Subrogation is an idea that's well-known in insurance and legal circles but rarely by the people they represent. Even if you've never heard the word before, it would be to your advantage to understand an overview of the process. The more you know, the more likely it is that relevant proceedings will work out favorably.
Any insurance policy you hold is a commitment that, if something bad occurs, the company on the other end of the policy will make restitutions in one way or another in a timely manner. If you get injured while working, for instance, your employer's workers compensation insurance 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 often a tedious, lengthy affair – and delay in some cases compounds the damage to the policyholder – insurance firms usually opt to pay up front and assign blame later. They then need a means to recover the costs if, in the end, they weren't responsible for the expense.
Let's Look at an Example
Your bedroom catches fire and causes $10,000 in house damages. Luckily, you have property insurance and it takes care of the repair expenses. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him responsible for the damages. You already have your money, but your insurance agency is out ten grand. What does the agency do next?
How Subrogation Works
This is where subrogation comes in. It is the way 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. Under ordinary circumstances, only you can sue for damages to your person or property. But under subrogation law, your insurance company is extended 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, 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 be precise, $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to recover its expenses by upping your premiums and call it a day. On the other hand, if it knows which cases it is owed and goes after them efficiently, 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 one-half to blame), you'll typically get half your deductible back, based on the laws in most states.
In addition, if the total loss 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 workmans comp attorney Essex MD, pursue subrogation and wins, it will recover your costs as well as its own.
All insurance agencies are not the same. When comparing, it's worth looking at the reputations of competing firms to determine if they pursue winnable subrogation claims; if they do so without delay; if they keep their policyholders informed as the case proceeds; 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, on the other hand, an insurance agency has a record of honoring claims that aren't its responsibility and then safeguarding its profit margin by raising your premiums, you'll feel the sting later.