Subrogation is a term that's understood in legal and insurance circles but sometimes 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 the nuances of how it works. The more you know about it, the better decisions you can make with regard to your insurance policy.
Every insurance policy you own is an assurance that, if something bad happens to you, the business on the other end of the policy will make restitutions in a timely fashion. If you get hurt while working, your employer's workers compensation agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.
But since figuring out who is financially accountable for services or repairs is typically a tedious, lengthy affair – and time spent waiting often compounds the damage to the policyholder – insurance firms in many cases decide to pay up front and figure out the blame afterward. They then need a way to regain the costs if, when there is time to look at all the facts, they weren't actually responsible for the expense.
Your bedroom catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it pays for the repairs. 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 to blame for the loss. The home has already been fixed up in the name of expediency, but your insurance company is out all that money. 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 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. Usually, only you can sue for damages to your self or property. But under subrogation law, your insurer is given 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 Policyholders?
For one thing, if you have a deductible, it wasn't just your insurer who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to the tune of $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to get back its expenses by ballooning your premiums. On the other hand, if it knows which cases it is owed and goes after them aggressively, it is acting both in its own interests and in yours. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get $500 back, depending on your state laws.
Moreover, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as workers comp attorney Reisterstown MD, pursue subrogation and wins, it will recover your expenses as well as its own.
All insurance agencies are not created equal. When shopping around, it's worth weighing the records of competing companies to evaluate if they pursue valid subrogation claims; if they do so fast; if they keep their customers advised as the case goes on; 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, on the other hand, an insurance agency has a record of paying out claims that aren't its responsibility and then safeguarding its income by raising your premiums, you'll feel the sting later.