Subrogation and How It Affects Policyholders
Subrogation is a concept that's understood in legal and insurance circles but sometimes 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 understand the nuances of the process. The more information you have, the better decisions you can make with regard to your insurance company.
Every insurance policy you have is an assurance that, if something bad occurs, the insurer of the policy will make restitutions in a timely fashion. If a fire damages your real estate, your property insurance steps in to repay you or facilitate 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 time spent waiting sometimes compounds the damage to the victim – insurance companies in many cases opt to pay up front and figure out the blame later. They then need a way to recoup the costs if, once the situation is fully assessed, they weren't actually in charge of the payout.
Let's Look at an Example
Your stove catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it takes care of the repair expenses. However, the assessor assigned to your case 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. You already have your money, but your insurance firm is out ten grand. What does the firm do next?
How Subrogation Works
This is where subrogation comes in. It is the way 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. Usually, only you can sue for damages done to your self or property. But under subrogation law, your insurer is considered to have 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.
How Does This Affect Individuals?
For one thing, if your insurance policy stipulated a deductible, it wasn't just your insurer 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 insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to recoup its expenses by ballooning your premiums and call it a day. On the other hand, if it has a competent legal team and pursues them enthusiastically, it is acting both in its own interests and in yours. If all is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent culpable), you'll typically get $500 back, depending on your state laws.
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 family law services Tumwater, WA, pursue subrogation and wins, it will recover your expenses as well as its own.
All insurers are not created equal. When comparing, it's worth looking at the records of competing firms to determine whether they pursue winnable subrogation claims; if they resolve those claims quickly; if they keep their policyholders apprised as the case continues; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, instead, an insurer has a reputation of honoring 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.