Subrogation and How It Affects Your Insurance Policy

Subrogation is a term that's well-known among insurance and legal companies but often not by the customers who hire them. Even if it sounds complicated, it is to your advantage to know the nuances of the process. The more you know, the more likely relevant proceedings will work out favorably.

An insurance policy you have is a promise that, if something bad happens to you, the company that covers the policy will make restitutions without unreasonable delay. If your vehicle is hit, insurance adjusters (and police, when necessary) determine who was at fault and that party's insurance pays out.

But since ascertaining who is financially accountable for services or repairs is sometimes a confusing affair – and time spent waiting sometimes increases the damage to the policyholder – insurance firms often opt to pay up front and assign blame after the fact. They then need a path to recoup the costs if, when all is said and done, they weren't in charge of the payout.

For Example

Your kitchen catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays for the repairs. 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 firm is out all that money. What does the firm do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement after it has paid for something that should have been paid by some other entity. Some companies 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 self or property. But under subrogation law, your insurer is considered to have 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.

How Does This Affect Me?

For one thing, if you have a deductible, it wasn't just your insurer who 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 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 aggressively, it is acting both in its own interests and in yours. If all $10,000 is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get half your deductible back, depending on the laws in your state.

Moreover, if the total loss of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely costly. If your insurance company or its property damage lawyers, such as Personal Injury Attorneys in Tacoma, WA, successfully press a subrogation case, it will recover your costs in addition to its own.

All insurers are not created equal. When comparing, it's worth comparing the records of competing companies to determine whether they pursue winnable subrogation claims; if they do so quickly; if they keep their customers posted as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, on the other hand, an insurer has a reputation of honoring claims that aren't its responsibility and then covering its bottom line by raising your premiums, you should keep looking.