 lax about bringing subrogation cases to court, it might opt to recover its losses by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases efficiently, it is doing you a favor as well as itself. 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 accountable), you'll typically get $500 back, depending on the laws in your state.
Moreover, if the total loss 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 criminal attorney Portland, OR, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurance companies are not created equal. When shopping around, it's worth looking up the records of competing agencies to evaluate whether they pursue legitimate subrogation claims; if they do so fast; if they keep their accountholders updated as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, instead, an insurance agency has a record of paying out claims that aren't its responsibility and then safeguarding its income by raising your premiums, you should keep looking.