Subrogation is an idea that's well-known among insurance and legal professionals but rarely by the policyholders they represent. Rather than leave it to the professionals, it is to your advantage to comprehend the steps of how it works. The more you know, the better decisions you can make about your insurance policy.
An insurance policy you hold is a promise that, if something bad occurs, the insurer of the policy will make restitutions without unreasonable delay. If you get an injury on the job, 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 determining who is financially responsible for services or repairs is regularly a confusing affair – and time spent waiting sometimes increases the damage to the policyholder – insurance companies usually opt to pay up front and figure out the blame later. They then need a means to get back the costs if, when all the facts are laid out, they weren't actually responsible for the expense.
Your living room catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it takes care of the repair expenses. However, the insurance investigator discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him accountable for the damages. The house has already been fixed up in the name of expediency, but your insurance firm is out ten grand. What does the firm do next?
How Subrogation Works
This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement 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 given 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.
How Does This Affect the Insured?
For starters, if your insurance policy stipulated a deductible, it wasn't just your insurer that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to be precise, $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to recover its losses by raising your premiums. On the other hand, if it knows which cases it is owed and pursues those cases enthusiastically, it is doing you a favor as well as itself. If all 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 at fault), you'll typically get $500 back, depending on the laws in your state.
Moreover, if the total cost 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 catastrophic injury law firm Perry Hall MD, pursue subrogation and succeeds, it will recover your costs as well as its own.
All insurance companies are not created equal. When shopping around, it's worth looking at the records of competing firms to find out whether they pursue legitimate subrogation claims; if they resolve those claims without delay; if they keep their clients updated as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, on the other hand, an insurer has a record of honoring claims that aren't its responsibility and then safeguarding its profitability by raising your premiums, you should keep looking.