What You Need to Know About Subrogation

Subrogation is an idea that's well-known among insurance and legal companies but sometimes not by the people 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 understand the nuances of the process. The more knowledgeable you are about it, the more likely relevant proceedings will work out in your favor.

Every insurance policy you have is a commitment that, if something bad occurs, the insurer of the policy will make good in one way or another without unreasonable delay. If your property suffers fire damage, your property insurance agrees to remunerate you or pay for the repairs, subject to state property damage laws.

But since ascertaining who is financially responsible for services or repairs is often a tedious, lengthy affair – and delay in some cases compounds the damage to the policyholder – insurance companies in many cases opt to pay up front and figure out the blame after the fact. They then need a mechanism to get back the costs if, when there is time to look at all the facts, they weren't responsible for the expense.

For Example

Your bedroom catches fire and causes $10,000 in home damages. Happily, 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 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 firm is out all that money. What does the firm do next?

How Subrogation Works

This is where subrogation comes in. It is the way that an insurance company uses to claim payment 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. Ordinarily, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is extended some of your rights in exchange 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 the Insured?

For starters, if your insurance policy stipulated a deductible, it wasn't just your insurance company 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 lax about bringing subrogation cases to court, it might opt to get back its losses by raising your premiums and call it a day. On the other hand, if it has a competent legal team and pursues those cases enthusiastically, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found one-half responsible), you'll typically get $500 back, based on the laws in most states.

Furthermore, if the total cost of an accident is more than 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 workmans comp attorney Alpharetta, pursue subrogation and succeeds, it will recover your costs in addition to its own.

All insurance companies are not created equal. When shopping around, it's worth measuring the reputations of competing agencies to find out if they pursue legitimate subrogation claims; if they do so in a reasonable amount of time; if they keep their accountholders informed as the case continues; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, on the other hand, an insurer has a record of honoring claims that aren't its responsibility and then safeguarding its income by raising your premiums, you should keep looking.