Subrogation is a concept that's understood in insurance and legal circles but sometimes not by the customers who employ them. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your benefit to know an overview of how it works. The more information you have, the better decisions you can make with regard to your insurance policy.
An insurance policy you have is a promise that, if something bad occurs, the firm that covers the policy will make good in a timely fashion. If you get an injury while working, your company's workers compensation insurance pays out for medical services. Employment lawyers handle the details; you just get fixed up.
But since determining who is financially accountable for services or repairs is sometimes a time-consuming affair – and delay in some cases increases the damage to the policyholder – insurance companies in many cases opt to pay up front and figure out the blame after the fact. They then need a path to regain the costs if, when there is time to look at all the facts, they weren't actually responsible for the expense.
Let's Look at an Example
You are in a traffic-light accident. Another car crashed into yours. Police are called, you exchange insurance details, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later it's determined that the other driver was entirely to blame and his insurance should have paid for the repair of your auto. How does your insurance company get its funds back?
How Does Subrogation Work?
This is where subrogation comes in. It is the way 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 to your self or property. But under subrogation law, your insurance company is extended 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 a start, if your insurance policy stipulated a deductible, it wasn't just your insurance company that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – namely, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its expenses by boosting your premiums. On the other hand, if it has a capable legal team and goes after them aggressively, it is acting both in its own interests and in yours. 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 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 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 lawyer Middle River MD, successfully press a subrogation case, it will recover your costs as well as its own.
All insurance companies are not created equal. When shopping around, it's worth looking at the reputations of competing agencies to determine whether they pursue winnable subrogation claims; if they resolve those claims without delay; if they keep their policyholders apprised as the case continues; and if they then process successfully won reimbursements quickly so that you can get your losses back and move on with your life. If, instead, an insurance company has a reputation of honoring claims that aren't its responsibility and then covering its profit margin by raising your premiums, you'll feel the sting later.