Subrogation and How It Affects Policyholders

Subrogation is a term that's understood in insurance and legal circles but sometimes not by the people they represent. Even if you've never heard the word before, it would be in your self-interest to understand the steps of how it works. The more knowledgeable you are, the better decisions you can make about your insurance company.

Any insurance policy you own is an assurance that, if something bad happens to you, the insurer of the policy will make restitutions without unreasonable delay. If a fire damages your real estate, for example, your property insurance agrees to remunerate you or pay for the repairs, subject to state property damage laws.

But since ascertaining who is financially accountable for services or repairs is often a heavily involved affair – and delay often compounds the damage to the victim – insurance companies in many cases opt to pay up front and figure out the blame later. They then need a mechanism to recover the costs if, when there is time to look at all the facts, they weren't actually in charge of the expense.

For Example

Your garage catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it pays for the repairs. However, in its investigation it finds out 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 company is out $10,000. What does the company do next?

How Subrogation Works

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 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 to your person or property. But under subrogation law, your insurance company is considered to have some of your rights in exchange for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.

Why Does This Matter to Me?

For a start, if your insurance policy stipulated a deductible, your insurance company 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 lax about bringing subrogation cases to court, it might choose to get back its costs by ballooning your premiums. On the other hand, if it has a capable legal team and pursues 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 one-half at fault), you'll typically get $500 back, based on the laws in most states.

Moreover, if the total expense 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 workers comp lawyer Milton, ga, pursue subrogation and succeeds, it will recover your costs as well as its own.

All insurers are not the same. When shopping around, it's worth contrasting the reputations of competing firms to find out if they pursue winnable subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their customers informed as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, instead, an insurer has a record of paying out claims that aren't its responsibility and then covering its profit margin by raising your premiums, you'll feel the sting later.