Subrogation is a term that's understood in legal and insurance circles but often not by the people they represent. Rather than leave it to the professionals, it would be to your advantage to understand an overview of how it works. The more knowledgeable you are about it, the better decisions you can make with regard to your insurance company.
An insurance policy you hold is a promise that, if something bad happens to you, the business that covers the policy will make restitutions without unreasonable delay. If your house is burglarized, your property insurance steps in to compensate you or facilitate the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is usually a confusing affair – and delay often compounds the damage to the policyholder – insurance companies in many cases opt to pay up front and assign blame after the fact. They then need a way to regain the costs if, when all the facts are laid out, they weren't actually in charge of the payout.
Can You Give an Example?
You are in a car accident. Another car ran into yours. The police show up to assess the situation, 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 to blame and his insurance policy should have paid for the repair of your vehicle. How does your company get its money back?
How Does Subrogation Work?
This is where subrogation comes in. It is the method 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. Normally, only you can sue for damages to your self 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 Does This Matter to Me?
For a start, 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 – to be precise, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recover its expenses by boosting your premiums. On the other hand, if it knows which cases it is owed and goes after them enthusiastically, it is doing you a favor as well as itself. If all of the money 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 responsible), you'll typically get half your deductible back, based on the laws in most states.
Moreover, if the total price 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 car accident lawyer Middle River MD, successfully press a subrogation case, it will recover your losses as well as its own.
All insurance agencies are not the same. When shopping around, it's worth researching the reputations of competing firms to determine whether they pursue winnable subrogation claims; if they do so with some expediency; if they keep their accountholders advised as the case continues; 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 insurer has a reputation of paying out claims that aren't its responsibility and then protecting its profitability by raising your premiums, you'll feel the sting later.