Subrogation is a concept that's well-known among legal and insurance professionals but sometimes not by the customers who hire them. Even if you've never heard the word before, it is in your benefit to understand the steps of the process. The more knowledgeable you are, the better decisions you can make about your insurance policy.
An insurance policy you hold is a promise that, if something bad happens to you, the business that insures the policy will make restitutions in a timely manner. If your vehicle is hit, insurance adjusters (and the judicial system, when necessary) decide who was at fault and that party's insurance covers the damages.
But since figuring out who is financially accountable for services or repairs is usually a tedious, lengthy affair – and time spent waiting in some cases increases the damage to the policyholder – insurance firms in many cases opt to pay up front and assign blame afterward. They then need a path to recoup the costs if, ultimately, they weren't responsible for the expense.
Can You Give an Example?
Your electric outlet catches fire and causes $10,000 in house 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 accountable for the loss. The home 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 companies 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 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.
Why Does This Matter to Me?
For one thing, 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 lost some money too – to be precise, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to recoup its costs by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases efficiently, it is acting both in its own interests and in yours. If all is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent at fault), you'll typically get $500 back, based on the laws in most states.
Furthermore, if the total cost of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as personal injury legal assistance Tacoma WA, successfully press a subrogation case, it will recover your expenses as well as its own.
All insurers are not created equal. When shopping around, it's worth weighing the reputations of competing agencies to determine whether they pursue winnable subrogation claims; if they do so without dragging their feet; if they keep their accountholders advised 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 company has a reputation of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, you should keep looking.