Subrogation is a term that's understood among legal and insurance firms but rarely by the customers who hire them. 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 about it, the better decisions you can make about your insurance company.
An insurance policy you hold is a promise that, if something bad occurs, the company that covers the policy will make restitutions in a timely manner. If you get hurt while you're on the clock, for example, your employer's workers compensation insurance agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.
But since ascertaining who is financially responsible for services or repairs is usually a tedious, lengthy affair – and delay in some cases compounds the damage to the policyholder – insurance firms in many cases opt to pay up front and assign blame later. They then need a method to get back the costs if, in the end, they weren't actually in charge of the expense.
Let's Look at an Example
Your garage catches fire and causes $10,000 in home damages. Happily, you have property insurance and it takes care of the repair expenses. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him liable for the loss. 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 way 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. Usually, only you can sue for damages 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 that was originally due to you, because it has covered the amount already.
Why Does This Matter to Me?
For one thing, if your insurance policy stipulated a deductible, it wasn't just your insurance company who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – namely, $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to get back its costs by increasing your premiums and call it a day. On the other hand, if it has a proficient legal team and pursues them efficiently, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent responsible), you'll typically get half your deductible back, depending on your state laws.
Moreover, if the total price of an accident is over your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as Family law attorney Portland OR, pursue subrogation and succeeds, it will recover your losses in addition to its own.
All insurers are not created equal. When comparing, it's worth looking at the records of competing firms to find out whether they pursue legitimate subrogation claims; if they resolve those claims without dragging their feet; if they keep their accountholders posted as the case goes on; 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, instead, an insurer has a reputation of honoring claims that aren't its responsibility and then protecting its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.