Subrogation is an idea that's well-known in legal and insurance circles but rarely by the policyholders who hire them. Even if it sounds complicated, it is to your advantage to know an overview of how it works. The more knowledgeable you are, the better decisions you can make with regard to your insurance company.
Any insurance policy you have is a promise that, if something bad occurs, the insurer of the policy will make good in one way or another in a timely fashion. If a blizzard damages your home, for instance, your property insurance agrees to remunerate you or enable the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is often a heavily involved affair – and time spent waiting often compounds the damage to the policyholder – insurance firms usually decide to pay up front and figure out the blame afterward. They then need a means to recoup the costs if, in the end, they weren't actually in charge of the expense.
Let's Look at an Example
You are in a car accident. Another car crashed into yours. Police are called, you exchange insurance information, 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 entirely to blame and his insurance should have paid for the repair of your car. How does your insurance company get its money back?
How Subrogation Works
This is where subrogation comes in. It is the process 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. Normally, 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 for having taken care of 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 starters, if your insurance policy stipulated 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 timid on any subrogation case it might not win, it might opt to recover its costs by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them efficiently, 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 to blame), you'll typically get $500 back, based on the laws in most states.
Additionally, if the total price 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 discrimination lawyer federal way wa, pursue subrogation and wins, it will recover your costs in addition to its own.
All insurers are not the same. When comparing, it's worth weighing the reputations of competing companies to determine if they pursue legitimate subrogation claims; if they do so without dragging their feet; if they keep their policyholders advised as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your money back and move on with your life. If, instead, an insurance company has a record of honoring claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, you should keep looking.