Subrogation is a term that's well-known among legal and insurance firms but often not by the people who hire them. Even if it sounds complicated, it is in your benefit to know an overview of how it works. The more you know about it, the better decisions you can make with regard to your insurance policy.
Every insurance policy you hold is a promise that, if something bad happens to you, the insurer of the policy will make good in one way or another in a timely manner. If you get hurt while working, your company's workers compensation picks up the tab for medical services. Employment lawyers handle the details; you just get fixed up.
But since figuring out who is financially responsible for services or repairs is typically a heavily involved affair – and delay sometimes increases the damage to the victim – insurance firms usually decide to pay up front and assign blame after the fact. They then need a means to recover the costs if, when all the facts are laid out, they weren't in charge of the expense.
Let's Look at an Example
You are in a highway accident. Another car crashed into yours. The police show up to assess the situation, you exchange insurance details, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later it's determined that the other driver was entirely to blame and her insurance policy should have paid for the repair of your auto. How does your company get its money back?
How Does Subrogation Work?
This is where subrogation comes in. It is the way that an insurance company uses to claim payment when it pays out a claim that turned out not to be its responsibility. 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. Usually, only you can sue for damages to your self or property. But under subrogation law, your insurer is extended some of your rights 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.
How Does This Affect the Insured?
For a start, if your insurance policy stipulated a deductible, your insurer 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 – namely, $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might choose to get back its costs by ballooning your premiums. On the other hand, if it has a knowledgeable legal team and goes after those cases aggressively, it is acting both in its own interests and in yours. If all ten grand 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 culpable), you'll typically get $500 back, based on the laws in most states.
In addition, if the total expense 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 auto accident lawyer Essex MD, pursue subrogation and wins, it will recover your costs as well as its own.
All insurers are not created equal. When comparing, it's worth looking up the records of competing companies to evaluate whether they pursue winnable subrogation claims; if they do so in a reasonable amount of time; if they keep their clients posted as the case goes on; and if they then process successfully won reimbursements immediately so that you can get your money 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 profit margin by raising your premiums, you'll feel the sting later.