Subrogation is an idea that's understood among legal and insurance companies but sometimes not by the customers who hire them. Even if you've never heard the word before, it is in your benefit to know the steps of how it works. The more you know, the better decisions you can make about your insurance company.
Any insurance policy you have is a promise that, if something bad happens to you, the firm on the other end of the policy will make restitutions in a timely fashion. If your vehicle is rear-ended, insurance adjusters (and the courts, 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 tedious, lengthy affair – and time spent waiting often compounds the damage to the policyholder – insurance companies in many cases opt to pay up front and assign blame later. They then need a mechanism to get back the costs if, when there is time to look at all the facts, they weren't responsible for the payout.
For Example
Your living room catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays out your claim in full. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him to blame for the damages. The house has already been fixed up in the name of expediency, but your insurance agency is out all that money. What does the agency 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. Ordinarily, 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 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 Me?
For starters, if you have a deductible, it wasn't just your insurance company who 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 insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to recoup its losses by increasing your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, it is doing you a favor as well as itself. 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 50 percent to blame), you'll typically get half your deductible back, depending on the laws in your state.
Additionally, if the total loss of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely costly. If your insurance company or its property damage lawyers, such as family law services Portland OR, successfully press a subrogation case, it will recover your losses in addition to its own.
All insurers are not the same. When shopping around, it's worth measuring the records of competing companies to find out if they pursue winnable subrogation claims; if they resolve those claims quickly; if they keep their customers informed 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 insurance firm has a reputation of honoring claims that aren't its responsibility and then safeguarding its income by raising your premiums, even attractive rates won't outweigh the eventual headache.