Subrogation is an idea that's well-known in insurance and legal circles but often not by the policyholders they represent. Even if it sounds complicated, it is to your advantage to know the nuances of how it works. The more information you have about it, the more likely it is that relevant proceedings will work out in your favor.
Every insurance policy you own is an assurance that, if something bad occurs, the insurer of the policy will make good without unreasonable delay. If your property is burglarized, your property insurance steps in to remunerate you or facilitate the repairs, subject to state property damage laws.
But since determining who is financially responsible for services or repairs is regularly a time-consuming affair – and delay often adds to the damage to the policyholder – insurance companies in many cases decide to pay up front and figure out the blame afterward. They then need a path to recover the costs if, when all the facts are laid out, they weren't actually in charge of the expense.
Can You Give an Example?
Your electric outlet catches fire and causes $10,000 in house damages. Happily, you have property insurance and it pays for the repairs. However, in its investigation it 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 firm is out all that money. What does the firm do next?
How Subrogation Works
This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement 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. Normally, only you can sue for damages to your person or property. But under subrogation law, your insurance company is given some of your rights for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Do I Need to Know This?
For one thing, if you have a deductible, your insurance company wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to get back its expenses by raising your premiums. On the other hand, if it has a competent legal team and goes after them enthusiastically, 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 culpable), you'll typically get $500 back, depending on your state laws.
Moreover, if the total loss 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 auto accident attorney Middle River MD, pursue subrogation and wins, it will recover your expenses in addition to its own.
All insurers are not the same. When shopping around, it's worth looking up the reputations of competing companies to evaluate if they pursue legitimate subrogation claims; if they do so with some expediency; if they keep their accountholders posted as the case continues; and if they then process successfully won reimbursements immediately so that you can get your losses back and move on with your life. If, instead, an insurer has a reputation of paying out claims that aren't its responsibility and then covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.