Subrogation is a term that's well-known in legal and insurance circles but sometimes not by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your self-interest to understand the nuances of the process. The more knowledgeable you are, the more likely it is that relevant proceedings will work out favorably.
Every insurance policy you have is a promise that, if something bad happens to you, the company that insures 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 at fault and that person's insurance covers the damages.
But since figuring out who is financially responsible for services or repairs is usually a tedious, lengthy affair – and delay in some cases compounds the damage to the policyholder – insurance companies usually decide to pay up front and figure out the blame afterward. They then need a method to recover the costs if, when there is time to look at all the facts, they weren't in charge of the expense.
Let's Look at an Example
You head to the doctor's office with a sliced-open finger. You give the receptionist your health insurance card and he writes down your plan details. You get stitched up and your insurer is billed for the tab. But the next day, when you arrive at your workplace – where the accident occurred – your boss hands you workers compensation paperwork to file. Your workers comp policy is in fact responsible for the bill, not your health insurance. The latter has an interest in recovering its costs somehow.
How Does Subrogation Work?
This is where subrogation comes in. It is the method 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. Ordinarily, only you can sue for damages done to your person or property. But under subrogation law, your insurer is given some of your rights in exchange 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 that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to be precise, $1,000. If your insurance company is timid on any subrogation case it might not win, it might choose to recoup its expenses by ballooning your premiums. On the other hand, if it has a capable legal team and goes after those cases efficiently, it is acting both in its own interests and in yours. If all $10,000 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 accountable), you'll typically get half your deductible back, depending on your state laws.
Moreover, if the total expense of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely costly. If your insurance company or its property damage lawyers, such as car accident attorney Rosedale MD, pursue subrogation and succeeds, it will recover your losses in addition to its own.
All insurers are not the same. When comparing, it's worth contrasting the reputations of competing firms to evaluate whether they pursue valid subrogation claims; if they do so in a reasonable amount of time; if they keep their policyholders apprised as the case continues; and if they then process successfully won reimbursements quickly so that you can get your money back and move on with your life. If, instead, an insurer has a record of honoring claims that aren't its responsibility and then protecting its income by raising your premiums, even attractive rates won't outweigh the eventual headache.