Subrogation is a concept that's well-known in insurance and legal circles but often not by the people they represent. Even if it sounds complicated, it is in your self-interest to comprehend the steps of how it works. The more you know, the more likely relevant proceedings will work out in your favor.
Every insurance policy you hold is an assurance that, if something bad happens to you, the company that covers the policy will make restitutions in a timely manner. If you get hurt while working, for example, your employer's workers compensation insurance agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.
But since determining who is financially accountable for services or repairs is usually a confusing affair – and delay sometimes adds to the damage to the victim – insurance companies in many cases opt to pay up front and figure out the blame later. They then need a means to regain the costs if, once the situation is fully assessed, they weren't responsible for the payout.
Let's Look at an Example
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 finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him responsible for the loss. The home has already been repaired in the name of expediency, but your insurance firm is out $10,000. What does the firm do next?
How Does Subrogation Work?
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 companies 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 to your person or property. But under subrogation law, your insurer is given some of your rights 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.
Why Does This Matter to Me?
For a start, if you have a deductible, your insurer wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to be precise, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to get back its losses by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them efficiently, it is acting both in its own interests and in yours. 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 culpable), you'll typically get half your deductible back, based on the laws in most states.
In addition, if the total price of an accident is more than 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 lawyers Reisterstown MD, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurers are not created equal. When comparing, it's worth looking up the reputations of competing companies to evaluate if they pursue valid subrogation claims; if they do so fast; if they keep their accountholders posted as the case proceeds; 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, on the other hand, an insurance firm has a record of honoring claims that aren't its responsibility and then protecting its profitability by raising your premiums, you'll feel the sting later.