Subrogation is a term that's well-known in legal and insurance circles but often not by the people they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to comprehend an overview of the process. The more knowledgeable you are, the better decisions you can make about your insurance company.
An insurance policy you hold is a commitment that, if something bad happens to you, the company that insures the policy will make restitutions in one way or another in a timely manner. If your home suffers fire damage, your property insurance steps in to compensate you or pay for the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is typically a time-consuming affair – and delay often compounds the damage to the victim – insurance firms often opt to pay up front and figure out the blame afterward. They then need a method to recoup the costs if, ultimately, they weren't responsible for the expense.
Let's Look at an Example
You are in an auto accident. Another car ran into yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later police tell the insurance companies that the other driver was entirely at fault and his insurance should have paid for the repair of your vehicle. How does your company get its funds back?
How Subrogation Works
This is where subrogation comes in. It is the method that an insurance company uses to claim payment when it pays out a claim that turned out not to be its responsibility. Some companies 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 given some of your rights 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 one thing, if your insurance policy stipulated a deductible, your insurance company 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 – to be precise, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to recoup its losses by boosting your premiums. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get half your deductible 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 spendy. If your insurance company or its property damage lawyers, such as bonney lake WA attorneys, pursue subrogation and succeeds, it will recover your expenses as well as its own.
All insurance companies are not created equal. When comparing, it's worth contrasting the reputations of competing firms to determine whether they pursue legitimate subrogation claims; if they do so without delay; if they keep their customers informed 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 insurer has a reputation of honoring claims that aren't its responsibility and then protecting its profit margin by raising your premiums, you should keep looking.