Subrogation is a concept that's understood in insurance and legal circles but rarely by the policyholders who employ them. Even if you've never heard the word before, it would be in your benefit to understand the steps of how it works. The more knowledgeable you are, the more likely relevant proceedings will work out favorably.
Any insurance policy you hold is an assurance that, if something bad happens to you, the insurer of the policy will make good without unreasonable delay. If a storm damages your house, your property insurance steps in 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 usually a heavily involved affair – and time spent waiting in some cases increases the damage to the policyholder – insurance companies usually decide to pay up front and figure out the blame afterward. They then need a means to recover the costs if, when there is time to look at all the facts, they weren't actually in charge of the payout.
Let's Look at an Example
Your kitchen catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it pays out your claim in full. However, the assessor assigned to your case 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 loss. You already have your money, but your insurance agency is out all that money. What does the agency do next?
How Subrogation Works
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 companies 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 person or property. But under subrogation law, your insurance company is given 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.
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 lost some money too – to the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to get back its losses by raising your premiums and call it a day. On the other hand, if it has a proficient legal team and pursues those cases aggressively, it is acting both in its own interests and in yours. If all ten grand is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found one-half to blame), you'll typically get $500 back, depending on the laws in your state.
Moreover, if the total cost 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 Attorney at law in WA, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurance companies are not created equal. When comparing, it's worth looking at the records of competing agencies to evaluate if they pursue legitimate subrogation claims; if they do so without delay; if they keep their clients updated as the case goes on; 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 reputation of paying out claims that aren't its responsibility and then protecting its profit margin by raising your premiums, you'll feel the sting later.