Subrogation and How It Affects Policyholders

Subrogation is a term that's well-known in legal and insurance circles but often not by the customers who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to comprehend the steps of how it works. The more you know about it, 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 company on the other end of the policy will make restitutions in one way or another in a timely manner. If a fire damages your home, your property insurance steps in to pay you or facilitate the repairs, subject to state property damage laws.

But since ascertaining who is financially accountable for services or repairs is sometimes a time-consuming affair – and time spent waiting sometimes compounds the damage to the policyholder – insurance companies in many cases opt to pay up front and figure out the blame later. They then need a method to regain the costs if, when there is time to look at all the facts, they weren't in charge of the payout.

Let's Look at an Example

Your electric outlet catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it pays for the repairs. However, the insurance investigator 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. You already have your money, but your insurance agency is out all that money. What does the agency do next?

How Does Subrogation Work?

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 done 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.

Why Does This Matter to Me?

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 lost some money too – to the tune of $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its losses by ballooning your premiums. On the other hand, if it knows which cases it is owed and goes after those cases enthusiastically, it is doing you a favor as well as itself. 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 at fault), you'll typically get half your deductible back, based on the laws in most states.

In addition, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as workers comp attorney Milton, ga, successfully press a subrogation case, it will recover your costs as well as its own.

All insurers are not created equal. When shopping around, it's worth looking at the reputations of competing firms to determine whether they pursue valid subrogation claims; if they do so without dragging their feet; if they keep their clients posted as the case goes on; 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, on the other hand, an insurance firm has a reputation of paying out claims that aren't its responsibility and then safeguarding its income by raising your premiums, even attractive rates won't outweigh the eventual headache.