Subrogation is a concept that's well-known in legal and insurance circles but rarely by the people they represent. Even if you've never heard the word before, it would be in your self-interest to know an overview of how it works. The more information you have about it, the more likely it is that relevant proceedings will work out in your favor.
Every insurance policy you hold is a promise that, if something bad happens to you, the company that covers the policy will make good in a timely manner. If a hailstorm damages your home, your property insurance steps in to repay you or pay for 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 delay sometimes compounds the damage to the policyholder – insurance companies in many cases opt to pay up front and figure out the blame afterward. They then need a way to recover the costs if, ultimately, they weren't responsible for the expense.
You are in an auto accident. Another car ran into yours. The police show up to assess the situation, you exchange insurance information, and you go on your way. You have comprehensive insurance that pays for the repairs right away. Later police tell the insurance companies that the other driver was to blame and her insurance should have paid for the repair of your auto. How does your insurance company get its funds back?
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 done to your person or property. But under subrogation law, your insurer is considered to have some of your rights in exchange 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 starters, if you have 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 lax about bringing subrogation cases to court, it might choose to recover its costs by upping your premiums. On the other hand, if it knows which cases it is owed and goes after those cases efficiently, it is acting both in its own interests and in yours. If all of the money is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found one-half accountable), you'll typically get $500 back, depending on your state laws.
Moreover, if the total cost of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as auto accident attorney pasadena md, pursue subrogation and succeeds, it will recover your losses in addition to its own.
All insurers are not created equal. When comparing, it's worth contrasting the records of competing firms to find out whether they pursue legitimate subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their policyholders informed as the case goes on; 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 insurer has a record of paying out claims that aren't its responsibility and then protecting its bottom line by raising your premiums, you'll feel the sting later.