Subrogation is a term that's well-known among legal and insurance companies but sometimes not by the policyholders who hire them. Even if you've never heard the word before, it is in your benefit to understand an overview of how it works. The more information you have, the better decisions you can make with regard to your insurance company.
Every insurance policy you have is a promise that, if something bad happens to you, the company that insures the policy will make restitutions without unreasonable delay. If your vehicle is hit, insurance adjusters (and the judicial system, when necessary) decide who was to blame and that person's insurance pays out.
But since ascertaining who is financially responsible for services or repairs is usually a confusing affair – and time spent waiting in some cases compounds the damage to the victim – insurance companies in many cases decide to pay up front and figure out the blame afterward. They then need a mechanism to recoup the costs if, ultimately, they weren't in charge of the expense.
Let's Look at an Example
Your garage catches fire and causes $10,000 in house damages. Happily, you have property insurance and it pays out your claim in full. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him to blame for the damages. You already have your money, but your insurance firm is out ten grand. 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 when it pays out a claim that turned out not to be its responsibility. 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. 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 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 Do I Need to Know This?
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 lost some money too – to be precise, $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to recover its expenses by raising your premiums. On the other hand, if it knows which cases it is owed and pursues them enthusiastically, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent accountable), you'll typically get half your deductible back, based on the laws in most states.
In addition, if the total price 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 criminal law Portland, OR, pursue subrogation and succeeds, it will recover your losses as well as its own.
All insurers are not created equal. When shopping around, it's worth looking up the reputations of competing companies to find out if they pursue valid subrogation claims; if they resolve those claims 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 funding 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 safeguarding its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.