The Things You Need to Know About Subrogation
Subrogation is an idea that's well-known in legal and insurance circles but rarely by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to understand the steps of the process. The more you know, the better decisions you can make about your insurance company.
Every insurance policy you hold is an assurance that, if something bad happens to you, the firm that covers the policy will make good in a timely manner. If your vehicle is hit, insurance adjusters (and the courts, when necessary) decide who was to blame and that party's insurance covers the damages.
But since figuring out who is financially responsible for services or repairs is often a tedious, lengthy affair – and delay in some cases compounds the damage to the victim – insurance companies often decide to pay up front and figure out the blame afterward. They then need a way to recover the costs if, when there is time to look at all the facts, they weren't actually in charge of the expense.
Let's Look at an Example
You are in a vehicle accident. Another car ran into yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance and file a repair claim. Later it's determined that the other driver was to blame and his insurance policy should have paid for the repair of your car. How does your company get its funds back?
How Subrogation Works
This is where subrogation comes in. It is the process 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. Under ordinary circumstances, only you can sue for damages to your person or property. But under subrogation law, your insurance company is given some of your rights in exchange for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Should I Care?
For starters, if your insurance policy stipulated a deductible, it wasn't just your insurance company that 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 timid on any subrogation case it might not win, it might opt to recover its costs by raising your premiums. On the other hand, if it knows which cases it is owed and pursues them aggressively, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent responsible), 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 could be in for a stiff bill. If your insurance company or its property damage lawyers, such as local attorney Lacey, WA, successfully press a subrogation case, it will recover your costs as well as its own.
All insurers are not created equal. When comparing, it's worth examining the reputations of competing companies to determine if they pursue legitimate subrogation claims; if they do so quickly; if they keep their policyholders informed as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, instead, an insurance company has a record of honoring claims that aren't its responsibility and then covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.