Subrogation is a term that's well-known among insurance and legal professionals but rarely by the policyholders they represent. Even if you've never heard the word before, it would be in your self-interest to comprehend the steps of how it works. The more information you have, the more likely it is that relevant proceedings will work out in your favor.
Every insurance policy you hold is a commitment that, if something bad occurs, the insurer of the policy will make good in one way or another in a timely manner. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) determine who was to blame and that party's insurance pays out.
But since figuring out who is financially responsible for services or repairs is regularly a tedious, lengthy affair – and delay sometimes adds to the damage to the policyholder – insurance companies in many cases decide to pay up front and assign blame afterward. They then need a path to get back the costs if, in the end, they weren't actually responsible for the expense.
Let's Look at an Example
Your bedroom catches fire and causes $10,000 in house damages. Happily, you have property insurance and it pays for the repairs. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him responsible for the loss. The house has already been repaired in the name of expediency, but your insurance agency is out ten grand. What does the agency 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. Usually, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is considered to have some of your rights in exchange for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Does This Matter to Me?
For starters, if you have a deductible, your insurance company wasn't the only one that 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 lax about bringing subrogation cases to court, it might choose to recoup its losses by increasing your premiums. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, it is acting both in its own interests and in yours. If all of the money 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 at fault), you'll typically get half your deductible back, depending on the laws in your state.
In addition, if the total loss of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as criminal law Portland, OR, pursue subrogation and wins, it will recover your costs as well as its own.
All insurers are not the same. When comparing, it's worth examining the reputations of competing companies to find out if they pursue valid subrogation claims; if they resolve those claims fast; if they keep their accountholders posted as the case proceeds; 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 insurer has a reputation of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.