Subrogation is a term that's well-known in legal and insurance circles but rarely by the policyholders who hire them. Rather than leave it to the professionals, it would be in your benefit to understand the steps of the process. The more information you have, the better decisions you can make about your insurance policy.
Every insurance policy you have is a promise that, if something bad occurs, the business that insures the policy will make good in one way or another in a timely fashion. If your vehicle is hit, insurance adjusters (and the judicial system, when necessary) determine who was at fault and that person's insurance covers the damages.
But since determining who is financially responsible for services or repairs is usually a confusing affair – and time spent waiting in some cases adds to the damage to the policyholder – insurance companies often opt to pay up front and figure out the blame after the fact. They then need a method to recoup the costs if, in the end, they weren't responsible for the payout.
Let's Look at an Example
Your electric outlet catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays for the repairs. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him accountable for the damages. The house has already been repaired in the name of expediency, but your insurance firm is out $10,000. What does the firm do next?
How Does Subrogation Work?
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 insurance firms 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 to your person or property. But under subrogation law, your insurer is extended some of your rights in exchange for making good on 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 Individuals?
For a start, if you have a deductible, your insurer wasn't the only one 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 costs by ballooning your premiums and call it a day. On the other hand, if it has a competent legal team and pursues them enthusiastically, it is doing you a favor as well as itself. 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 one-half culpable), you'll typically get $500 back, depending on the laws in your state.
Additionally, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely expensive. If your insurance company or its property damage lawyers, such as catastrophic injury law firm Perry Hall MD, successfully press a subrogation case, it will recover your losses in addition to its own.
All insurers are not created equal. When shopping around, it's worth looking at the records of competing agencies to evaluate whether they pursue legitimate subrogation claims; if they resolve those claims fast; if they keep their policyholders apprised as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your losses back and move on with your life. If, instead, an insurance agency has a record of paying out claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, you should keep looking.