Subrogation and How It Affects Policyholders
Subrogation is an idea that's well-known in insurance and legal circles but often not by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is to your advantage to understand an overview of how it works. The more you know about it, the better decisions you can make with regard to your insurance company.
An insurance policy you have is a promise that, if something bad occurs, the company on the other end of the policy will make good in one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) decide who was to blame and that person's insurance covers the damages.
But since determining who is financially accountable for services or repairs is sometimes a heavily involved affair – and time spent waiting often increases the damage to the victim – insurance companies usually decide to pay up front and assign blame afterward. They then need a method 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 garage catches fire and causes $10,000 in home damages. Happily, 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 accountable for the loss. The house has already been repaired in the name of expediency, but your insurance company is out all that money. 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. Under ordinary circumstances, only you can sue for damages done to your self or property. But under subrogation law, your insurer is extended some of your rights for having taken care of 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 Individuals?
For starters, if your insurance policy stipulated a deductible, your insurer wasn't the only one 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 timid on any subrogation case it might not win, it might opt to get back its expenses by raising your premiums and call it a day. 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 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 accountable), you'll typically get $500 back, based on the laws in most states.
In addition, if the total expense 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 criminal law defense lawyer Vancouver WA, pursue subrogation and wins, it will recover your costs in addition to its own.
All insurance companies are not created equal. When comparing, it's worth examining the reputations of competing firms to evaluate if they pursue valid subrogation claims; if they resolve those claims quickly; if they keep their accountholders informed as the case proceeds; 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 insurer has a reputation of honoring 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.