- 6 19, 2019
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Subrogation is a concept that's understood among insurance and legal firms but often not by the people they represent. Rather than leave it to the professionals, it is to your advantage to understand the nuances of the process. The more you know about it, the better decisions you can make about your insurance policy.
Any insurance policy you hold is an assurance that, if something bad happens to you, the insurer of the policy will make restitutions in one way or another in a timely fashion. If your vehicle is in a fender-bender, insurance adjusters (and the courts, when necessary) decide who was at fault and that person's insurance covers the damages.
But since determining who is financially responsible for services or repairs is often a confusing affair – and time spent waiting in some cases compounds the damage to the policyholder – insurance companies often opt to pay up front and assign 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 in charge of the payout.
Let's Look at an Example
Your stove catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it pays out your claim in full. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him liable for the loss. You already have your money, but your insurance agency is out $10,000. What does the agency do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the process 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. Under ordinary circumstances, only you can sue for damages done to your person or property. But under subrogation law, your insurer is given 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.
How Does This Affect Individuals?
For a start, if your insurance policy stipulated a deductible, it wasn't just your insurer who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to recover its losses by ballooning your premiums. On the other hand, if it has a capable legal team and pursues them enthusiastically, 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 one-half responsible), you'll typically get half your deductible back, based on the laws in most states.
In addition, if the total loss 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 wage garnishment defense attorneys jonesboro ar, successfully press a subrogation case, it will recover your expenses as well as its own.
All insurers are not created equal. When shopping around, it's worth contrasting the reputations of competing companies to evaluate whether they pursue valid subrogation claims; if they resolve those claims quickly; if they keep their customers updated as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your losses back and move on with your life. If, on the other hand, an insurer has a record of paying out claims that aren't its responsibility and then covering its income by raising your premiums, you'll feel the sting later.