Subrogation is a concept that's well-known among legal and insurance professionals but sometimes not by the people who employ them. Even if you've never heard the word before, it is to your advantage to know the steps of the process. The more knowledgeable you are about it, the better decisions you can make with regard to your insurance company.
An 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 a timely fashion. If your real estate suffers fire damage, your property insurance agrees to pay you or enable the repairs, subject to state property damage laws.
But since determining who is financially responsible for services or repairs is typically a heavily involved affair – and time spent waiting often increases the damage to the policyholder – insurance companies often opt to pay up front and figure out the blame afterward. They then need a means to recover the costs if, when there is time to look at all the facts, they weren't in charge of the expense.
Let's Look at an Example
You head to the emergency room with a deeply cut finger. You hand the receptionist your health insurance card and she records your coverage information. You get taken care of and your insurance company is billed for the medical care. But the next morning, when you arrive at your workplace – where the injury happened – you are given workers compensation forms to file. Your workers comp policy is in fact responsible for the invoice, not your health insurance company. The latter has a right to recover its money somehow.
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 companies 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 self or property. But under subrogation law, your insurance company is considered to have 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.
How Does This Affect Me?
For starters, if you have 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 have a stake in the outcome as well – to the tune of $1,000. If your insurer is lax about bringing subrogation cases to court, it might choose to get back its costs by upping your premiums and call it a day. On the other hand, if it has a proficient legal team and goes after those cases enthusiastically, it is acting both in its own interests and in yours. If all $10,000 is recovered, you will get your full $1,000 deductible back. If it recovers half (for instance, in a case where you are found one-half responsible), you'll typically get $500 back, based on the laws in most states.
Moreover, if the total cost of an accident is over your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as accident lawyer pasadena, md, pursue subrogation and wins, it will recover your costs in addition to its own.
All insurance companies are not created equal. When shopping around, it's worth comparing the reputations of competing agencies to determine whether they pursue winnable subrogation claims; if they resolve those claims without delay; if they keep their clients updated as the case continues; and if they then process successfully won reimbursements immediately so that you can get your deductible back and move on with your life. If, on the other hand, an insurance agency has a record of paying out claims that aren't its responsibility and then covering its profitability by raising your premiums, you should keep looking.