Subrogation is a term that's understood in legal and insurance circles but often not by the policyholders they represent. Even if it sounds complicated, it would be to your advantage to understand an overview of the process. The more you know, the more likely it is that relevant proceedings will work out favorably.
Every insurance policy you own is a commitment that, if something bad occurs, the company that insures the policy will make restitutions without unreasonable delay. If a hailstorm damages your property, your property insurance steps in to compensate you or pay for the repairs, subject to state property damage laws.
But since determining who is financially responsible for services or repairs is typically a confusing affair – and delay sometimes adds to the damage to the victim – insurance companies often decide to pay up front and assign blame after the fact. They then need a mechanism to get back the costs if, once the situation is fully assessed, they weren't responsible for the payout.
Can You Give an Example?
Your stove catches fire and causes $10,000 in home damages. Happily, you have property insurance and it takes care of the repair expenses. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him responsible for the loss. The house has already been fixed up in the name of expediency, but your insurance firm is out $10,000. What does the firm 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. Usually, only you can sue for damages done to your self or property. But under subrogation law, your insurance company is extended some of your rights in exchange for having taken care of 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 Me?
For starters, if your insurance policy stipulated a deductible, your insurance company wasn't the only one that 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 lax about bringing subrogation cases to court, it might choose to get back its losses by boosting your premiums and call it a day. 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 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 the laws in your state.
Additionally, if the total price of an accident is more than 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 injury lawyer reisterstown, md, successfully press a subrogation case, it will recover your costs as well as its own.
All insurance companies are not created equal. When comparing, it's worth contrasting the reputations of competing companies to evaluate whether they pursue legitimate subrogation claims; if they resolve those claims quickly; if they keep their clients posted as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, instead, an insurer has a reputation of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.