Subrogation is a term that's understood in legal and insurance circles but often not by the people they represent. Rather than leave it to the professionals, it is in your benefit to know an overview of how it works. The more information you have, the better decisions you can make about your insurance policy.
Every insurance policy you hold is a commitment that, if something bad happens to you, the business on the other end of the policy will make good in a timely fashion. If your home burns down, your property insurance steps in to pay you or facilitate the repairs, subject to state property damage laws.
But since ascertaining who is financially responsible for services or repairs is usually a tedious, lengthy affair – and delay often adds to the damage to the policyholder – insurance firms often decide to pay up front and assign blame afterward. They then need a mechanism to recover the costs if, ultimately, they weren't actually in charge of the expense.
Let's Look at an Example
You go to the hospital with a gouged finger. You give the nurse your medical insurance card and he takes down your policy information. You get stitched up and your insurance company is billed for the services. But on the following morning, when you get to your workplace – where the accident happened – you are given workers compensation paperwork to file. Your workers comp policy is actually responsible for the hospital visit, not your medical insurance company. The latter has an interest in recovering its money in some way.
How Subrogation Works
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. Usually, only you can sue for damages done to your person or property. But under subrogation law, your insurance company is given some of your rights in exchange 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 the Insured?
For starters, if your insurance policy stipulated a deductible, your insurance company wasn't the only one who had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to the tune of $1,000. If your insurer is unconcerned with pursuing subrogation even when it is entitled, it might opt to recoup its losses by raising your premiums and call it a day. On the other hand, if it knows which cases it is owed and pursues those cases enthusiastically, it is acting both in its own interests and in yours. If all of the money 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 culpable), you'll typically get $500 back, depending on your state laws.
Furthermore, if the total cost 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 Medical malpractice attorney Frederick Maryland, successfully press a subrogation case, it will recover your expenses in addition to its own.
All insurance agencies are not the same. When comparing, it's worth contrasting the reputations of competing companies to evaluate if they pursue winnable subrogation claims; if they resolve those claims in a reasonable amount of time; if they keep their customers updated as the case goes on; 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, on the other hand, an insurer has a record of honoring claims that aren't its responsibility and then safeguarding its profit margin by raising your premiums, even attractive rates won't outweigh the eventual headache.