Subrogation is a concept that's well-known in legal and insurance circles but rarely by the people they represent. Rather than leave it to the professionals, it would be in your benefit to know an overview of how it works. The more you know about it, the better decisions you can make about your insurance policy.
Every insurance policy you hold is a promise that, if something bad occurs, the insurer of the policy will make good in one way or another without unreasonable delay. If you get an injury on the job, your employer's workers compensation insurance agrees to pay for medical services. Employment lawyers handle the details; you just get fixed up.
But since ascertaining who is financially accountable for services or repairs is typically a confusing affair – and delay in some cases increases the damage to the victim – insurance firms usually decide to pay up front and figure out the blame later. They then need a means to recoup the costs if, when all the facts are laid out, they weren't actually in charge of the expense.
Your stove catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it takes care of the repair expenses. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him accountable for the damages. You already have your money, but your insurance firm is out all that money. What does the firm do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the process that an insurance company uses to claim reimbursement when it pays out a claim that turned out not to be its responsibility. Some companies have in-house property damage lawyers and personal injury attorneys, or a department dedicated to subrogation; others contract with a law firm. Ordinarily, only you can sue for damages done to your person or property. But under subrogation law, your insurance company 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.
Why Do I Need to Know This?
For starters, if you have a deductible, it wasn't just your insurance company who had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – namely, $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to get back its costs by ballooning your premiums. On the other hand, if it has a proficient legal team and pursues them efficiently, it is doing you a favor as well as itself. If all of the money is recovered, you will get your full 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, depending on the laws in your state.
Furthermore, if the total cost of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as workers compensation lawyers Reisterstown MD, pursue subrogation and succeeds, it will recover your expenses as well as its own.
All insurers are not the same. When comparing, it's worth weighing the records of competing firms to determine if they pursue valid subrogation claims; if they resolve those claims fast; if they keep their policyholders posted as the case goes on; 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 reputation of honoring claims that aren't its responsibility and then covering its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.