Subrogation and How It Affects You

Subrogation is an idea that's understood among insurance and legal firms but rarely by the people who employ them. Rather than leave it to the professionals, it would be in your benefit to comprehend an overview of how it works. The more you know about it, the more likely it is that an insurance lawsuit will work out favorably.

Every insurance policy you own is a promise that, if something bad happens to you, the company on the other end of the policy will make restitutions in one way or another without unreasonable delay. If your vehicle is rear-ended, insurance adjusters (and the judicial system, when necessary) determine who was to blame and that party's insurance covers the damages.

But since determining who is financially accountable for services or repairs is sometimes a tedious, lengthy affair – and time spent waiting often adds to the damage to the policyholder – insurance firms in many cases decide to pay up front and figure out the blame afterward. They then need a way to recoup the costs if, ultimately, they weren't in charge of the payout.

Let's Look at an Example

Your bedroom catches fire and causes $10,000 in house damages. Happily, you have property insurance and it pays out your claim in full. However, the insurance investigator finds out that an electrician had installed some faulty wiring, and there is reason to believe that a judge would find him responsible for the damages. The home has already been fixed up in the name of expediency, but your insurance firm is out all that money. What does the firm do next?

How Does Subrogation Work?

This is where subrogation comes in. It is the process 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. Under ordinary circumstances, only you can sue for damages done to your person 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.

Why Do I Need to Know This?

For a start, 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 lost some money too – to be precise, $1,000. If your insurance company is unconcerned with pursuing subrogation even when it is entitled, it might choose to get back its costs by increasing your premiums. On the other hand, if it knows which cases it is owed and pursues them efficiently, it is doing you a favor as well as itself. 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 at fault), you'll typically get half your deductible back, based on the laws in most states.

Furthermore, if the total price of an accident is more than your maximum coverage amount, you may have had to pay the difference. If your insurance company or its property damage lawyers, such as auto accident injury lawyer reisterstown, md, successfully press a subrogation case, it will recover your expenses as well as its own.

All insurance agencies are not the same. When shopping around, it's worth measuring the reputations of competing agencies to find out if they pursue valid subrogation claims; if they do so without dragging their feet; if they keep their clients apprised as the case proceeds; and if they then process successfully won reimbursements immediately so that you can get your funding back and move on with your life. If, instead, an insurance company has a reputation of honoring claims that aren't its responsibility and then protecting its income by raising your premiums, you should keep looking.

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