Subrogation is a concept that's understood in insurance and legal circles but sometimes not by the people they represent. Even if you've never heard the word before, it is in your self-interest to understand the steps of how it works. The more information you have, the better decisions you can make about your insurance company.
Every insurance policy you hold is a promise that, if something bad happens to you, the insurer of the policy will make restitutions without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) determine who was at fault and that party's insurance pays out.
But since figuring out who is financially accountable for services or repairs is typically a heavily involved affair – and time spent waiting sometimes increases the damage to the victim – insurance firms usually decide to pay up front and figure out the blame afterward. They then need a way to recoup the costs if, when all is said and done, they weren't in charge of the expense.
Can You Give an Example?
Your electric outlet catches fire and causes $10,000 in house damages. Fortunately, you have property insurance and it takes care of the repair expenses. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him accountable for the loss. You already have your money, but your insurance company is out ten grand. What does the company do next?
How Subrogation Works
This is where subrogation comes in. It is the way that an insurance company uses to claim payment when it pays out a claim that turned out not to be its responsibility. 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. Ordinarily, only you can sue for damages to your self 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.
Why Do I Need to Know This?
For one thing, 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 lost some money too – namely, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recoup its losses by increasing your premiums and call it a day. On the other hand, if it has a competent legal team and pursues them aggressively, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent accountable), you'll typically get $500 back, depending on your state laws.
In addition, if the total expense 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 auto accident injury lawyer Essex MD, successfully press a subrogation case, it will recover your losses in addition to its own.
All insurance companies are not the same. When comparing, it's worth scrutinizing the reputations of competing agencies to evaluate whether they pursue winnable subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their accountholders posted 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 agency has a record of paying out claims that aren't its responsibility and then covering its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.