Subrogation is an idea that's well-known in insurance and legal circles but often not 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 in your benefit to comprehend an overview of the process. The more you know about it, the better decisions you can make with regard to your insurance policy.
Every insurance policy you hold is a commitment that, if something bad occurs, the company on the other end of the policy will make good in one way or another without unreasonable delay. If your vehicle is hit, insurance adjusters (and the courts, when necessary) decide who was at fault and that person's insurance pays out.
But since ascertaining who is financially responsible for services or repairs is regularly a confusing affair – and time spent waiting in some cases compounds the damage to the policyholder – insurance companies usually decide to pay up front and figure out the blame after the fact. They then need a mechanism to get back the costs if, ultimately, they weren't actually responsible for the payout.
You are in a car accident. Another car crashed into yours. Police are called, you exchange insurance information, and you go on your way. You have comprehensive insurance and file a repair claim. Later it's determined that the other driver was at fault and his insurance policy should have paid for the repair of your auto. How does your insurance company get its funds back?
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 insurance firms 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 done to your person or property. But under subrogation law, your insurance company is considered to have 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.
How Does This Affect Individuals?
For one thing, if your insurance policy stipulated a deductible, it wasn't just your insurance company 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 insurer is timid on any subrogation case it might not win, it might opt to recover its losses by ballooning your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases aggressively, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent accountable), you'll typically get $500 back, based on the laws in most states.
Additionally, if the total loss of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as workers comp attorney Reisterstown MD, pursue subrogation and wins, it will recover your costs as well as its own.
All insurance agencies are not the same. When shopping around, it's worth examining the records of competing firms to evaluate if they pursue winnable subrogation claims; if they do so without delay; if they keep their customers posted as the case goes on; and if they then process successfully won reimbursements right away so that you can get your losses 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 covering its profit margin by raising your premiums, you should keep looking.