Subrogation is an idea that's well-known among legal and insurance firms but sometimes not by the people who hire them. Even if you've never heard the word before, it would be to your advantage to understand an overview of how it works. The more information you have about it, the better decisions you can make about your insurance company.
An insurance policy you hold is an assurance that, if something bad happens to you, the company that covers the policy will make good in one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) determine who was to blame and that person's insurance covers the damages.
But since determining who is financially responsible for services or repairs is sometimes a time-consuming affair – and time spent waiting often adds to the damage to the policyholder – insurance firms in many cases decide to pay up front and assign blame after the fact. They then need a path to get back the costs if, when all is said and done, they weren't actually in charge of the expense.
Let's Look at an Example
Your kitchen catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays for the repairs. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him liable for the loss. You already have your money, but your insurance company is out ten grand. What does the company do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the way that an insurance company uses to claim payment after it has paid for something that should have been paid by some other entity. 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. Under ordinary circumstances, only you can sue for damages to your person or property. But under subrogation law, your insurer is extended some of your rights for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Do I Need to Know This?
For starters, if you have a deductible, it wasn't just your insurer that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to be precise, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to recoup its losses by increasing your premiums and call it a day. On the other hand, if it has a capable legal team and pursues them efficiently, it is doing you a favor as well as itself. If all 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 at fault), you'll typically get $500 back, based on the laws in most states.
In addition, if the total loss of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as car accident attorney Rosedale MD, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurers are not created equal. When comparing, it's worth scrutinizing the reputations of competing firms to find out if they pursue legitimate subrogation claims; if they resolve those claims fast; if they keep their accountholders informed as the case continues; and if they then process successfully won reimbursements quickly so that you can get your losses back and move on with your life. If, instead, an insurance company has a reputation of paying out claims that aren't its responsibility and then covering its income by raising your premiums, you'll feel the sting later.