North Carolina Homeowners Insurance Subrogation Claims

In many homeowners insurance cases in North Carolina, the term “subrogation” is used when dealing with a significant loss claim. The concept of subrogation can be confusing and understanding your rights as a homeowner when there is a subrogation claim can be very complicated.

What is Subrogation in a North Carolina homeowners insurance claim?

A subrogation claim is a homeowners insurance claim by your insurance company seeking reimbursement against someone else who may be responsible for the damage to your home.

For instance, let’s assume your home has experienced a fire loss and, after investigation, it is determined that the cause of the fire was faulty electrical work by a recently hired electrician. After paying you for your loss due to the fire, your insurance company may now have a subrogation claim against the electrician to recover the amounts that your insurance company paid to you on the loss.

How does the insurance company have a Subrogation claim in a North Carolina homeowners insurance policy?

A homeowners insurance policy is a form of a contract. As any homeowner who is dealing with a claim probably knows, the full insurance policy is often close to 50 pages long with many sections that impact a homeowners’ rights. The subrogation clause is typically found in the Conditions section of the Policy and reads as follows:

“An insured may waive in writing before a loss all rights of recovery against any person. If not waived, we may require an assignment of rights of recovery for a loss to the extent that payment is made by us. If an assignment is sought, an ‘insured’ must sign and deliver all related papers and cooperate with us.”

Does a North Carolina homeowner have a claim similar to a subrogation claim after the insurance company pays for the loss?

The short answer is yes. If a North Carolina homeowner has damages due to a fire or other covered loss, and these damages exceed the amount of coverage, and the damages were caused by someone else, the homeowner has a claim against this other person for the unpaid damages.

Following our example above involving the electrician: let’s assume that the damage due to the fire was $500,000 but the homeowner only had $300,000 in insurance coverage. After the insurance company has paid the $300,000 to the homeowner, the homeowner still has a claim against the electrician for the remaining $200,000 in uncovered losses.

Who gest paid first in a North Carolina subrogation claim – the homeowner or the insurance company?

Following the North Carolina Court of Appeals decision in Wichnoski v. Piedmont Fire Systems, the homeowner gets paid and made whole before the insurance company.

Again, following the example above involving the electrician, let’s assume the electrician only has $200,000 to pay the claim (due to limited insurance or limited funds), the homeowner should get paid the entire $200,000 before the insurance company gets reimbursed any money.

What should a North Carolina homeowner do if there is a subrogation claim?

The homeowners insurance policy requires a homeowner to cooperate with their insurance company if there is a subrogation claim. This includes providing information and documentation to the insurance company about the loss and damage to the home.

In many cases, the homeowners claim against the responsible party is pursued in conjunction with the subrogation claim. Attorney Mike Malone has significant experience handling sizable homeowners insurance claims including claims against responsible parties. We regularly work side-by-side with the insurance company lawyers to pursue a favorable recovery for our clients in these cases.

If you have a question about a North Carolina homeowners insurance claim where there is a subrogation issue, contact attorney Mike Malone today. He can be reached directly at 919-573-1423 or by email at mmalone@hendrenmalone.com.