Subrogation is a concept that's well-known among insurance and legal companies but sometimes not by the customers they represent. Even if it sounds complicated, it is in your self-interest to know the steps of how it works. The more knowledgeable you are, the more likely an insurance lawsuit will work out in your favor.
Every insurance policy you have is a commitment that, if something bad happens to you, the business that insures the policy will make good without unreasonable delay. If you get injured on the job, your employer's workers compensation pays out for medical services. Employment lawyers handle the details; you just get fixed up.
But since ascertaining who is financially responsible for services or repairs is usually a time-consuming affair – and time spent waiting in some cases increases the damage to the victim – insurance firms often opt to pay up front and figure out the blame later. They then need a method to regain the costs if, in the end, they weren't actually responsible for the payout.
Can You Give an Example?
Your electric outlet catches fire and causes $10,000 in house damages. Happily, you have property insurance and it takes care of the repair expenses. 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 to blame for the loss. You already have your money, but your insurance firm is out $10,000. What does the firm do next?
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 insurer is given some of your rights for having taken care of 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 Policyholders?
For starters, if your insurance policy stipulated a deductible, your insurer 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 – to the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its expenses by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, it is acting both in its own interests and in yours. 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 responsible), you'll typically get half your deductible back, depending on your state laws.
Furthermore, if the total loss of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as legal assistance payson ut, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurers are not the same. When comparing, it's worth looking at the records of competing firms to find out if they pursue legitimate subrogation claims; if they do so quickly; if they keep their customers posted as the case continues; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, on the other hand, an insurance agency has a record of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.