Subrogation is an idea that's well-known in legal and insurance circles but often not by the people they represent. Even if you've never heard the word before, it would be to your advantage to know the steps of how it works. The more you know, the more likely relevant proceedings will work out in your favor.
An insurance policy you own is a promise that, if something bad happens to you, the business that covers the policy will make good in one way or another without unreasonable delay. If your property is burglarized, your property insurance agrees to remunerate you or pay for the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is typically a heavily involved affair – and time spent waiting sometimes adds to the damage to the victim – insurance companies usually opt to pay up front and assign blame after the fact. They then need a path to recover the costs if, when all the facts are laid out, they weren't actually responsible for the expense.
Let's Look at an Example
Your garage catches fire and causes $10,000 in house damages. Happily, you have property insurance and it pays out your claim in full. However, the assessor assigned to your case finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him to blame for the damages. The home has already been repaired in the name of expediency, but your insurance company is out ten grand. What does the company do next?
How Subrogation Works
This is where subrogation comes in. It is the process 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. Normally, 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 for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.
How Does This Affect Policyholders?
For one thing, if you have a deductible, your insurance company 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 – to the tune of $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might opt to recoup its costs by ballooning your premiums. On the other hand, if it has a knowledgeable legal team and pursues them efficiently, it is acting both in its own interests and in yours. If all is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half to blame), you'll typically get $500 back, based on the laws in most states.
Furthermore, if the total loss 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 lawyer Essex MD, pursue subrogation and succeeds, it will recover your expenses in addition to its own.
All insurers are not the same. When shopping around, it's worth looking at the records of competing agencies to find out if they pursue legitimate subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their accountholders updated as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, instead, an insurance company has a record of honoring claims that aren't its responsibility and then covering its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.