Subrogation is a concept that's understood among legal and insurance firms but rarely by the customers who employ them. 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 company.
Every insurance policy you hold is a commitment that, if something bad happens to you, the firm on the other end of the policy will make good in one way or another in a timely manner. If your vehicle is rear-ended, insurance adjusters (and the courts, when necessary) decide who was at fault and that person's insurance covers the damages.
But since determining who is financially responsible for services or repairs is often a tedious, lengthy affair – and time spent waiting in some cases adds to the damage to the victim – insurance firms in many cases opt to pay up front and assign blame after the fact. They then need a mechanism to recover the costs if, ultimately, they weren't actually responsible for the payout.
Let's Look at an Example
You are in a traffic-light accident. Another car collided with yours. Police are called, you exchange insurance information, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later police tell the insurance companies that the other driver was entirely at fault and his insurance should have paid for the repair of your auto. How does your insurance company get its money back?
How Subrogation Works
This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement 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 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 Me?
For starters, 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 insurance company is lax about bringing subrogation cases to court, it might choose to recover its losses by increasing your premiums. On the other hand, if it has a capable legal team and pursues them aggressively, 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 responsible), you'll typically get $500 back, based on the laws in most states.
In addition, if the total cost of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely costly. If your insurance company or its property damage lawyers, such as workers comp attorney Reisterstown MD, pursue subrogation and succeeds, it will recover your costs as well as its own.
All insurers are not created equal. When shopping around, it's worth looking up the records of competing firms to evaluate whether they pursue legitimate subrogation claims; if they resolve those claims without delay; if they keep their customers apprised as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, instead, an insurer 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.