Subrogation and How It Affects Policyholders

Subrogation is a term that's understood in insurance and legal circles but rarely by the customers they represent. If this term has come up when dealing with your insurance agent or a legal proceeding, it would be to your advantage to know an overview of the process. The more you know about it, the more likely relevant proceedings will work out favorably.

Any insurance policy you own is a promise that, if something bad occurs, the firm that covers the policy will make restitutions in a timely manner. If you get hurt on the job, for instance, your employer's workers compensation insurance pays out for medical services. Employment lawyers handle the details; you just get fixed up.

But since figuring out who is financially responsible for services or repairs is often a confusing affair – and delay often compounds the damage to the victim – insurance companies often decide to pay up front and assign blame afterward. They then need a path to regain the costs if, ultimately, they weren't responsible for the expense.

For Example

Your bedroom catches fire and causes $10,000 in home damages. Fortunately, you have property insurance and it pays out your claim in full. However, the assessor assigned to your case discovers that an electrician had installed some faulty wiring, and there is a reasonable possibility that a judge would find him liable for the loss. You already have your money, but your insurance firm is out $10,000. What does the firm do next?

How Subrogation Works

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. Normally, only you can sue for damages done to your self or property. But under subrogation law, your insurer is considered to have some of your rights in exchange for having taken care of the damages. It can go after the money originally due to you, because it has covered the amount already.

How Does This Affect the Insured?

For a start, if you have a deductible, your insurer wasn't the only one that had to pay. In a $10,000 accident with a $1,000 deductible, you lost some money too – to be precise, $1,000. If your insurance company is timid on any subrogation case it might not win, it might opt to recover its losses by raising your premiums. On the other hand, if it knows which cases it is owed and goes after those cases aggressively, 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 50 percent accountable), you'll typically get half your deductible back, based on the laws in most states.

Moreover, if the total expense 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 Catastrophic injury attorneys Severna Park MD, successfully press a subrogation case, it will recover your costs as well as its own.

All insurance agencies are not created equal. When comparing, it's worth scrutinizing the records of competing agencies to evaluate if they pursue legitimate subrogation claims; if they resolve those claims without delay; if they keep their policyholders advised as the case goes on; and if they then process successfully won reimbursements quickly so that you can get your losses 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 bottom line by raising your premiums, you'll feel the sting later.

Catastrophic injury attorneys Severna Park MD