Subrogation is a concept that's well-known in legal and insurance circles but rarely by the customers who employ them. Even if you've never heard the word before, it is in your self-interest to understand the nuances of how it works. The more knowledgeable you are, the better decisions you can make with regard to your insurance policy.
Every insurance policy you own is a commitment that, if something bad occurs, the company that covers the policy will make good in one way or another in a timely manner. If a windstorm damages your house, your property insurance steps in to pay you or pay for the repairs, subject to state property damage laws.
But since determining who is financially responsible for services or repairs is usually a tedious, lengthy affair – and time spent waiting sometimes adds to the damage to the victim – insurance companies often decide to pay up front and figure out the blame after the fact. They then need a mechanism to regain the costs if, when there is time to look at all the facts, they weren't in charge of the payout.
Can You Give an Example?
You arrive at the doctor's office with a sliced-open finger. You hand the receptionist your health insurance card and he writes down your coverage information. You get stitches and your insurer is billed for the expenses. But on the following morning, when you get to your workplace – where the accident occurred – your boss hands you workers compensation forms to turn in. Your company's workers comp policy is in fact responsible for the bill, not your health insurance policy. The latter has an interest in recovering its money somehow.
How Subrogation Works
This is where subrogation comes in. It is the way 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. Normally, only you can sue for damages done to your person or property. But under subrogation law, your insurer is extended some of your rights for having taken care of 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 Policyholders?
For one thing, if your insurance policy stipulated a deductible, it wasn't just your insurer who 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 unconcerned with pursuing subrogation even when it is entitled, it might opt to recover its expenses by increasing your premiums and call it a day. On the other hand, if it has a competent legal team and pursues those cases aggressively, it is acting both in its own interests and in yours. 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 50 percent at fault), you'll typically get half your deductible back, depending on the laws in your state.
Moreover, if the total price 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 car accident attorney Middle River 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 weighing the reputations of competing agencies to determine if they pursue valid 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 funding back and move on with your life. If, instead, an insurance firm has a reputation of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, even attractive rates won't outweigh the eventual headache.