Subrogation is a term that's well-known among legal and insurance professionals but rarely by the policyholders they represent. 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, the more likely it is that relevant proceedings will work out in your favor.
An insurance policy you own is a commitment that, if something bad occurs, the firm on the other end of the policy will make good in one way or another without unreasonable delay. If your house is broken into, for instance, your property insurance steps in to remunerate you or pay for the repairs, subject to state property damage laws.
But since determining who is financially accountable for services or repairs is typically a tedious, lengthy affair – and delay often 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, once the situation is fully assessed, they weren't actually responsible for the payout.
For Example
You are in an auto accident. Another car crashed into yours. The police show up to assess the situation, you exchange insurance details, and you go on your way. You have comprehensive insurance and file a repair claim. Later police tell the insurance companies that the other driver was at fault and her insurance policy should have paid for the repair of your vehicle. How does your company get its funds back?
How Does Subrogation Work?
This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement after it has paid for something that should have been paid by some other entity. 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. Under ordinary circumstances, only you can sue for damages to your self or property. But under subrogation law, your insurance company is considered to have some of your rights for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Does This Matter to Me?
For one thing, 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 have a stake in the outcome as well – namely, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its expenses by boosting your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases aggressively, it is doing you a favor as well as itself. If all $10,000 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 to blame), you'll typically get half your deductible back, based on the laws in most states.
In addition, if the total price 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, pursue subrogation and succeeds, it will recover your costs in addition to its own.
All insurance companies are not created equal. When comparing, it's worth contrasting the reputations of competing agencies to find out whether they pursue winnable subrogation claims; if they do so without delay; if they keep their clients informed as the case continues; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, instead, an insurance company has a record of paying out claims that aren't its responsibility and then covering its profit margin by raising your premiums, you should keep looking.