Subrogation is a concept that's well-known among legal and insurance companies but rarely by the people they represent. Even if you've never heard the word before, it is in your benefit to understand the nuances of the process. The more knowledgeable you are, the better decisions you can make about your insurance policy.
Any insurance policy you have is a promise 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 property is broken into, for instance, your property insurance agrees to compensate you or enable the repairs, subject to state property damage laws.
But since ascertaining who is financially responsible for services or repairs is regularly a confusing affair – and delay often adds to the damage to the victim – insurance companies usually decide to pay up front and figure out the blame after the fact. They then need a path to regain the costs if, when all is said and done, they weren't responsible for the payout.
Your garage 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 finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him accountable for the damages. You already have your money, but your insurance company is out all that money. What does the company do next?
How Does Subrogation Work?
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 companies 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 done to your person or property. But under subrogation law, your insurer is considered to have some of your rights in exchange for making good on 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 you have a deductible, your insurer wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to the tune of $1,000. If your insurance company is timid on any subrogation case it might not win, it might opt to get back its losses by raising your premiums and call it a day. On the other hand, if it has a capable legal team and goes after those cases efficiently, it is acting both in its own interests and in yours. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half to blame), you'll typically get $500 back, based on the laws in most states.
In addition, if the total loss of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as medical negligence lawyer Frederick Maryland, pursue subrogation and wins, it will recover your expenses in addition to its own.
All insurers are not created equal. When shopping around, it's worth comparing the reputations of competing firms to evaluate whether they pursue legitimate subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their accountholders updated as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your deductible back and move on with your life. If, instead, an insurance company has a record of honoring claims that aren't its responsibility and then covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.