What You Need to Know About Subrogation

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.

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The Things You Need to Know About Subrogation

Subrogation is a term that's understood among insurance and legal professionals but often not by the customers they represent. Even if it sounds complicated, it is to your advantage to comprehend an overview of how it works. The more knowledgeable you are, the more likely an insurance lawsuit will work out in your favor.

An insurance policy you have is a promise that, if something bad happens to you, the company on the other end of the policy will make restitutions in one way or another without unreasonable delay. If your vehicle is hit, insurance adjusters (and police, when necessary) decide who was at fault and that party's insurance pays out.

But since figuring out who is financially accountable for services or repairs is sometimes a heavily involved affair – and delay in some cases adds to the damage to the policyholder – insurance firms usually decide to pay up front and figure out the blame afterward. They then need a path to recover the costs if, once the situation is fully assessed, they weren't actually responsible for the payout.

Let's Look at an Example

Your kitchen catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays out your claim in full. However, in its investigation it finds out that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him liable for the damages. You already have your money, but your insurance agency is out $10,000. What does the agency do next?

How Does Subrogation Work?

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 companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Ordinarily, only you can sue for damages to your person or property. But under subrogation law, your insurer is given some of your rights in exchange for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.

Why Does This Matter to Me?

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 insurer is timid on any subrogation case it might not win, it might choose to recoup its costs by ballooning your premiums. On the other hand, if it has a proficient legal team and goes after them enthusiastically, it is doing you a favor as well as itself. If all of the money 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 to blame), 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 could be in for a stiff bill. If your insurance company or its property damage lawyers, such as workers compensation attorney Reisterstown MD, pursue subrogation and wins, it will recover your costs in addition to its own.

All insurers are not the same. When shopping around, it's worth researching the reputations of competing agencies to evaluate if they pursue winnable subrogation claims; if they resolve those claims without delay; if they keep their policyholders apprised as the case continues; and if they then process successfully won reimbursements right away so that you can get your funding 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 profit margin by raising your premiums, you'll feel the sting later.

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