Subrogation is a term that's understood among legal and insurance professionals but rarely by the policyholders they represent. Rather than leave it to the professionals, it would be in your self-interest to understand the nuances of the process. The more you know about it, the better decisions you can make with regard to your insurance company.
Every insurance policy you hold is a promise that, if something bad occurs, the insurer of the policy will make restitutions without unreasonable delay. If your vehicle is hit, insurance adjusters (and police, when necessary) decide who was to blame and that person's insurance covers the damages.
But since determining who is financially accountable for services or repairs is regularly a heavily involved affair – and delay in some cases increases the damage to the victim – insurance companies often decide to pay up front and assign blame after the fact. They then need a mechanism to get back the costs if, when there is time to look at all the facts, they weren't actually responsible for the payout.
For Example
Your electric outlet catches fire and causes $10,000 in house damages. Happily, you have property insurance and it pays out your claim in full. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him to blame for the loss. You already have your money, 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 method 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. Usually, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is extended 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 starters, if you have a deductible, your insurance company wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to the tune of $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to recover its costs by raising your premiums. On the other hand, if it has a capable legal team and pursues those cases enthusiastically, it is doing you a favor as well as itself. 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 50 percent at fault), you'll typically get half your deductible back, depending on the laws in your state.
Moreover, if the total cost 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 personal injury legal assistance Sumner WA, pursue subrogation and succeeds, it will recover your expenses as well as its own.
All insurance companies are not created equal. When shopping around, it's worth scrutinizing the reputations of competing agencies to find out if they pursue winnable subrogation claims; if they resolve those claims with some expediency; if they keep their clients posted as the case continues; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, instead, an insurance firm has a record of paying out claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you should keep looking.