Subrogation is an idea that's understood among insurance and legal companies but often not by the customers they represent. Rather than leave it to the professionals, it would be in your self-interest to know an overview of how it works. The more information you have, the better decisions you can make with regard to your insurance policy.
An insurance policy you hold is an assurance that, if something bad occurs, the company that insures the policy will make restitutions in a timely manner. If your vehicle is hit, insurance adjusters (and the judicial system, when necessary) determine who was at fault and that party's insurance covers the damages.
But since ascertaining who is financially accountable for services or repairs is usually a time-consuming affair – and time spent waiting in some cases increases the damage to the policyholder – insurance firms usually decide to pay up front and assign blame after the fact. They then need a means to recoup the costs if, when all the facts are laid out, they weren't actually responsible for the payout.
Your stove catches fire and causes $10,000 in home damages. Luckily, you have property insurance and it takes care of the repair expenses. However, in its investigation it finds out that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him responsible for the loss. You already have your money, but your insurance company is out all that money. What does the company do next?
How Subrogation Works
This is where subrogation comes in. It is the method that an insurance company uses to claim payment 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. Normally, only you can sue for damages to your person or property. But under subrogation law, your insurance company is given some of your rights in exchange for making good on the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Should I Care?
For a start, if you have 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 – namely, $1,000. If your insurance company is timid on any subrogation case it might not win, it might choose to recover its losses by increasing your premiums. On the other hand, if it knows which cases it is owed and pursues them efficiently, it is acting both in its own interests and in yours. If all of the money 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.
Moreover, if the total price 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 Workers Comp Lawyer Perry Hall MD, successfully press a subrogation case, it will recover your losses in addition to its own.
All insurance companies are not created equal. When shopping around, it's worth measuring the records of competing companies to determine whether they pursue winnable subrogation claims; if they do so in a reasonable amount of time; if they keep their policyholders apprised as the case continues; 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, instead, an insurance company has a reputation of honoring claims that aren't its responsibility and then protecting its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.