Subrogation is an idea that's well-known in insurance and legal circles but often not by the people who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your benefit to know an overview of the process. The more knowledgeable you are, the better decisions you can make about your insurance policy.
An insurance policy you hold is an assurance that, if something bad occurs, the business that covers the policy will make good in one way or another in a timely fashion. If you get injured while you're on the clock, your company's workers compensation insurance agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.
But since ascertaining who is financially responsible for services or repairs is usually a heavily involved affair – and delay sometimes compounds the damage to the policyholder – insurance firms in many cases opt to pay up front and figure out the blame after the fact. They then need a way to regain the costs if, when all is said and done, they weren't actually responsible for the payout.
Can You Give an Example?
Your bedroom catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays for the repairs. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him responsible for the damages. The house has already been repaired in the name of expediency, 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 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. Usually, only you can sue for damages done to your person or property. But under subrogation law, your insurer is considered to have 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.
How Does This Affect Individuals?
For a start, if your insurance policy stipulated a deductible, it wasn't just your insurer that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its costs by increasing your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after them enthusiastically, it is doing you a favor as well as itself. 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 half your deductible back, depending on your state laws.
In addition, if the total loss of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as personal injury attorney glen burnie md, pursue subrogation and succeeds, it will recover your losses in addition to its own.
All insurers are not the same. When comparing, it's worth measuring the reputations of competing companies to evaluate whether they pursue valid subrogation claims; if they resolve those claims quickly; if they keep their customers advised as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your money back and move on with your life. If, instead, an insurance firm has a reputation of honoring claims that aren't its responsibility and then safeguarding its income by raising your premiums, you'll feel the sting later.