Subrogation is a concept that's understood among insurance and legal firms but sometimes not by the people they represent. Even if it sounds complicated, it is in your self-interest to know an overview of the process. The more you know, the better decisions you can make with regard to your insurance company.
Every insurance policy you have is a promise that, if something bad happens to you, the company on the other end of the policy will make good without unreasonable delay. If you get hurt while working, for instance, your employer's workers compensation picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.
But since figuring out who is financially accountable for services or repairs is often a confusing affair – and delay in some cases increases the damage to the policyholder – insurance companies in many cases decide to pay up front and assign blame afterward. They then need a way to recoup the costs if, when all is said and done, they weren't actually in charge of the expense.
Let's Look at an Example
You are in a traffic-light accident. Another car collided with 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 it's determined that the other driver was to blame and his insurance should have paid for the repair of your auto. How does your company get its funds back?
How Does Subrogation Work?
This is where subrogation comes in. It is the process that an insurance company uses to claim payment 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. Usually, only you can sue for damages to your self 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 originally due to you, because it has covered the amount already.
How Does This Affect the Insured?
For a start, if your insurance policy stipulated a deductible, it wasn't just your insurance company 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 lax about bringing subrogation cases to court, it might opt to get back its expenses by increasing 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 deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get half your deductible back, depending on your state laws.
Additionally, if the total cost 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 personal injury claims reisterstown, md, successfully press a subrogation case, it will recover your losses in addition to its own.
All insurers are not the same. When shopping around, it's worth measuring the records of competing companies to evaluate whether they pursue valid subrogation claims; if they resolve those claims fast; if they keep their clients informed as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your losses back and move on with your life. If, on the other hand, an insurer has a reputation of honoring claims that aren't its responsibility and then safeguarding its bottom line by raising your premiums, you'll feel the sting later.