Subrogation is a term that's understood among insurance and legal firms but sometimes not by the policyholders they represent. Even if you've never heard the word before, it would be to your advantage to understand the steps of how it works. The more you know about it, the more likely relevant proceedings will work out in your favor.
Every insurance policy you hold is a promise that, if something bad occurs, the insurer of the policy will make good in one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) determine who was at fault and that person's insurance pays out.
But since determining who is financially responsible for services or repairs is sometimes a heavily involved affair – and time spent waiting sometimes adds to the damage to the policyholder – insurance companies in many cases opt to pay up front and assign blame afterward. They then need a path to recoup the costs if, in the end, they weren't actually in charge of the expense.
Can You Give an Example?
You are in a highway accident. Another car crashed 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 entirely at fault 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. 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 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 Should I Care?
For starters, 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 – namely, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to recoup its costs by boosting your premiums and call it a day. On the other hand, if it has a capable legal team and goes after those cases efficiently, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get half your deductible back, depending on the laws in your state.
Furthermore, if the total expense 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 workers compensation attorney Reisterstown MD, pursue subrogation and succeeds, it will recover your losses as well as its own.
All insurance agencies are not created equal. When comparing, it's worth weighing the reputations of competing agencies to find out whether they pursue valid subrogation claims; if they do so in a reasonable amount of time; if they keep their clients informed as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, on the other hand, an insurance company has a reputation of paying out claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, you should keep looking.