What You Need to Know About Subrogation

Subrogation is a concept that's well-known in insurance and legal circles but often not by the people who employ them. Rather than leave it to the professionals, it would be in your self-interest to know the steps of the process. The more information you have, the better decisions you can make about your insurance company.

Any insurance policy you own is a commitment that, if something bad occurs, the firm that insures the policy will make good in a timely manner. If your vehicle is rear-ended, insurance adjusters (and the courts, when necessary) determine who was to blame and that party's insurance covers the damages.

But since determining who is financially responsible for services or repairs is often a time-consuming affair – and delay sometimes compounds the damage to the policyholder – insurance companies often decide to pay up front and figure out the blame later. They then need a mechanism to get back the costs if, when there is time to look at all the facts, they weren't actually in charge of the payout.

Can You Give an Example?

You are in a car accident. Another car collided with yours. The police show up to assess the situation, you exchange insurance details, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later it's determined that the other driver was entirely to blame and her insurance policy should have paid for the repair of your auto. How does your company get its funds back?

How Subrogation Works

This is where subrogation comes in. It is the process 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. Normally, only you can sue for damages to your self 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.

Why Does This Matter to Me?

For one thing, 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 have a stake in the outcome as well – namely, $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to recover its expenses by increasing your premiums. On the other hand, if it knows which cases it is owed and pursues them aggressively, it is acting both in its own interests and in yours. 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 one-half accountable), you'll typically get half your deductible back, based on the laws in most states.

Additionally, if the total cost 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 lawyer Essex MD, successfully press a subrogation case, it will recover your costs as well as its own.

All insurance agencies are not created equal. When comparing, it's worth comparing the reputations of competing companies to evaluate whether they pursue winnable subrogation claims; if they resolve those claims without dragging their feet; if they keep their clients apprised as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, on the other hand, an insurance agency has a reputation of paying out claims that aren't its responsibility and then covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.