Subrogation is a concept that's well-known among insurance and legal companies but often 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 to your advantage to understand the nuances of the process. The more information you have, the better decisions you can make with regard to your insurance policy.
Every insurance policy you hold is a commitment that, if something bad happens to you, the insurer of the policy will make good without unreasonable delay. If your vehicle is hit, insurance adjusters (and police, when necessary) determine who was to blame and that person's insurance covers the damages.
But since determining who is financially accountable for services or repairs is regularly a confusing affair – and time spent waiting sometimes compounds the damage to the policyholder – insurance companies usually opt to pay up front and assign blame after the fact. They then need a mechanism to recoup 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 house damages. Fortunately, you have property insurance and it pays out your claim in full. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him responsible for the damages. The house has already been fixed up 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 method 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. Usually, only you can sue for damages to your self or property. But under subrogation law, your insurance company is considered to have 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 Policyholders?
For a start, if your insurance policy stipulated a deductible, it wasn't just your insurance company 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 lax about bringing subrogation cases to court, it might opt to get back its costs by raising your premiums. On the other hand, if it has a competent legal team and goes after them enthusiastically, 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 responsible), you'll typically get half your deductible back, depending on your state laws.
Furthermore, if the total cost 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 lawyers specializing in workers compensation Perry Hall MD, successfully press a subrogation case, it will recover your costs as well as its own.
All insurers are not created equal. When comparing, it's worth looking at the records of competing agencies to evaluate if they pursue valid subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their accountholders posted as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, instead, an insurance firm has a record of paying out claims that aren't its responsibility and then protecting its bottom line by raising your premiums, you'll feel the sting later.