Subrogation is a term that's well-known in legal and insurance circles but sometimes not by the people 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 knowledgeable you are about it, the more likely it is that an insurance lawsuit will work out in your favor.

Every insurance policy you own is an assurance that, if something bad occurs, the company that insures the policy will make good without unreasonable delay. If your home suffers fire damage, for example, your property insurance agrees to compensate you or facilitate the repairs, subject to state property damage laws.

But since figuring out who is financially responsible for services or repairs is often a confusing affair – and time spent waiting often adds to the damage to the victim – insurance companies usually opt to pay up front and assign blame afterward. They then need a means to regain the costs if, ultimately, they weren't actually responsible for the expense.

Let's Look at an Example

Your kitchen catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it takes care of the repair expenses. 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 loss. The home has already been repaired in the name of expediency, 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 method 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. Ordinarily, only you can sue for damages to your self or property. But under subrogation law, your insurance company is given some of your rights for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.

How Does This Affect the Insured?

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 – to the tune of $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to recoup its expenses by increasing 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 doing you a favor as well as itself. 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 50 percent culpable), you'll typically get half your deductible back, depending on your state laws.

Additionally, if the total expense 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 criminal law Hillsboro OR, pursue subrogation and wins, it will recover your expenses as well as its own.

All insurers are not the same. When shopping around, it's worth weighing the records of competing agencies to find out whether they pursue valid subrogation claims; if they resolve those claims quickly; if they keep their policyholders advised as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, instead, an insurer has a record of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you should keep looking.