Subrogation is a term that's understood in legal and insurance circles but often not by the customers they represent. Even if you've never heard the word before, it is in your benefit to comprehend the nuances of how it works. The more knowledgeable you are, the better decisions you can make with regard to your insurance company.
Every insurance policy you own is a promise that, if something bad happens to you, the insurer of the policy will make restitutions in a timely fashion. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) decide who was at fault and that person's insurance covers the damages.
But since figuring out who is financially responsible for services or repairs is typically a heavily involved affair – and time spent waiting in some cases increases the damage to the policyholder – insurance firms usually decide to pay up front and assign blame after the fact. They then need a means to recoup the costs if, when all is said and done, they weren't in charge of the payout.
Can You Give an Example?
Your stove catches fire and causes $10,000 in home 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 reason to believe that a judge would find him responsible for the damages. You already have your money, but your insurance agency is out $10,000. What does the agency do next?
How Subrogation Works
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. Normally, only you can sue for damages done to your person or property. But under subrogation law, your insurer is considered to have 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 Does This Matter to Me?
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 the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to recoup its expenses by ballooning your premiums. On the other hand, if it has a proficient legal team and pursues them enthusiastically, it is doing you a favor as well as itself. If all 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 half your deductible back, based on the laws in most states.
In addition, if the total price of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as wills and estates lawyers Racine WI, pursue subrogation and succeeds, it will recover your costs in addition to its own.
All insurers are not the same. When shopping around, it's worth scrutinizing the reputations of competing companies to find out if they pursue legitimate subrogation claims; if they do so quickly; if they keep their customers apprised as the case continues; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, on the other hand, an insurance agency has a reputation of paying out claims that aren't its responsibility and then covering its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.