What Every Policyholder Ought to Know About Subrogation

Subrogation is a concept that's understood among insurance and legal professionals but rarely by the people they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your self-interest to understand the nuances of the process. The more knowledgeable you are, the more likely relevant proceedings will work out favorably.

Every insurance policy you have is a commitment that, if something bad happens to you, the insurer of the policy will make good without unreasonable delay. If you get injured while working, your employer's workers compensation agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.

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

Can You Give an Example?

Your living room catches fire and causes $10,000 in home damages. Happily, 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 reason to believe that a judge would find him accountable for the damages. You already have your money, but your insurance firm is out $10,000. What does the firm do next?

How Does Subrogation Work?

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. Under ordinary circumstances, only you can sue for damages done to your self or property. But under subrogation law, your insurance company is considered to have some of your rights for having taken care of 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 one thing, 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 lost some money too – to the tune of $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to get back its costs by upping your premiums and call it a day. On the other hand, if it has a knowledgeable legal team and goes after them efficiently, it is acting both in its own interests and in yours. If all is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent at fault), you'll typically get $500 back, based on the laws in most states.

Additionally, 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 expensive. If your insurance company or its property damage lawyers, such as lawsuit attorney payson ut, pursue subrogation and succeeds, it will recover your losses as well as its own.

All insurers are not created equal. When comparing, it's worth looking up the reputations of competing firms to determine whether they pursue legitimate subrogation claims; if they do so quickly; if they keep their clients updated as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, instead, an insurance firm has a record of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, you'll feel the sting later.