Subrogation is an idea that's understood among legal and insurance professionals 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 an overview of the process. The more information you have, the more likely relevant proceedings will work out in your favor.
An insurance policy you hold is a promise that, if something bad happens to you, the company on the other end of the policy will make restitutions without unreasonable delay. If your house is broken into, for instance, your property insurance steps in to remunerate you or pay for the repairs, subject to state property damage laws.
But since determining who is financially accountable for services or repairs is often a heavily involved affair – and time spent waiting sometimes increases the damage to the victim – insurance companies in many cases decide to pay up front and figure out the blame later. They then need a way to regain the costs if, when all is said and done, they weren't in charge of the payout.
Let's Look at an Example
Your bedroom catches fire and causes $10,000 in house damages. Happily, you have property insurance and it takes care of the repair expenses. However, in its investigation it finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him to blame for the loss. You already have your money, 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 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. Under ordinary circumstances, only you can sue for damages done to your self or property. But under subrogation law, your insurance company is given some of your rights for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Do I Need to Know This?
For starters, if you have a deductible, your insurance company 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 the tune of $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to recover its losses by boosting your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues them enthusiastically, it is doing you a favor as well as itself. If all 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 to blame), you'll typically get half your deductible back, depending on your state laws.
Additionally, 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 attorney Middle River MD, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurance companies are not created equal. When shopping around, it's worth looking up the records of competing firms to find out whether they pursue legitimate subrogation claims; if they resolve those claims without dragging their feet; if they keep their clients informed as the case continues; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, on the other hand, an insurer has a reputation of paying out claims that aren't its responsibility and then protecting its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.