Subrogation is an idea that's well-known among legal and insurance professionals but sometimes not by the customers they represent. Even if you've never heard the word before, it is to your advantage to understand the steps of the process. The more information you have about it, the better decisions you can make about your insurance policy.
Any insurance policy you own is an assurance that, if something bad occurs, the firm that insures the policy will make good without unreasonable delay. If you get an injury while you're on the clock, for instance, your company's workers compensation insurance 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 delay sometimes compounds the damage to the policyholder – insurance firms often opt to pay up front and assign blame later. They then need a means to regain the costs if, when all is said and done, they weren't actually in charge of the payout.
Your electric outlet catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays for the repairs. However, the assessor assigned to your case finds out that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him liable for the loss. The home has already been repaired in the name of expediency, but your insurance company is out ten grand. What does the company do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the process that an insurance company uses to claim payment 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 to your person or property. But under subrogation law, your insurer is given 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.
Why Do I Need to Know This?
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 lost some money too – namely, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to get back its expenses by upping your premiums. 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 one-half accountable), you'll typically get $500 back, depending on your state laws.
Additionally, if the total loss 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 lawyer Essex MD, successfully press a subrogation case, it will recover your expenses as well as its own.
All insurance agencies are not created equal. When shopping around, it's worth measuring the records of competing firms to determine if they pursue valid subrogation claims; if they resolve those claims without delay; if they keep their policyholders advised as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, on the other hand, an insurer has a record of paying out claims that aren't its responsibility and then protecting its income by raising your premiums, even attractive rates won't outweigh the eventual headache.