Subrogation is an idea that's well-known in legal and insurance circles but often not by the people they represent. Rather than leave it to the professionals, it is in your self-interest to understand the nuances of how it works. The more you know about it, the better decisions you can make with regard to your insurance policy.
An insurance policy you own is an assurance that, if something bad occurs, the company that covers the policy will make good in one way or another without unreasonable delay. If you get injured while you're on the clock, your company's workers compensation pays out for medical services. Employment lawyers handle the details; you just get fixed up.
But since determining who is financially accountable for services or repairs is sometimes a time-consuming affair – and time spent waiting often increases the damage to the policyholder – insurance firms in many cases decide to pay up front and figure out the blame after the fact. They then need a method to get back the costs if, when there is time to look at all the facts, they weren't actually responsible for the payout.
Can You Give an Example?
Your stove catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it pays out your claim in full. However, in its investigation it finds out that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him to blame for the damages. You already have your money, but your insurance agency is out ten grand. What does the agency do next?
How Subrogation Works
This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement when it pays out a claim that turned out not to be its responsibility. Some insurance firms have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Ordinarily, only you can sue for damages done to your self or property. But under subrogation law, your insurer is considered to have some of your rights 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 Individuals?
For starters, if you have a deductible, your insurer wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to be precise, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to recover its losses by upping your premiums. On the other hand, if it knows which cases it is owed and pursues those cases aggressively, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent responsible), you'll typically get $500 back, depending on your state laws.
In addition, 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 Middle River MD, successfully press a subrogation case, it will recover your losses in addition to its own.
All insurance companies are not created equal. When comparing, it's worth looking at the records of competing agencies to find out if they pursue winnable subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their customers advised 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 agency has a record of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.