Subrogation is a concept that's understood among legal and insurance companies but rarely by the customers they represent. Even if it sounds complicated, it is to your advantage to know an overview of how it works. The more information you have, the better decisions you can make with regard to your insurance company.
Every insurance policy you own is an assurance that, if something bad happens to you, the company on the other end of the policy will make good in one way or another in a timely fashion. If your vehicle is hit, insurance adjusters (and the judicial system, when necessary) determine who was at fault and that party's insurance pays out.
But since determining who is financially accountable for services or repairs is typically a time-consuming affair – and delay sometimes compounds the damage to the policyholder – insurance firms in many cases decide to pay up front and assign blame afterward. They then need a mechanism to recover the costs if, when all the facts are laid out, they weren't responsible for the expense.
Your living room catches fire and causes $10,000 in home damages. Happily, you have property insurance and it pays for the repairs. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him liable for the damages. The home has already been fixed up in the name of expediency, but your insurance firm is out $10,000. What does the firm do next?
How Subrogation Works
This is where subrogation comes in. It is the process that an insurance company uses to claim payment 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 insurer 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 one thing, if you have a deductible, your insurer wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to be precise, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to recoup its expenses by raising your premiums and call it a day. On the other hand, if it has a competent legal team and goes after them enthusiastically, it is acting both in its own interests and in yours. If all is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent responsible), you'll typically get half your deductible back, based on the laws in most states.
Moreover, if the total loss of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as workman's comp insurance Purcellville, VA, successfully press a subrogation case, it will recover your losses as well as its own.
All insurance agencies are not created equal. When shopping around, it's worth contrasting the reputations of competing firms to evaluate if they pursue legitimate subrogation claims; if they resolve those claims without dragging their feet; if they keep their policyholders posted as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, on the other hand, an insurer has a record of paying out claims that aren't its responsibility and then safeguarding its profit margin by raising your premiums, you should keep looking.