Subrogation is a concept that's understood among legal and insurance firms but often not by the people they represent. Even if it sounds complicated, it would be in your self-interest to comprehend the steps of how it works. The more you know, the better decisions you can make about your insurance company.
Any insurance policy you own is a promise that, if something bad occurs, the insurer of the policy will make good in one way or another in a timely manner. If your vehicle is in a fender-bender, insurance adjusters (and police, when necessary) determine who was to blame and that person's insurance pays out.
But since figuring out who is financially responsible for services or repairs is typically a time-consuming affair – and time spent waiting sometimes increases the damage to the victim – insurance firms in many cases opt to pay up front and assign blame after the fact. They then need a mechanism to recover the costs if, when there is time to look at all the facts, they weren't actually responsible for the payout.
Can You Give an Example?
You are in a traffic-light accident. Another car collided with yours. The police show up to assess the situation, you exchange insurance details, and you go on your way. You have comprehensive insurance and file a repair claim. Later police tell the insurance companies that the other driver was to blame and her insurance policy should have paid for the repair of your vehicle. How does your company get its funds back?
How Subrogation Works
This is where subrogation comes in. It is the method that an insurance company uses to claim payment after it has paid for something that should have been paid by some other entity. Some companies 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 extended some of your rights in exchange for making good on 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 one thing, 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 have a stake in the outcome as well – to be precise, $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recover its losses by increasing your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, it is acting both in its own interests and in yours. If all 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 to blame), you'll typically get half your deductible back, based on the laws in most states.
In addition, if the total cost of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as Catastrophic injury attorneys Perry Hall MD, successfully press a subrogation case, it will recover your losses as well as its own.
All insurers are not the same. When comparing, it's worth looking at the records of competing firms to evaluate whether they pursue winnable subrogation claims; if they resolve those claims with some expediency; if they keep their policyholders updated as the case goes on; and if they then process successfully won reimbursements quickly 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 safeguarding its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.