Subrogation is an idea that's understood among insurance and legal companies but sometimes not by the customers who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your benefit to know the steps of how it works. The more information you have about it, the more likely an insurance lawsuit will work out in your favor.
An insurance policy you hold is a commitment that, if something bad happens to you, the firm on the other end of the policy will make good in one way or another in a timely fashion. If you get injured while working, your employer's workers compensation picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.
But since determining who is financially responsible for services or repairs is usually a time-consuming affair – and delay sometimes compounds the damage to the victim – insurance companies often opt to pay up front and assign blame afterward. They then need a mechanism to get back the costs if, once the situation is fully assessed, they weren't actually responsible for the payout.
Can You Give an Example?
Your garage catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it pays out your claim in full. However, the insurance investigator finds out 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 all that money. 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. Ordinarily, only you can sue for damages to your person or property. But under subrogation law, your insurer is given some of your rights for having taken care of 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 starters, if you have a deductible, it wasn't just your insurer that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to recoup its expenses by upping your premiums. On the other hand, if it knows which cases it is owed and pursues those cases enthusiastically, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half responsible), you'll typically get half your deductible back, depending on your state laws.
Additionally, if the total loss of an accident is over your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as real estate attorney paddock lake wi, successfully press a subrogation case, it will recover your losses as well as its own.
All insurance companies are not created equal. When comparing, it's worth scrutinizing the reputations of competing companies to determine whether they pursue valid subrogation claims; if they do so fast; if they keep their policyholders informed as the case continues; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, on the other hand, an insurer has a record 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.
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