Subrogation is an idea that's well-known among insurance and legal companies but often not by the customers they represent. Even if it sounds complicated, it would be in your benefit to know the steps of how it works. The more information you have about it, the more likely it is that an insurance lawsuit will work out in your favor.
Any insurance policy you hold is a promise that, if something bad occurs, the business on the other end of the policy will make restitutions in one way or another in a timely manner. If your home suffers fire damage, for example, your property insurance agrees to repay you or enable the repairs, subject to state property damage laws.
But since figuring out who is financially responsible for services or repairs is often a time-consuming affair – and time spent waiting sometimes increases 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, when there is time to look at all the facts, they weren't responsible for the expense.
Let's Look at an Example
Your kitchen catches fire and causes $10,000 in home damages. Happily, you have property insurance and it pays out your claim in full. However, in its investigation it discovers that an electrician had installed some faulty wiring, and there is a decent chance that a judge would find him responsible for the loss. You already have your money, but your insurance agency is out $10,000. What does the agency do next?
How Does Subrogation Work?
This is where subrogation comes in. It is the way 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. Normally, only you can sue for damages to your self 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.
How Does This Affect Policyholders?
For starters, if you have a deductible, it wasn't just your insurance company 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 insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to recover its losses by increasing your premiums. On the other hand, if it knows which cases it is owed and pursues those cases 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 accountable), you'll typically get $500 back, based on the laws in most states.
Additionally, if the total loss of an accident is over 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 weighing the reputations of competing firms to evaluate if they pursue legitimate subrogation claims; if they resolve those claims quickly; if they keep their accountholders apprised as the case continues; and if they then process successfully won reimbursements right away so that you can get your deductible back and move on with your life. If, instead, an insurance company has a reputation of paying out claims that aren't its responsibility and then covering its profit margin by raising your premiums, you'll feel the sting later.