Subrogation is a concept that's well-known in insurance and legal circles but rarely by the people they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to know the nuances of how it works. The more information you have, the better decisions you can make about your insurance company.
Any insurance policy you own is a promise that, if something bad occurs, the business that insures the policy will make restitutions in one way or another in a timely fashion. If you get hurt at work, your employer's workers compensation insurance picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.
But since ascertaining who is financially responsible for services or repairs is often a tedious, lengthy affair – and delay sometimes compounds the damage to the victim – insurance companies usually opt to pay up front and figure out the blame after the fact. They then need a way to recoup the costs if, when all is said and done, they weren't actually in charge of the payout.
Let's Look at an Example
Your bedroom catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it pays for the repairs. However, in its investigation it finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him accountable for the loss. The home has already been repaired in the name of expediency, but your insurance firm is out all that money. What does the firm do next?
How Subrogation Works
This is where subrogation comes in. It is the process that an insurance company uses to claim payment after it has paid for something that should have been paid by some other entity. Some companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Usually, only you can sue for damages done to your person or property. But under subrogation law, your insurer is extended some of your rights in exchange for making good on the damages. It can go after the money that was originally due to you, because it has covered the amount already.
How Does This Affect Policyholders?
For a start, if you have a deductible, it wasn't just your insurer who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its costs by raising your premiums and call it a day. On the other hand, if it has a proficient legal team and pursues them enthusiastically, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found one-half to blame), you'll typically get half your deductible back, depending on the laws in your state.
Furthermore, if the total expense of an accident is over your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as auto accident attorney Rosedale MD, successfully press a subrogation case, it will recover your losses as well as its own.
All insurance agencies are not created equal. When shopping around, it's worth scrutinizing the reputations of competing companies to determine if they pursue valid subrogation claims; if they do so fast; if they keep their customers apprised as the case continues; and if they then process successfully won reimbursements right away so that you can get your funding back and move on with your life. If, on the other hand, an insurance firm has a record of honoring claims that aren't its responsibility and then safeguarding its income by raising your premiums, you should keep looking.