Subrogation is a concept that's well-known in insurance and legal circles but rarely by the policyholders who employ them. Rather than leave it to the professionals, it is in your self-interest to know the steps of the process. The more knowledgeable you are about it, the better decisions you can make about your insurance company.
An insurance policy you own is a commitment that, if something bad occurs, the insurer of the policy will make restitutions without unreasonable delay. If your house is burglarized, for instance, your property insurance steps in to remunerate you or enable the repairs, subject to state property damage laws.
But since determining who is financially accountable for services or repairs is typically a time-consuming affair – and delay in some cases 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, once the situation is fully assessed, they weren't in charge of the expense.
Let's Look at an Example
Your living room catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays out your claim in full. 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 accountable for the loss. The home has already been fixed up in the name of expediency, 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 process that an insurance company uses to claim reimbursement 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 person or property. But under subrogation law, your insurer 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.
How Does This Affect Policyholders?
For starters, if your insurance policy stipulated a deductible, your insurer wasn't the only one that 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 opt to get back its expenses by increasing your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after them aggressively, it is acting both in its own interests and in yours. If all 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 at fault), you'll typically get half your deductible back, based on the laws in most states.
Moreover, if the total price 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 workmen's compensation Alpharetta, pursue subrogation and succeeds, it will recover your losses in addition to its own.
All insurance agencies are not the same. When shopping around, it's worth weighing the reputations of competing agencies to evaluate whether they pursue legitimate subrogation claims; if they do so fast; if they keep their accountholders advised as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your funding 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 covering its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.