Subrogation is a term that's well-known among legal and insurance companies but sometimes not by the policyholders they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your self-interest to know an overview of the process. The more information you have, the more likely it is that an insurance lawsuit will work out in your favor.
Every insurance policy you hold is a promise that, if something bad occurs, the insurer of the policy will make good without unreasonable delay. If your vehicle is in a fender-bender, insurance adjusters (and the judicial system, when necessary) determine who was at fault and that party's insurance pays out.
But since ascertaining who is financially accountable for services or repairs is usually a heavily involved affair – and time spent waiting often increases the damage to the policyholder – insurance firms in many cases decide to pay up front and assign blame after the fact. They then need a mechanism to recoup the costs if, ultimately, they weren't responsible for the payout.
You are in an auto accident. Another car ran into 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 at fault and her insurance policy should have paid for the repair of your car. How does your company get its money back?
How Subrogation Works
This is where subrogation comes in. It is the method 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. Under ordinary circumstances, only you can sue for damages to your person or property. But under subrogation law, your insurer is extended 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.
How Does This Affect Me?
For starters, if your insurance policy stipulated a deductible, your insurer wasn't the only one that 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 insurance company is lax about bringing subrogation cases to court, it might opt to recoup its losses by boosting your premiums. 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 50 percent responsible), you'll typically get half your deductible back, depending on your state laws.
In addition, if the total expense of an accident is over your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as workers comp attorney near me Reisterstown MD, pursue subrogation and wins, it will recover your costs as well as its own.
All insurance agencies are not created equal. When shopping around, it's worth looking at the reputations of competing firms to determine if they pursue legitimate subrogation claims; if they resolve those claims fast; if they keep their customers informed as the case proceeds; and if they then process successfully won reimbursements quickly so that you can get your funding back and move on with your life. If, on the other hand, an insurance agency has a reputation of paying out claims that aren't its responsibility and then protecting its profitability by raising your premiums, you should keep looking.