Subrogation is a term that's understood among legal and insurance firms but sometimes not by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your self-interest to comprehend an overview of how it works. The more knowledgeable you are, the better decisions you can make with regard to 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 a timely fashion. If you get injured while you're on the clock, for example, 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 typically a heavily involved affair – and time spent waiting in some cases compounds the damage to the policyholder – insurance companies usually decide to pay up front and assign blame after the fact. They then need a means to regain the costs if, when all is said and done, they weren't in charge of the expense.
Your electric outlet 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 decent chance that a judge would find him to blame for the damages. You already have your money, but your insurance agency is out $10,000. What does the agency do next?
How Subrogation Works
This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement when it pays out a claim that turned out not to be its responsibility. 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 to your person or property. But under subrogation law, your insurer is extended some of your rights 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.
Why Do I Need to Know This?
For one thing, if you have a deductible, your insurer wasn't the only one that 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 timid on any subrogation case it might not win, it might opt to recover 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 them aggressively, it is acting both in its own interests and in yours. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get half your deductible back, based on the laws in most states.
In addition, if the total price 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 auto accident attorney Middle River MD, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurers are not created equal. When comparing, it's worth examining the records of competing companies to determine if they pursue winnable subrogation claims; if they do so fast; if they keep their accountholders apprised as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, on the other hand, an insurer has a reputation of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, you'll feel the sting later.