Subrogation is a term that's well-known in legal and insurance circles but often not by the policyholders they represent. Even if it sounds complicated, it would be to your advantage to know an overview of the process. The more information you have, the more likely an insurance lawsuit will work out favorably.
An insurance policy you hold is a commitment that, if something bad occurs, the firm that covers the policy will make restitutions in one way or another in a timely fashion. If you get injured at work, 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 figuring out who is financially accountable for services or repairs is typically a heavily involved affair – and time spent waiting often adds to the damage to the victim – insurance companies often opt to pay up front and assign blame after the fact. They then need a mechanism to recover the costs if, in the end, they weren't actually in charge of the payout.
Let's Look at an Example
Your kitchen catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays out your claim in full. However, the assessor assigned to your case finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him liable for the damages. The house has already been repaired in the name of expediency, but your insurance company is out all that money. What does the company do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement 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 person or property. But under subrogation law, your insurance company is extended some of your rights in exchange 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 Do I Need to Know This?
For a start, 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 have a stake in the outcome as well – to be precise, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to recoup its losses by ballooning your premiums. On the other hand, if it has a competent legal team and pursues those cases efficiently, it is acting both in its own interests and in yours. If all is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half responsible), you'll typically get $500 back, based on the laws in most states.
Additionally, if the total price 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 workers comp attorney Glen Burnie 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 measuring the records of competing companies to find out whether they pursue legitimate subrogation claims; if they do so quickly; if they keep their policyholders informed as the case goes on; and if they then process successfully won reimbursements quickly 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 profit margin by raising your premiums, you'll feel the sting later.