Subrogation and How It Affects You
Subrogation is an idea that's understood among legal and insurance firms but often not by the people they represent. Even if it sounds complicated, it would be in your self-interest to comprehend an overview of how it works. The more knowledgeable you are, the better decisions you can make about your insurance policy.
Every insurance policy you own is a commitment that, if something bad occurs, the company on the other end of the policy will make restitutions in one way or another without unreasonable delay. If you get injured while you're on the clock, your company's workers compensation insurance pays out for medical services. Employment lawyers handle the details; you just get fixed up.
But since ascertaining who is financially responsible for services or repairs is usually a heavily involved affair – and delay sometimes compounds the damage to the victim – insurance firms often decide to pay up front and assign blame afterward. They then need a method to recoup the costs if, once the situation is fully assessed, they weren't in charge of the payout.
For Example
Your living room catches fire and causes $10,000 in home damages. Happily, you have property insurance and it takes care of the repair expenses. 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 liable for the loss. You already have your money, 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 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 insurance company is considered to have 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.
How Does This Affect Individuals?
For starters, if you have 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 have a stake in the outcome as well – to be precise, $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 ballooning your premiums. On the other hand, if it knows which cases it is owed and pursues them aggressively, it is acting both in its own interests and in yours. If all of the money 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 to blame), you'll typically get $500 back, based on the laws in most states.
Additionally, 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 personal injury law 95037, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurers are not the same. When shopping around, it's worth comparing the reputations of competing agencies to find out whether they pursue winnable subrogation claims; if they resolve those claims without dragging their feet; if they keep their policyholders advised as the case continues; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, instead, an insurance company has a record of paying out claims that aren't its responsibility and then safeguarding its income by raising your premiums, you'll feel the sting later.