Subrogation is an idea that's well-known in legal and insurance circles but sometimes not by the policyholders who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is to your advantage to understand the steps of how it works. The more knowledgeable you are about it, the more likely an insurance lawsuit will work out in your favor.
Every insurance policy you hold is a promise that, if something bad happens to you, the firm that covers the policy will make restitutions without unreasonable delay. If you get injured at work, your employer's workers compensation 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 often a confusing affair – and time spent waiting sometimes adds to the damage to the victim – insurance firms usually decide to pay up front and assign blame after the fact. They then need a means to recover the costs if, ultimately, they weren't in charge of the expense.
Let's Look at an Example
You are in an auto accident. Another car crashed into yours. The police show up to assess the situation, you exchange insurance details, and you go on your way. You have comprehensive insurance and file a repair claim. Later police tell the insurance companies that the other driver was to blame and her insurance should have paid for the repair of your car. How does your company get its funds back?
How Does Subrogation Work?
This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement when it pays out a claim that turned out not to be its responsibility. Some companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Under ordinary circumstances, only you can sue for damages to your self or property. But under subrogation law, your insurance company is considered to have some of your rights 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 insurance company that 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 unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its losses by raising 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 doing you a favor as well as itself. If all $10,000 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 responsible), you'll typically get half your deductible back, based on the laws in most states.
Moreover, if the total expense of an accident is over 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 auto accident injury lawyer Rosedale MD, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurance companies are not created equal. When shopping around, it's worth weighing the records of competing companies to find out whether they pursue legitimate subrogation claims; if they resolve those claims with some expediency; if they keep their policyholders posted as the case continues; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, on the other hand, an insurance firm has a reputation of paying out claims that aren't its responsibility and then covering its bottom line by raising your premiums, you'll feel the sting later.