Subrogation is a concept that's understood among legal and insurance companies but sometimes not by the customers who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to comprehend an overview of how it works. The more knowledgeable you are about it, the more likely it is that an insurance lawsuit will work out in your favor.
Any insurance policy you own is a promise that, if something bad occurs, the firm that covers the policy will make good without unreasonable delay. If you get an injury on the job, for instance, your employer's workers compensation insurance agrees to pay 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 heavily involved affair – and delay often increases the damage to the victim – insurance companies in many cases opt to pay up front and figure out the blame later. They then need a way to recoup the costs if, when there is time to look at all the facts, they weren't in charge of the expense.
You are in a car 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 that pays for the repairs right away. 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 money back?
How Subrogation Works
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 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 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 Me?
For one thing, if your insurance policy stipulated a deductible, it wasn't just your insurance company who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to the tune of $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to recover its costs by raising your premiums and call it a day. 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 of the money is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found 50 percent accountable), you'll typically get half your deductible 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. If your insurance company or its property damage lawyers, such as catastrophic injury law firm Rosedale MD, pursue subrogation and wins, it will recover your expenses as well as its own.
All insurance companies are not the same. When shopping around, it's worth measuring the reputations of competing agencies to determine if they pursue winnable subrogation claims; if they resolve those claims without dragging their feet; if they keep their clients advised as the case continues; and if they then process successfully won reimbursements right away so that you can get your money back and move on with your life. If, on the other hand, an insurance company has a record of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you'll feel the sting later.