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Subrogation is an idea that's understood among insurance and legal companies but rarely by the customers they represent. Even if it sounds complicated, it would be in your benefit to understand an overview of the process. The more you know, the more likely relevant proceedings will work out favorably.

Every insurance policy you hold is a commitment that, if something bad occurs, the insurer of the policy will make restitutions in one way or another without unreasonable delay. If you get hurt while you're on the clock, for example, your employer's workers compensation pays out for medical services. Employment lawyers handle the details; you just get fixed up.

But since figuring out who is financially responsible for services or repairs is typically a tedious, lengthy affair – and time spent waiting often compounds the damage to the victim – insurance firms usually opt to pay up front and assign blame after the fact. They then need a path to recoup the costs if, once the situation is fully assessed, they weren't actually responsible for 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 decent chance that a judge would find him to blame for the loss. The house has already been repaired in the name of expediency, but your insurance company is out all that money. 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 when it pays out a claim that turned out not to be its responsibility. Some companies 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 self or property. But under subrogation law, your insurer is extended some of your rights for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.

Why Do I Need to Know This?

For starters, if you have 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 choose to get back its losses by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases enthusiastically, it is acting both in its own interests and in yours. If all $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half culpable), you'll typically get half your deductible back, based on the laws in most states.

Additionally, if the total price of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as attorney morgan hill ca, pursue subrogation and succeeds, it will recover your expenses as well as its own.

All insurance agencies are not the same. When shopping around, it's worth comparing the reputations of competing agencies to evaluate whether they pursue legitimate subrogation claims; if they resolve those claims without dragging their feet; if they keep their policyholders apprised as the case continues; and if they then process successfully won reimbursements quickly so that you can get your losses back and move on with your life. If, instead, an insurer has a reputation of honoring claims that aren't its responsibility and then covering its income by raising your premiums, you'll feel the sting later.