Subrogation is a concept that's understood among legal and insurance companies but rarely by the policyholders they represent. Even if you've never heard the word before, it is in your benefit to know the nuances of the process. The more you know, the better decisions you can make with regard to your insurance company.
An insurance policy you hold is an assurance that, if something bad happens to you, the business that covers the policy will make good without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) determine who was to blame and that person's insurance covers the damages.
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 policyholder – insurance companies usually decide to pay up front and figure out the blame later. They then need a mechanism to recover the costs if, when all the facts are laid out, they weren't actually in charge of the expense.
Your stove catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it pays out your claim in full. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him responsible for the damages. You already have your money, but your insurance agency is out all that money. What does the agency do next?
How Subrogation Works
This is where subrogation comes in. It is the process 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 done to your person or property. But under subrogation law, your insurance company is considered to have 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.
How Does This Affect Individuals?
For starters, if your insurance policy stipulated a deductible, your insurance company 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 insurance company is timid on any subrogation case it might not win, it might opt to get back its costs by boosting your premiums. On the other hand, if it has a competent legal team and pursues them enthusiastically, it is acting both in its own interests and in yours. If all 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 at fault), you'll typically get half your deductible back, based on the laws in most states.
Furthermore, if the total cost 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 serious injury lawyers Rosedale MD, successfully press a subrogation case, it will recover your expenses as well as its own.
All insurers are not the same. When comparing, it's worth looking up the records of competing companies to evaluate if they pursue legitimate subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their clients apprised as the case continues; and if they then process successfully won reimbursements quickly 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 covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.