Subrogation is a term that's well-known among legal and insurance professionals but sometimes not by the policyholders they represent. Even if you've never heard the word before, it is in your benefit to understand an overview of how it works. The more you know, the more likely an insurance lawsuit will work out in your favor.
Every insurance policy you own is a promise that, if something bad happens to you, the company on the other end of the policy will make restitutions without unreasonable delay. If your home burns down, for instance, your property insurance steps in to remunerate you or enable the repairs, subject to state property damage laws.
But since figuring out who is financially accountable for services or repairs is usually a confusing affair – and delay in some cases compounds the damage to the policyholder – insurance firms often opt to pay up front and figure out the blame later. They then need a method to get back the costs if, when there is time to look at all the facts, they weren't actually in charge of the expense.
Can You Give an Example?
You are in a car accident. Another car crashed into yours. The police show up to assess the situation, you exchange insurance details, and you go on your way. You have comprehensive insurance and file a repair claim. Later police tell the insurance companies that the other driver was entirely at fault and his insurance should have paid for the repair of your auto. How does your insurance company get its money back?
How Does Subrogation Work?
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. Ordinarily, only you can sue for damages done to your person or property. But under subrogation law, your insurance company 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.
Why Does This Matter to Me?
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 – namely, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might opt to recoup its expenses by boosting your premiums. On the other hand, if it has a capable legal team and goes after those cases aggressively, it is acting both in its own interests and in yours. If all of the money is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get half your deductible back, depending on the laws in your state.
In addition, if the total price 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 auto accident attorney Middle River MD, successfully press a subrogation case, it will recover your losses in addition to its own.
All insurers are not the same. When comparing, it's worth weighing the records of competing companies to determine if they pursue legitimate subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their clients updated as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your money back and move on with your life. If, instead, an insurer has a record of paying out claims that aren't its responsibility and then protecting its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.