Subrogation is a term that's well-known in legal and insurance circles but often not by the people they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be in your benefit to know an overview of how it works. The more you know about it, the better decisions you can make about your insurance policy.
Any insurance policy you hold is a promise that, if something bad occurs, the firm on the other end of the policy will make good in one way or another in a timely manner. If your vehicle is hit, insurance adjusters (and the judicial system, when necessary) decide 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 sometimes a tedious, lengthy affair – and time spent waiting sometimes increases the damage to the victim – insurance companies often opt to pay up front and figure out the blame after the fact. They then need a means to regain the costs if, when all is said and done, they weren't responsible for the payout.
Let's Look at an Example
You are in a highway 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 it's determined that the other driver was entirely at fault and his insurance policy should have paid for the repair of your car. How does your insurance company get its funds back?
How Does Subrogation Work?
This is where subrogation comes in. It is the method that an insurance company uses to claim reimbursement 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. Ordinarily, only you can sue for damages to your person 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 originally due to you, because it has covered the amount already.
Why Do I Need to Know This?
For starters, if your insurance policy stipulated a deductible, it wasn't just your insurer 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 timid on any subrogation case it might not win, it might opt to get back its losses by ballooning your premiums. On the other hand, if it has a proficient legal team and pursues them enthusiastically, it is acting both in its own interests and in yours. If all ten grand 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 at fault), you'll typically get half your deductible back, based on the laws in most states.
In addition, if the total expense 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 personal injury lawyers glen Essex MD, successfully press a subrogation case, it will recover your losses in addition to its own.
All insurers are not created equal. When comparing, it's worth looking at the reputations of competing companies to evaluate whether they pursue winnable subrogation claims; if they do so fast; if they keep their accountholders informed as the case proceeds; 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 safeguarding its income by raising your premiums, you'll feel the sting later.