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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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Water Damage from Frozen or Broken Pipes?

Frozen, Broken Water Pipes Can Be Homeowner Nightmare.  If you have water damage from broken or frozen pipes call Royal Water Damage immediately to minimize the damage.

215-657-2244 for a FREE No Obigation Estimate

We don’t often think of damage from frozen and broken water pipes as being on the same scale as a natural disaster, but damage from water is the most prevalent — yet least recognized — catastrophe. In fact, frozen and broken water pipes rank No. 2 behind hurricanes in terms of both the number of homes damaged and the amount of claim costs in the U.S.

Damage from frozen and broken water pipes can be a homeowner’s nightmare. When a pipe bursts, water gushes from the pipe like a fire hydrant, turning a basement into a lake within minutes. Water from frozen and broken pipes causes the most damage while people are away from home, because the plumbing can rupture and water can run unnoticed for several days. Repairs of around $50,000 are common due to water’s wrath.

Frozen and broken water pipes are a significant cause of loss across the nation. Damage can include soaked and ruined drywall. Wallpaper turns moldy. Kitchen cabinets warp, and carpet and draperies can be ruined. Photo albums, paperwork, antiques, furniture and clothing also can be destroyed. Sometimes homes have to be gutted because mold and mildew cover every inch from floor to ceiling.

Potential damage from frozen and broken water pipes is preventable. Efforts to prevent pipes from breaking in your home will save you from the nightmares of water damage and help reduce the enormous insurance claims  that result. Policyholders share the financial burden of frozen and broken water pipes through increased homeowners insurance rates. Obviously, preventing broken water pipes is in your best interest

Call today for your No-Obligation, FREE Estimate – (215) 657-2244
Royal Water Damage suggests five easy  things you can do to protect your home from frozen and broken water pipes:

1. Disconnect all garden hoses and other outside hose connections. If possible, use an indoor valve to shut off and drain water from pipes leading to outside faucets.

2. Insulate all exposed pipes located in your basement, under your home, on outside walls or in attics. For pipes with northern exposures, use heat tape according to the manufacturer’s instructions. (Improper usage may cause a fire.)

3. Set the thermostat to at least 55 degrees even when your home is vacant or unoccupied during the winter. If you plan to be away during cold-weather months, have someone regularly check your home
to make sure it’s staying warm enough to prevent freezing.

4. Winterize sprinkler systems according to the manufacturer’s recommendations. Blowing out excess water with a compressor may be the best way to prevent frozen and broken pipes. If you have a swamp cooler, winterize it by disconnecting the water source and clearing the line.

5. Very important is knowing how to shut off the water supply if a pipe bursts. Quick action can minimize damage.

Taking  these few precautions before the next freeze sets in may save your home
from the devastating effects of frozen and broken water pipes.

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