Subrogation is a term that's well-known in insurance and legal circles but sometimes not by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it is in your self-interest to understand the nuances of how it works. The more you know about it, the better decisions you can make about your insurance company.
Every insurance policy you own is a commitment that, if something bad occurs, the insurer of the policy will make good in a timely fashion. If your vehicle is rear-ended, insurance adjusters (and police, when necessary) determine who was at fault and that party's insurance pays out.
But since determining who is financially accountable for services or repairs is regularly a time-consuming affair – and time spent waiting in some cases increases the damage to the policyholder – insurance companies often decide to pay up front and assign blame afterward. They then need a way to recoup the costs if, when there is time to look at all the facts, they weren't responsible for the payout.
Let's Look at an Example
You head to the emergency room with a gouged finger. You give the receptionist your health insurance card and she records your policy details. You get taken care of and your insurer gets a bill for the medical care. But the next afternoon, when you get to your place of employment – where the accident happened – you are given workers compensation forms to fill out. Your workers comp policy is actually responsible for the invoice, not your health insurance company. It has a vested interest in getting that money back somehow.
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 done to your self 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 that was 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 insurer that had to pay. In a $10,000 accident with a $1,000 deductible, you have a stake in the outcome as well – to be precise, $1,000. If your insurance company is timid on any subrogation case it might not win, it might choose to get back its expenses by boosting your premiums. On the other hand, if it knows which cases it is owed and goes after them aggressively, it is acting both in its own interests and in yours. If all $10,000 is recovered, you will get your full deductible back. If it recovers half (for instance, in a case where you are found one-half culpable), you'll typically get $500 back, depending on your state laws.
Moreover, if the total price of an accident is more than your maximum coverage amount, you may have had to pay the difference, which can be extremely spendy. If your insurance company or its property damage lawyers, such as personal injury attorney glen Essex MD, pursue subrogation and wins, it will recover your expenses in addition to its own.
All insurers are not created equal. When shopping around, it's worth comparing the reputations of competing firms to evaluate if they pursue legitimate subrogation claims; if they resolve those claims quickly; if they keep their clients apprised as the case proceeds; and if they then process successfully won reimbursements right away so that you can get your losses back and move on with your life. If, on the other hand, an insurance firm has a reputation of honoring claims that aren't its responsibility and then covering its income by raising your premiums, even attractive rates won't outweigh the eventual headache.