Subrogation is a concept that's well-known among insurance and legal companies but sometimes not by the people who hire them. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your benefit to know the steps of the process. The more knowledgeable you are, the better decisions you can make about your insurance company.
Any insurance policy you have is a promise that, if something bad occurs, the company that insures the policy will make good without unreasonable delay. If your house burns down, your property insurance agrees to repay you or pay for the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is usually a heavily involved affair – and delay sometimes increases the damage to the victim – insurance companies often decide to pay up front and assign blame later. They then need a means to get back the costs if, in the end, they weren't responsible for the expense.
You are in a highway accident. Another car ran into yours. Police are called, 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 entirely to blame and his insurance should have paid for the repair of your car. How does your company get its funds back?
How Does Subrogation Work?
This is where subrogation comes in. It is the way that an insurance company uses to claim reimbursement 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. Under ordinary circumstances, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is extended some of your rights for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.
Why Do I Need to Know This?
For a start, if you have a deductible, it wasn't just your insurance company who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – namely, $1,000. If your insurance company is lax about bringing subrogation cases to court, it might choose to recoup its expenses by increasing your premiums and call it a day. On the other hand, if it has a capable legal team and goes after those cases enthusiastically, it is doing you a favor as well as itself. If all ten grand is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half culpable), you'll typically get half your deductible back, depending on the laws in your state.
Furthermore, if the total loss 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 accident lawyer pasadena, md, successfully press a subrogation case, it will recover your expenses as well as its own.
All insurers are not created equal. When shopping around, it's worth comparing the reputations of competing companies to find out whether they pursue winnable subrogation claims; if they do so without dragging their feet; if they keep their accountholders advised as the case proceeds; 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, instead, an insurer has a reputation of paying out claims that aren't its responsibility and then covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.