Subrogation is a term that's understood in legal and insurance circles but rarely by the policyholders who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to comprehend the steps of how it works. The more knowledgeable you are about it, the better decisions you can make about your insurance company.
An insurance policy you have is a commitment that, if something bad happens to you, the insurer of the policy will make good in one way or another without unreasonable delay. If your property is robbed, your property insurance steps in to pay you or enable the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is usually a time-consuming affair – and delay often increases the damage to the policyholder – insurance firms often decide to pay up front and figure out the blame after the fact. They then need a method to recoup the costs if, ultimately, they weren't in charge of the payout.
Can You Give an Example?
You rush into the hospital with a sliced-open finger. You hand the receptionist your medical insurance card and she writes down your plan information. You get stitches and your insurance company is billed for the tab. But the next morning, when you arrive at your place of employment – where the accident occurred – you are given workers compensation forms to fill out. Your workers comp policy is in fact responsible for the payout, not your medical insurance company. It has a vested interest in getting that money back somehow.
How Subrogation Works
This is where subrogation comes in. It is the method 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. Normally, 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 that was originally due to you, because it has covered the amount already.
Why Should I Care?
For starters, if you have 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 the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might opt to recover its expenses by boosting your premiums. On the other hand, if it knows which cases it is owed and pursues them enthusiastically, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full thousand-dollar 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 expense of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as workers compensation lawyers Reisterstown MD, successfully press a subrogation case, it will recover your costs in addition to its own.
All insurers are not created equal. When shopping around, it's worth measuring the records of competing firms to find out whether they pursue legitimate subrogation claims; if they do so with some expediency; if they keep their accountholders advised as the case continues; and if they then process successfully won reimbursements quickly so that you can get your deductible back and move on with your life. If, on the other hand, an insurer 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.