Subrogation and How It Affects Your Insurance Policy

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.

Subrogation and How It Affects You

Subrogation is a term that's well-known among insurance and legal firms but rarely by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to understand an overview of how it works. The more knowledgeable you are about it, the more likely it is that an insurance lawsuit will work out favorably.

Any insurance policy you have is a commitment that, if something bad happens to you, the company on the other end of the policy will make good in a timely fashion. If you get hurt at work, for example, your employer's workers compensation picks up the tab 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 typically a confusing affair – and time spent waiting often increases the damage to the policyholder – insurance companies often decide to pay up front and figure out the blame after the fact. They then need a method to recover the costs if, when all is said and done, they weren't responsible for the payout.

Let's Look at an Example

You go to the Instacare with a sliced-open finger. You give the nurse your medical insurance card and he records your plan information. You get stitched up and your insurance company gets an invoice for the services. But on the following day, when you arrive at work – where the accident occurred – you are given workers compensation forms to fill out. Your employer's workers comp policy is in fact responsible for the hospital visit, not your medical insurance policy. It has a vested interest in getting that money back in some way.

How Does Subrogation Work?

This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement after it has paid for something that should have been paid by some other entity. 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. Ordinarily, only you can sue for damages done to your self or property. But under subrogation law, your insurance company is given 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 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 the tune of $1,000. If your insurance company is timid on any subrogation case it might not win, it might opt to get back its losses by increasing your premiums. On the other hand, if it has a knowledgeable legal team and goes after those cases aggressively, it is acting both in its own interests and in yours. If all $10,000 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 responsible), you'll typically get $500 back, depending on your state laws.

Additionally, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as workmen's compensation Canton, ga, successfully press a subrogation case, it will recover your costs as well as its own.

All insurance companies are not the same. When comparing, it's worth measuring the reputations of competing companies to find out whether they pursue legitimate subrogation claims; if they resolve those claims without dragging their feet; if they keep their customers posted as the case goes on; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, instead, an insurer has a reputation of honoring claims that aren't its responsibility and then covering its profitability by raising your premiums, you'll feel the sting later.