Legal terms may not be something you encounter in your daily life, so when they do pop up, it can catch you off guard. One of these terms that tends to pop up is subrogation. Here’s what you need to know about it.
When one party can file a claim for damages on behalf of another party, that’s called subrogation. This practice is very common for property damages, and typically involves insurance providers acting as the claim filers. Whether an insurance company or other party is the entity filing on behalf of someone, they’re doing so to recover costs. A good example of this is filing an insurance claim after a car accident. When you file the claim with your insurance company, your provider will work with the insurance company of the other driver to determine fault on your behalf. Your insurance company will cover all or part of the cost of your vehicle’s repair or replacement. If it is determined that you were not at fault, then your provider will expect the other insurance company to recoup them the cost of your repairs.
Subrogation is quite common, though not always recognized by name. Because of this, there is a standard procedure for how the process works. First, the insurance provider determines who is at fault. Then, the provider contacts either the at-fault party or that party’s own insurance carrier, depending on whether the party is insured. After contact is made, negotions occur between insurance carriers. Then, the providers will contact the initial parties involved and either request further information or explain the payment arrangement.
There are several benefits to utilizing subrogation. The two main benefits are financial and speed. Sometimes, when an insurance company files a claim to recoup, you’ll receive some of that money. This typically occurs when you’ve paid a deductible for repairs or replacements already. If you already paid and you were found not to be at fault, then you’re likely to see that amount returned to you. Even if you are deemed the party at fault, you may still see a percentage of your deductible back. Additionally, filing a claim through an insurance carrier can shorten the time it takes to process your claim.
A waiver of subrogation is a clause that helps minimize subrogation. Basically, it means that when your insurance provider covers the cost of your car’s repairs, the company is then barred from recouping the cost from the party at fault. These waivers help protect you from the potential of dealing with a lawsuit. However, as insurance is still a business, it’s common for providers to include a fee on top of your premium if subrogation waivers are included on your policy. Waivers are also common for things like workers’ comp and commercial property insurance.
Even if it’s not part of your professional life, knowing a little about things like subrogation can help you when you’re dealing with different kinds of contracts or insurance situations.