Subrogation is an idea that's well-known among legal and insurance companies but often not by the people who employ them. Even if it sounds complicated, it is in your self-interest to know the steps of how it works. The more information you have, the better decisions you can make about your insurance policy.
Every insurance policy you own is a promise that, if something bad occurs, the business that insures the policy will make restitutions without unreasonable delay. If your vehicle is hit, insurance adjusters (and the judicial system, when necessary) determine who was at fault and that person's insurance pays out.
But since figuring out who is financially responsible for services or repairs is often a tedious, lengthy affair – and time spent waiting sometimes increases the damage to the policyholder – insurance firms often opt to pay up front and assign blame afterward. They then need a method to get back the costs if, once the situation is fully assessed, they weren't responsible for the payout.
Can You Give an Example?
Your garage catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays for the repairs. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him accountable for the loss. The house has already been repaired in the name of expediency, but your insurance firm is out $10,000. What does the firm do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the way that an insurance company uses to claim payment 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. Normally, only you can sue for damages done to your self or property. But under subrogation law, your insurance company is considered to have some of your rights in exchange 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.
How Does This Affect the Insured?
For one thing, if you have 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 – to the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to recover its losses by upping your premiums and call it a day. On the other hand, if it has a competent legal team and goes after 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 thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found one-half responsible), you'll typically get $500 back, depending on the laws in your state.
Furthermore, 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 attorneys that specialize in auto accidents Norcross GA, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurance agencies are not created equal. When shopping around, it's worth measuring the reputations of competing firms to evaluate if they pursue legitimate subrogation claims; if they resolve those claims quickly; if they keep their accountholders advised as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, instead, an insurer has a record of paying out claims that aren't its responsibility and then protecting its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.