Subrogation is a term that's well-known among insurance and legal firms but sometimes not by the people who hire them. Even if it sounds complicated, it is in your benefit to understand an overview of how it works. The more you know, the more likely it is that an insurance lawsuit will work out favorably.
An insurance policy you own is an assurance that, if something bad happens to you, the company that insures the policy will make good in a timely fashion. If you get an injury while you're on the clock, for instance, your employer's workers compensation pays out for medical services. Employment lawyers handle the details; you just get fixed up.
But since determining who is financially responsible for services or repairs is typically a tedious, lengthy affair – and time spent waiting sometimes adds to the damage to the policyholder – insurance companies usually decide to pay up front and assign blame later. They then need a path to recoup the costs if, in the end, they weren't actually responsible for the payout.
Your electric outlet catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays out your claim in full. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him to blame for the damages. The home has already been repaired in the name of expediency, but your insurance company is out all that money. What does the company do next?
How Subrogation Works
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 companies 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 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.
Why Should I Care?
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 – namely, $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to recoup its losses by boosting your premiums. On the other hand, if it knows which cases it is owed and goes after those cases efficiently, it is doing you a favor as well as itself. If all is recovered, you will get your full thousand-dollar deductible back. If it recovers half (for instance, in a case where you are found 50 percent to blame), you'll typically get half your deductible back, based on the laws in most states.
Moreover, if the total price of an accident is more than your maximum coverage amount, you could be in for a stiff bill. If your insurance company or its property damage lawyers, such as workers compensation lawyers Pasadena MD, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurers are not the same. When comparing, it's worth measuring the reputations of competing firms to evaluate if they pursue legitimate subrogation claims; if they resolve those claims without delay; if they keep their clients advised as the case continues; and if they then process successfully won reimbursements right away so that you can get your money back and move on with your life. If, on the other hand, an insurer has a record of honoring claims that aren't its responsibility and then covering its bottom line by raising your premiums, even attractive rates won't outweigh the eventual headache.