Subrogation is a term that's well-known in insurance and legal circles but sometimes not by the people who hire them. Even if it sounds complicated, it is in your self-interest to understand an overview of how it works. The more you know about it, the better decisions you can make about your insurance policy.
An insurance policy you hold is a promise that, if something bad happens to you, the company that insures the policy will make good in a timely manner. If a fire damages your house, for instance, your property insurance agrees to remunerate you or enable the repairs, subject to state property damage laws.
But since ascertaining who is financially accountable for services or repairs is sometimes a confusing affair – and time spent waiting in some cases adds to the damage to the victim – insurance firms usually opt to pay up front and assign blame after the fact. They then need a means to regain the costs if, when all is said and done, they weren't actually responsible for the payout.
Let's Look at an Example
You rush into the hospital with a sliced-open finger. You hand the receptionist your medical insurance card and she takes down your plan details. You get taken care of and your insurance company gets an invoice for the tab. But on the following afternoon, when you get to your place of employment – where the injury occurred – you are given workers compensation paperwork 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 in some way.
How Does Subrogation Work?
This is where subrogation comes in. It is the process 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. Under ordinary circumstances, only you can sue for damages to your person or property. But under subrogation law, your insurance company is given some of your rights 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.
How Does This Affect Me?
For one thing, if your insurance policy stipulated a deductible, it wasn't just your insurance company who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its expenses by boosting your premiums. On the other hand, if it knows which cases it is owed and pursues those cases aggressively, it is doing you a favor as well as itself. If all $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found 50 percent at fault), you'll typically get $500 back, depending on the laws in your state.
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 expensive. If your insurance company or its property damage lawyers, such as auto accident attorney Rosedale MD, successfully press a subrogation case, it will recover your costs as well as its own.
All insurance agencies are not the same. When comparing, it's worth contrasting the reputations of competing firms to determine if they pursue valid subrogation claims; if they resolve those claims quickly; if they keep their accountholders informed as the case continues; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, instead, an insurer has a reputation of honoring claims that aren't its responsibility and then covering its profitability by raising your premiums, you should keep looking.