Subrogation is a term that's understood among insurance and legal professionals but often not by the people they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to understand the nuances of how it works. The more information you have, the better decisions you can make about your insurance policy.
Any insurance policy you own is an assurance that, if something bad occurs, the business that insures the policy will make restitutions in one way or another without unreasonable delay. If you get an injury on the job, for instance, your company's workers compensation insurance agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.
But since ascertaining who is financially accountable for services or repairs is often a time-consuming affair – and time spent waiting in some cases increases the damage to the policyholder – insurance firms in many cases decide to pay up front and figure out the blame after the fact. They then need a means to recoup the costs if, in the end, they weren't responsible for the expense.
Can You Give an Example?
Your garage catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it takes care of the repair expenses. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him liable for the loss. You already have your money, but your insurance firm is out ten grand. What does the firm do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the process 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. Usually, only you can sue for damages done to your self or property. But under subrogation law, your insurer is extended some of your rights for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Should I Care?
For one thing, if you have a deductible, your insurer wasn't the only one that 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 insurer is lax about bringing subrogation cases to court, it might choose to recoup its losses by boosting your premiums. 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 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 at fault), you'll typically get $500 back, depending on the laws in your state.
Moreover, if the total expense 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 workers compensation attorney Reisterstown MD, pursue subrogation and wins, it will recover your costs in addition to its own.
All insurance agencies are not the same. When shopping around, it's worth weighing the reputations of competing agencies to evaluate whether they pursue valid subrogation claims; if they do so quickly; if they keep their accountholders posted as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your losses back and move on with your life. If, on the other hand, an insurer has a reputation of honoring claims that aren't its responsibility and then safeguarding its income by raising your premiums, you'll feel the sting later.