Subrogation is an idea that's understood among insurance and legal professionals but often not by the policyholders they represent. Even if you've never heard the word before, it is to your advantage to understand the nuances of the process. The more knowledgeable you are, the better decisions you can make about your insurance company.
Every insurance policy you have is a commitment that, if something bad occurs, the insurer of the policy will make restitutions in one way or another without unreasonable delay. If your vehicle is hit, insurance adjusters (and the judicial system, when necessary) determine who was to blame and that person's insurance covers the damages.
But since figuring out who is financially accountable for services or repairs is typically a tedious, lengthy affair – and delay sometimes compounds the damage to the policyholder – insurance companies usually opt to pay up front and assign blame afterward. They then need a method to regain the costs if, in the end, they weren't actually in charge of the payout.
Can You Give an Example?
Your bedroom catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays for the repairs. However, in its investigation it finds out that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him liable for the loss. The house has already been repaired in the name of expediency, but your insurance agency is out ten grand. What does the agency do next?
How Does Subrogation Work?
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 self or property. But under subrogation law, your insurer is given some of your rights in exchange for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.
How Does This Affect Policyholders?
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 the tune of $1,000. If your insurer is timid on any subrogation case it might not win, it might opt to get back its costs by raising your premiums. On the other hand, if it knows which cases it is owed and goes after them aggressively, it is acting both in its own interests and in yours. If all is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half at fault), you'll typically get half your deductible back, depending on your state laws.
Moreover, if the total loss of an accident is more than 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 injury attorney glen Essex MD, successfully press a subrogation case, it will recover your losses as well as its own.
All insurers are not the same. When comparing, it's worth comparing the reputations of competing firms to find out whether they pursue winnable subrogation claims; if they resolve those claims quickly; if they keep their clients informed as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your funding back and move on with your life. If, instead, an insurance firm has a reputation of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, you'll feel the sting later.