Subrogation is an idea that's well-known in insurance and legal circles but often not by the policyholders who hire them. Even if you've never heard the word before, it would be to your advantage to understand the steps of the process. The more you know, the better decisions you can make with regard to your insurance policy.
An insurance policy you own is an assurance that, if something bad happens to you, the business that covers the policy will make restitutions in a timely manner. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) decide who was to blame and that person's insurance pays out.
But since figuring out who is financially responsible for services or repairs is often a time-consuming affair – and delay sometimes increases the damage to the victim – insurance firms often decide to pay up front and figure out the blame after the fact. They then need a mechanism to regain the costs if, ultimately, they weren't in charge of the expense.
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 finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him accountable for the loss. You already have your money, but your insurance company is out $10,000. What does the company do next?
How Subrogation Works
This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement after it has paid for something that should have been paid by some other entity. 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 done 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.
How Does This Affect Individuals?
For starters, if your insurance policy stipulated a deductible, your insurance company wasn't the only one 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 lax about bringing subrogation cases to court, it might choose to recover its losses by boosting your premiums. On the other hand, if it knows which cases it is owed and pursues those cases efficiently, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get half your deductible back, depending on the laws in your state.
Moreover, if the total expense 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 workmans comp Duluth, pursue subrogation and wins, it will recover your expenses as well as its own.
All insurers are not created equal. When comparing, it's worth looking at the records of competing agencies to determine whether they pursue valid subrogation claims; if they do so quickly; if they keep their accountholders posted as the case continues; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, instead, an insurance firm has a record of honoring claims that aren't its responsibility and then protecting its profitability by raising your premiums, you'll feel the sting later.