What You Need to Know About Subrogation
Subrogation is a term that's well-known among insurance and legal firms but sometimes not by the policyholders they represent. Even if you've never heard the word before, it is in your self-interest to know an overview 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 commitment that, if something bad occurs, the firm on the other end of the policy will make good in a timely fashion. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) decide who was to blame and that person's insurance pays out.
But since determining who is financially responsible for services or repairs is typically a tedious, lengthy affair – and time spent waiting in some cases adds to the damage to the victim – insurance firms usually decide to pay up front and assign blame after the fact. They then need a means to recoup the costs if, ultimately, they weren't responsible for the expense.
Let's Look at an Example
Your stove catches fire and causes $10,000 in home damages. Happily, you have property insurance and it pays for the repairs. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him liable for the damages. You already have your money, but your insurance agency is out $10,000. What does the agency do next?
How Subrogation Works
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 companies 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 to your self or property. But under subrogation law, your insurer is considered to have some of your rights for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
How Does This Affect Me?
For one thing, if you have 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 timid on any subrogation case it might not win, it might opt to recoup its losses by raising your premiums. On the other hand, if it has a competent legal team and pursues them efficiently, 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.
In addition, 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 costly. If your insurance company or its property damage lawyers, such as Criminal Defense Springville UT, pursue subrogation and succeeds, it will recover your costs in addition to its own.
All insurance agencies are not created equal. When comparing, it's worth scrutinizing the reputations of competing agencies to evaluate if they pursue legitimate subrogation claims; if they do so without dragging their feet; if they keep their clients updated as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, instead, an insurance agency has a reputation of paying out claims that aren't its responsibility and then protecting its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.