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What Is Subrogation? And how it matters to you.

Subrogation refers to the process an insurance company uses to seek reimbursement from the responsible party for a claim it has already paid.

Subrogation matters to you if:

  • You have a covered loss, and
  • You submit a claim to your insurance company, but
  • Another party is actually responsible for all or part of the damages (i.e. you have a car accident and the other driver caused the accident, or if damage to your home was caused by a faulty appliance)

In this case, your insurance company may pay your claim, and then seek reimbursement from the other party. This would depend on the circumstances surrounding the loss, the laws in your state, and your policy provisions.

If your company decides to pursue subrogation, the company will work to recover the damages from the responsible party. Damages may involve costs paid by you and the insurance company. Costs paid by you usually means your deductible, but could include amounts over your policy limits not paid by your insurance company. This would depend on the laws in your state and the specific circumstances surrounding the loss.

The subrogation process may also be used if you are at fault for damages. In this case, the other party and/or their insurance company would make a claim against you, usually directly to your insurance company. Your company will review the facts of investigation to determine if you are liable for the damages. Your company may make payment to the other company if you have coverage and it is determined that you would be legally responsible for all or part of the damages. Keep in mind that often times liability is not clear cut. In some cases, both parties may be partially responsible. Dependent on the laws in your state, both parties may share responsibility for payment of damages. For example, one party may be 40% responsible, and the other party may be 60% responsible. This could mean that both companies make subrogation claims against each other, and each company pays their respective portion of the other party’s claim.

In all cases, your participation and cooperation with us in the investigation phase of the claim process is important. Your assistance can help to establish important facts, and preserve evidence, and may help to accelerate the recovery process.

Reimbursement When Money is Recovered

If money is recovered, and part of the recovered amount was paid by you, (you paid your deductible, for example, but it was the other party’s fault) a reimbursement check will be issued. The reimbursement check is usually issued when money is received. Please note that practices vary based on the specific laws for your state.

The amount to be reimbursed is based on the amount claimed and the amount recovered. The amount claimed through subrogation depends on the amount each party was at fault. The amount recovered usually is divided proportionally between the insurance company and the insured, after expenses. This could vary based on the laws in your state.

 How Reimbursement Amounts are Calculated

Dependent on the laws in your state, you may be fully reimbursed for your deductible if:

  • The other party was 100% at fault
  • The other party paid the damages claimed in full
  • There were no collection expenses (i.e. collection agency) to recover the money.

 Often times though, it is not that simple. Based on the different factors that come into play, the calculation of the reimbursement amount can become quite complicated. The reimbursement of your deductible depends on several factors, including the amount recovered, the amount claimed (based on the amount the various parties were at fault), and state laws.

Generally, you would receive reimbursement of your deductible equal to your proportion of the total amount claimed to the total amount recovered, net of expenses. However, precisely how the reimbursement amount is determined varies by state.

These examples outline general rules that apply in many states—please discuss the specifics of your case with your subrogation claim representative.

 Example 1: Other party is 100% liable, but only paid part of the amount

The total amount of damages paid is $10,000. The other party was 100% responsible for the damages. Subrogation claim is for $10,000.

  • You paid $1,000 and your insurance company paid $9,000.
  • Your proportion is 1/10 or 10% of the total amount claimed—$1,000.
  • The amount actually collected is $5,000. There were no collection expenses.
  • You are reimbursed for $500, or 10% of the amount collected.
  • Your insurance company is reimbursed for $4,500.

 Example 2: Other party is partially liable; only paid part of the amount

The total amount of damages paid is $1000. The other party was 60% responsible for the damages. Subrogation claim is for $6,000.

  • You paid $1,000 and your insurance company paid $9,000.
  • Your proportion is 1/10 or 10% of the total amount claimed—$600.
  • The amount actually collected is $3,000. There were no collection expenses.
  • You are reimbursed for $300, or 10% of the amount collected.
  • Your insurance company is reimbursed for $2,700.

 Questions? Your Claims Representative Can Help.

Subrogation can be complex and non-intuitive. If you have questions, please let your claims representative know.

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3 Ways to Help Prevent Water Damage in Your Home or Business

A pipe bursts, a hose blows or a steady drip goes unnoticed for months. Whatever causes a leak, it usually results in a messy, costly problem. In fact, the Insurance Institute for Business and Home Safety reports the average cost of a plumbing failure is more than $5,000 after the insurance deductible was paid.

A leak detection device can be your first line of defense against water damage in your home. Here’s a look at what’s available:

  • Passive systems are alarm-only detectors. They are relatively inexpensive and should be placed near appliances and fixtures that use water, in the basement and in other areas where you may have a concern about leaks. The units emit a loud noise or whistle when a leak is detected. Typically battery-powered, they are portable and require no hard wiring, so they’re ideal for do-it-yourselfers.
  • Appliance leak detectors are connected to specific appliances that could leak, such as a washing machine or a refrigerator with a water dispenser. These detectors also issue an alarm, but because they turn off the water to the appliance when a leak is detected they are considered “active” leak detection systems. Some appliance leak detectors can be installed by a homeowner; others may require professional plumbing assistance for best results.
  • Whole-house leak detection systems provide widespread protection. A shut-off valve is installed on the main water line; the system’s primary unit is typically hard-wired to an electrical source to power the valve. When a leak is detected, the sensors transmit an alert to the main unit, which shuts off the water to the entire house. Moisture-sensing technologies for these systems vary by manufacturer and generally are either internal components of the shut off valve or external moisture sensors that are installed at all appliances and fixtures where leaks can occur. Sophisticated systems can be connected to a home security or fire alarm system, and can be programmed to send an electronic message about the leak to you or a security company. Plumber contractors often install whole-house systems.

In addition to installing leak detection devices, homeowners should stay on the lookout for potential water problems around the home.

  • Pay attention to damp or discolored areas under sinks or near refrigerators, and around bathroom fixtures. 
  • Look for rust on the exterior or base of a water heater.
  • Replace hoses on the washing machine every 3-5 years as part of a proactive maintenance plan.
  • Investigate musty smells in the basement or near water fixtures.
  • Clean and test your sump pump periodically.
  • If a leak is discovered, have it repaired immediately.

    If you suspect a problem, consider having a plumber check your pipes, fittings and water pressure.

If you do incur water damage be sure to call us for a FREE Estimate and Evaluation at 215-657-2244.

 

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