Subrogation is an idea that's understood in insurance and legal circles but sometimes not by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your benefit to understand an overview of how it works. The more you know, the more likely relevant proceedings will work out favorably.
Any insurance policy you have is a commitment that, if something bad occurs, the insurer of the policy will make restitutions in a timely fashion. If your vehicle is hit, insurance adjusters (and the judicial system, when necessary) determine who was to blame and that party's insurance covers the damages.
But since determining who is financially responsible for services or repairs is often a confusing affair – and time spent waiting often increases the damage to the policyholder – insurance companies usually decide to pay up front and assign blame later. They then need a mechanism to get back the costs if, when there is time to look at all the facts, they weren't actually responsible for the payout.
For Example
Your garage catches fire and causes $10,000 in home damages. Happily, you have property insurance and it pays out your claim in full. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him responsible for the damages. The house has already been fixed up in the name of expediency, but your insurance agency is out $10,000. 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 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. Ordinarily, only you can sue for damages to your person or property. But under subrogation law, your insurer is extended some of your rights in exchange for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Should I Care?
For one thing, if your insurance policy stipulated a deductible, your insurer wasn't the only one who 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 unconcerned with pursuing subrogation even when it is entitled, it might opt to recover its expenses by increasing your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases enthusiastically, it is doing you a favor as well as itself. 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 at fault), you'll typically get $500 back, based on the laws in most states.
Furthermore, 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 Divorce attorney american fork UT, pursue subrogation and wins, it will recover your losses in addition to its own.
All insurers are not the same. When shopping around, it's worth researching the records of competing agencies to evaluate whether they pursue legitimate subrogation claims; if they resolve those claims without delay; if they keep their accountholders apprised as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your funding 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 safeguarding its profit margin by raising your premiums, you'll feel the sting later.